On December 18, 2025, the Cuban National Assembly passed Law 181/2025, setting the State Budget for 2026. This budget projects gross revenues of 484,120.6 million pesos and allows for a maximum fiscal deficit of 74,500 million pesos, relying heavily on a more stringent and discretionary tax framework.
According to the document published in the Official Gazette, this budget includes a complex 22-tax system designed to generate 349,429.9 million pesos in tax revenues and 134,690.7 million in non-tax revenues. This occurs against a backdrop of inflation, reduced production, and a growing non-state sector as the primary revenue source.
Intensified Tax Measures
The law retains a 35% general tax rate on profits, applicable even to local development projects. For personal income, the progressive tax scale intensifies, reaching up to 50% for those earning over a million pesos annually—a threshold more easily met due to inflation.
Individual agricultural producers face a fixed 2% withholding tax. Additionally, the law confirms a 15% general rate for retail sales and services, including micro, small, and medium-sized enterprises (MSMEs) and non-agricultural cooperatives.
Increased Fiscal Burden on Consumption
Telecommunications services rendered by Etecsa, a monopoly, are subject to a specific 5% levy, reinforcing consumption as a stable fiscal revenue source. Social security contributions remain heavy, with employers contributing 14%, of which 12.5% goes to the State Budget, while workers contribute 5% up to 15,000 pesos monthly and 10% on the excess.
Other taxes include a 1% territorial contribution for local development on gross income, a 5% tax on labor use, and land idleness levies ranging from 225 to 900 pesos per hectare, depending on the classification.
Expanded Ministerial Discretion
Beyond figures, the text reveals a significant increase in ministerial discretion. Several provisions grant the Minister of Finance and Prices the power to redistribute expenditures, adjust budgets mid-year, and decide which goods or services will be subject to special taxes without returning to the National Assembly. This setup introduces legal uncertainty for taxpayers by allowing fiscal rule changes during the budgetary cycle.
Ambiguities in Transportation Taxes
An additional ambiguity is found in Annex I, which addresses land transport taxes. It divides tax amounts between "Group 1" and "Group 2" without explicitly defining which entities belong to each category. Historically, this division separated the state from the non-state sector, but the lack of a legal definition creates an interpretive gap that complicates citizen oversight.
The disparity between both groups is stark. For each vehicle category, Group 2's required amount is precisely 25 times that of Group 1. For instance, a motorcycle pays 110 pesos in Group 1 and 2,750 in Group 2; a five-seater car pays 260 versus 6,500; a truck or bus is taxed 450 compared to 11,250 pesos. Even animal-drawn vehicles for public transport follow the same multiplier, with 150 pesos for Group 1 and 3,750 for Group 2.
In heavy cargo cases, this asymmetry is more pronounced. While Group 1 pays a base of 1,000 pesos plus 75 per additional ton, Group 2 faces a base of 25,000 pesos plus 1,875 per ton or fraction. The only convergence is a complete exemption for ambulances, funeral services, and humanitarian institutions.
From a technical perspective, the annex's structure does not seem to reflect individual tax capacity studies but rather the mechanical application of a fixed multiplier. This indicates that vehicle ownership in the private sector is used as a potent tool to offset the 2026 fiscal deficit.
Strategic Silences on Currency Operations
The law also contains strategic silences. Article 64 empowers the minister to make tax adjustments related to freely convertible currency operations but does not define collection mechanisms or reference exchange rates, leaving foreign currency revenue transparency unclear.
In contrast, the law explicitly suspends property taxes on homes, land, and agricultural lands for 2026, aiming to alleviate social tensions surrounding basic assets amid the crisis.
Overall, Law 181/2025 establishes a budget model that relies on increased fiscal pressure, primarily on the non-state sector, along with significant administrative discretion. It places the main burden of a recognized structural deficit on the taxpayer.
Implications of Cuba's 2026 Budget
What is the main focus of Cuba's 2026 budget as per Law 181?
The main focus of Cuba's 2026 budget under Law 181 is to implement a more aggressive tax system and increase state discretion, particularly impacting the non-state sector to address the fiscal deficit.
How does Law 181 affect personal income taxation in Cuba?
Law 181 intensifies the progressive tax scale on personal income, reaching a maximum of 50% for individuals earning over one million pesos annually, which is more easily attainable due to inflation.
What are the discretionary powers granted to the Minister of Finance and Prices?
The Minister of Finance and Prices is granted the power to redistribute expenditures, adjust budgets during the year, and decide on special taxes without needing approval from the National Assembly, increasing legal uncertainty for taxpayers.