Law on Foreign Investment (LFI) Cuba – Law 77 and 118

Please note: These laws may have been updated since originally writing this post so further research may be needed

Introduction to Law 77 and 118

For the last twenty-five years, Law 77 in Cuba was one of the key laws that documented the investment laws for foreign companies looking to get involved in Cuban business and trade.

Law 77 was replaced in 2014 by the ‘Law on Foreign Investment’ (law 118), also known as the LFI, and this law is documented by the Gaceta Oficial de la Republic de Cuba (or in English – the ‘Official Gazette of the Republic of Cuba‘).

The ‘Gaceta Oficial’ is a publication which is produced by the Ministry of Justice in Cuba, the legislators for the government, and the name Gaceta is taken from the Italian word gazette.

The Gazette is produced by the Ministry of Justice to advertise official legislation for the Republic of Cuba.

The main change that the LFI includes is a push to provide greater guarantees for foreign companies looking to invest in Cuba.

Cuba is keen to attract certain types of investment in particular and to increase opportunities for the Cuban export market.

The new Law on Foreign Investment includes some improved tax incentives for foreign companies.

There are several problems that remain though from the point of view of foreign companies looking to do business in Cuba.

The LFI rules, for example, state that you will have to use Cuban employees, and they will be employed by the state rather than by you as a foreign business.

Similarly, Cuban companies you work with will have to be state-approved.

The overall intention of the LFI rules seems to be to drive funds towards the Cuban government and related agencies, rather than an attempt to create opportunities for individual business owners in Cuba.

Foreign Investment Act 118

The document detailing Act 118 is 30 pages long (at least the version I have read in English is) and for this reason, I have summarised the main points from the document below.

• The intention of Act 118 is to promote business opportunities for companies outside of Cuba looking to invest in the Republic of Cuba and to give certain legal security and guarantees. Control measures and conflict resolution is also covered in the document. This act, in other words, is a detailed document that seems a genuine attempt by the Cuban government to drive investment into the country.
• Important issues such as the regulation of taxes, import an export rules and insurance are all documented.

Investor Guarantees

Chapter three of Act 118 lays out the guarantees that are made by the Cuban government to foreign investors. There are a number of quite specific guarantees such as Article 10 which promises:

Joint ventures and national and foreign investors which are parties to international economic association agreements, shall be subject to the special tax regime established in this Act for until the term for which they were authorized expires.

Many of the articles laid out within the act are quite technical to understand and need careful attention if you are attending to apply for the chance to invest in Cuba.

Rules include detailed specifics on the use of the national banking system of Cuba, as shown below in article 25.1

One document I would strongly recommend to read and learn about is the appropriately named document from the government named the ‘Portfolio of Opportunities’ – see below:

Resources

• The ‘Portfolio of Opportunities for Foreign Investment‘ document provided by the Cuban government gives details on specific business opportunities that are sought.