HAVANA, Dec 23. Among the measures announced in the Second Ordinary Period of Sessions of the National Assembly of People’s Power by Cuban Prime Minister Manuel Marrero Cruz,the updating of the reference values of the homes is found. The values establish the minimum amount in the sale of goods between natural persons and, therefore, the taxes associated with this type of operation.
The announcement comes in the context of a deep inflationary crisis and growing fiscal deficit that are staggering the national economy, and while many people are offering their homes to pay for an immigration project.
Before 2011, the sale and purchase of homes in Cuba was prohibited. The only viable option to modify the place of residence was exchange. In case of leaving the country, there was no possibility of selling the property to an individual.
The State thus maintained the right of first refusal over the homes, that is, the buyer’s preference for the properties for sale. In addition, the State also centrally determined the value of house prices.
HOUSE SALE IN HAVANA: FROM LESS THAN TWO THOUSAND TO ONE MILLION DOLLARS
The informal real estate market in Cuba is marked by contrasts, especially in Havana. At one end, luxurious residences, unimaginable for many in the island’s landscape; and, in the other, precarious, barely habitable housing, both are for sale.
The situation continued in the country for almost 50 years, until in November 2011 the Cuban authorities established Decree Law 288, which allowed the free sale and purchase of homes.
At that time, the State chose not to set minimum reference values, which allowed the tax base of the tax to be determined by the parties, with the only condition that it had to be higher than the “legal” value.
«For acts of sale of homes, the tax base is constituted by the sale price of the home that is transferred, declared by the parties in said act, provided that it is equal to or greater than the updated value of the same; Otherwise, it will be constituted by the latter,” Decree Law 288 textually established.
However, in 2017 the Cuban authorities modified the legislation through Resolution 112 of the Ministry of Finance and Prices, through which “minimum reference values” for real estate were introduced. Minimum values varied based on location and specific property characteristics.
From that moment on, the tax base for calculating the tax on the transfer of assets would be, at a minimum, that established by the regulations. There was a notable increase in the prices considered “legal” and, consequently, in contributions.
THESE ARE THE CHANGES FOR 2024 ANNOUNCED BY MARRERO IN THE NATIONAL ASSEMBLY
On December 20, 2023, six years after the first regulation of the minimum reference values, the Cuban authorities reported that the amounts would be modified shortly.
According to what the Government declared before the Cuban Parliament, the measure seeks greater fiscal control over operations. “Swaps have almost disappeared because it is better to sell and buy,” said Marrero. To prevent tax evasion, a mechanism was approved to set new reference prices for the place where the home is located.
Obviously, the announced modifications will not aim at a reduction, but rather at an increase, as they reiterated the need to collect more taxes to address the growing fiscal deficit which, according to official figures, increased 44.4% more than expected in 2023.
What will be the magnitude of the increase? To know for sure, we will have to wait for the publication of the regulations.
It is pertinent to point out that the real estate market in Havana, for example, presents great imbalances. An analysis of more than 20,000 offers on classifieds sites by the DeFacto team in 2023 showed the size of the gap.
Although in Siboney – a zone of silence, known for protecting the Government dome – a house with a pool and four bedrooms can be offered for 1.5 million dollars, the average cost of houses on the outskirts of the city has decreased. In municipalities such as La Lisa, Guanabacoa, Regla and San Miguel del Padrón, there are properties with a value of less than 3,000 dollars.
For the moment, Marrero Cruz said that the measure to control tax evasion in home purchase and sale transactions, and others presented in Parliament to be implemented in 2024, have the objective of “invigorating the national economy.”
He acknowledged that the Government could “have done more” and “that its own inadequacies and subjective problems persisted that affect the capacity of economic programs and projections.”