The Cuban government will impose a new tax on Cuban baseball players who sign Major League contracts, but the tax rate will be much less than such athletes will pay in the United States.
The tax rate that Cuba will impose on players who sign contracts to play outside the island will be 4 percent, according to the 2019 budget law published over the weekend in Cuba’s Gaceta Oficial.
Under an agreement announced in December among Major League Baseball, the MLB Players Association and the Cuban Baseball Federation (FCB), Cuban players may now be contracted directly in Cuba and go to the United States as free agents. Negotiators said the deal was designed to cut down on illegal trafficking of Cuban stars with MLB and sometimes perilous sea crossings to third countries.
In the talks between the MLB, MLB Players Association and the FCB, the taxation of players was discussed at length and MLB negotiators were told the Cuban tax would be in the 3-4 percent range.
Current U.S. regulations allow non-immigrant Cubans to be employed in the United States, open U.S. bank accounts and pay for their expenses with the salary or other compensation they earn “provided that the national of Cuba is not subject to any special tax assessments by the Cuban government in connection with the receipt of salary or other compensation.”
“That means that if the Cuban government taxed them at a special rate, they couldn’t be paid by our clubs,” said a source familiar with the negotiations.
Although the 4 percent tax on income obtained abroad had been mentioned in a 2012 tax law, it had not been implemented until now.
Since general wages in Cuba are low, about $30 per month, the government had held off on implementing income taxes for the general population. But artists, Cubans who have private businesses, those who work in cooperatives and those working for companies that paid additional bonuses have been subject to income taxes.
This group has been charged at a rate of 50 percent for income in excess of $2,083, although certain deductions are allowed.