The Foreign Investment Act: Law 118/2014

The Cuban Parliament adopted Law 118 for Foreign Investment in March 2014.

The Act provides basic investment protection and other general rules relevant to foreign investors and sets out the various legal structures for the implementation of investment projects in Cuba.

Antilles Gold has chosen to invest in the development of the La Demajagua gold mine through a registered Joint Venture Company – Minera La Victoria SA – in which it will hold 49% of the shares.

Features of Law 118/2014 that will apply to the Joint Venture company include:

  • The potential to invest in additional mining projects
  • No assets may be expropriated without compensation in convertible currency, and determined by agreed experts
  • All Board decisions must be unanimous
  • Free transfer abroad of loans, profits and dividends is guaranteed without taxes or fees
  • Sale of shares in the Joint Venture company are not restricted
  • Senior management, specialists and consultants to be nominated by Antilles Gold
  • Workers must be hired through a Government agency
  • Importation of goods and services for the project may be carried out by the Joint Venture company rather than a State agency
  • The corporate tax rate will be 15% but waived for the first 8 years, or longer subject to approval by the Ministry of Finance
  • Disputes in relation to termination and liquidation of the Joint Venture company or deadlock must be submitted to the Cuban Courts for resolution
  • Disputes in relation to the Joint Venture Agreement or operational matters must be submitted to arbitration in Paris for resolution at the International Court of Arbitration (“CCI”)
  • Payroll tax is not applicable
  • A social security contribution equal to 14% of payroll is applicable
  • The goods and services tax of 10% is reduced by 50% for the duration of the project, and waived for the first year of operations
  • Withholding tax is not applicable
  • Personal income tax for expatriates is 15%
  • Import duties are not applicable during the project development period, nor on capital equipment thereafter
  • A ‘Proceeds Account’ is to be established overseas at an International Bank to receive all loans to the project, and sales proceeds.  From this account payments will be made directly to service such loans, and pay foreign creditors, and dividends/distribution of profits. Funds to be remitted to Cuba will be those required for domestic capital and operating expenses, and Government taxes and fees.