Update on Cuba’s Reference Value for Housing: New Rates and Economic Implications
Cuba’s Ministry of Finance and Prices (MFP) recently published Official Gazette No. 102 of 2024, which includes Resolution 313/2024. This regulation establishes an increase in the reference value used to assess properties and calculate taxes on real estate transactions. According to the MFP, the measure aims to “correct distortions and boost the economy,” as well as increase state revenue through fiscal collection.
The adjustment will take effect on November 15, with a new table of reference values that redefines the market price of real estate on the island, directly impacting the tax calculation for real estate transactions.
Changes in Tax Obligations for Buyers and Sellers
Under the new resolution, both buyers and sellers will face increased tax obligations. The buyer will pay the Property Transfer and Inheritance Tax, while the seller will be subject to the Occasional Personal Income Tax. These adjustments imply higher transaction costs, which may affect the dynamics of the real estate market in Cuba.
The MFP bases this measure on market studies revealing that housing sale prices have exceeded current reference values by up to ten times. Although prices have recently shown a downward trend, largely attributed to the country’s ongoing migration crisis, this adjustment seeks to reflect real market values and curb the common practice of underreporting prices, although this practice is not expected to disappear completely.
New Criteria for Calculating the Reference Value
Resolution 313/2024 establishes five main factors to determine the reference value of properties:
- Geographical location: Value varies by area, taking into account economic and service disparities across different regions.
- Type of property: The regulation differentiates between houses and apartments, reflecting the diversity in housing structures.
- Structure and construction type: The quality and construction characteristics of a property affect its value based on durability and resilience.
- Number of rooms: The number of bedrooms is fundamental in defining the property’s size and value.
- Amenities like garage, patio, or garden: These additional features increase the property’s value by adding comfort and space.
Economic Impact of New Reference Values
Updating the reference values can increase the current value up to fivefold, resulting in a proportional tax increase. While these values aim to accurately represent market prices, price underreporting is anticipated to remain a challenge for tax authorities in Cuba’s real estate market.
Tax Tables: A Reference Guide for Buyers and Sellers
The Official Gazette outlines tax tables that guide the tax amounts for purchasing and selling properties in Cuba. Tax rates range from 20,000 to 100,000 Cuban pesos, depending on the aforementioned factors. This table provides citizens with a clear reference of their tax obligations when conducting real estate transactions. Specific details are available on the MFP’s website.
Outlook and Challenges of the Reference Value Adjustment
Resolution 313/2024 demonstrates the Cuban government’s intent to regulate and bring greater transparency to the real estate market while ensuring increased tax revenue. However, doubts persist as to whether this measure will successfully reduce underreporting of prices and whether taxpayers will be willing to accurately declare their income in real estate transactions. This adjustment may also hinder access to housing for those who rely on external financing or remittances to acquire property.
The increase in the reference value for housing in Cuba, alongside tax adjustments, represents a significant shift in the real estate market. Aimed at aligning with real market values and correcting economic distortions, the new regulation presents considerable challenges for those in the sector. Its impact on the Cuban economy and housing access will be crucial to monitor in the coming months.
