Cuba’s Radical Move: Property Transaction Taxes Skyrocket Fivefold Amid Economic Collapse

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Cuba has announced a significant increase in taxes related to the buying, selling, or donation of residential properties, set to take effect on November 15. This measure is part of a broader series of tax reforms being implemented by the government amid an unprecedented economic crisis.

According to Las Américas and the Gaceta Oficial, the new tax regime will classify properties into five distinct zones, which will directly affect the reference values used for tax calculations. This change also shifts the tax payment timeline, now requiring potential buyers to pay taxes at the moment of the transaction, instead of after signing the property documents, as was the case previously.

Before 2011, all properties in Cuba were state-owned under the 1976 Constitution, making private ownership and transactions impossible. That changed with a reform that allowed the buying and selling of homes, creating a new real estate market that, however, has faced serious challenges in recent years.

According to the National Office of Tax Administration (ONAT), Cuba currently holds an accumulated debt of approximately $194 million in unpaid taxes, primarily due to tax evasion in the real estate sector. This steep tax increase is intended to address the issue, but many critics question its effectiveness given the country’s ongoing economic crisis.

Independent Cuban journalism has highlighted the impact of mass migration on the real estate market. Journalist Vladimir Turró reports that property prices have plummeted, explaining that many people now want to leave the country. Properties once valued at $15,000 to $20,000 are now being sold for less than $5,000.

The market’s decline is not limited to luxury homes. Ángel Marcelo Rodríguez Pita, an entrepreneurship advisor, noted that in areas like Centro Habana and Old Havana (La Habana Vieja), apartments are being sold for as little as $2,000 to $3,000. These types of properties, once popular for short-term tourist rentals, are losing their appeal, further exacerbating the crisis for property owners.

The situation is worsened by the new tax classifications, which divide properties into five categories with different tax rates based on their location:

1. Properties in special economic development zones.
2. Properties in key tourist areas like Old Havana and Varadero.
3. Properties in various municipalities in the capital, including Cerro and Centro Habana.
4. Properties in provincial capitals and select surrounding municipalities.
5. Properties in other municipalities throughout the country.

These new categorizations could have a significant impact on property values, depending on location. However, many Cubans are questioning whether these new taxes are sustainable in a country where most citizens are already struggling with inflation and economic dissatisfaction.

The introduction of this tax reform will undoubtedly spark further debate in Cuban society about the viability of the real estate market, which, despite being liberalized in 2011, still faces deep challenges.

With these changes, the Cuban government seeks to strengthen its fiscal control while citizens continue to search for ways to survive in a harsh economic environment.