UPDATE 3-Cuba plans big tax breaks to lure foreign investors

Wed Mar 26, 2014 4:56pm EDT
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(Adds details from text of proposed law)

By Marc Frank

HAVANA, March 26 (Reuters) - Cuba's communist government has drawn up a new foreign investment law that will cut the profits tax in half and exempt investors from paying it for eight years in an attempt to attract desperately needed capital into the economy.

The National Assembly will meet on Saturday to approve the legislation that Cuba promises will offer investment security to foreigners and help further integrate the Caribbean island in the global economy.

But the proposed law appears to withhold many of the tax benefits from companies that are 100 percent foreign-owned, instead reserving those incentives for joint ventures with the Cuban state and between foreign and Cuban companies.

The proposed law includes a clause that bans expropriations except in cases of public interest previously established by the government, in which case investors would be compensated.

The new investment law continues the structural economic reforms under way in Cuba since President Raul Castro took over from his ailing brother Fidel in 2008. It has been anticipated since 2011, when Cuba enacted a 300-point overhaul of its domestic economy to encourage more private enterprise.

The law aims to address the lengthy and sometimes murky process to approve foreign investment deals and improve investment guarantees, two major concerns of potential investors and foreign governments.

It would also guarantee the free transfer of profits or dividends outside of Cuba without paying additional tax, and allows investment in any sector of the economy except education and healthcare.   Continued...