Cuban Regime Introduces New Rules for Profit Distribution in State-Owned Enterprises

The National Institute of State-Owned Enterprise Assets (INAEE) unveiled Resolution 2/2026 on Wednesday, setting forth new guidelines for the allocation of profits within the Cuban state enterprise system. This includes payments to employees, the establishment of reserves, and fund management within corporate groups.

Officially issued on July 24 and published in the Ordinary Official Gazette No. 72 of 2026, the resolution will take effect on January 1, 2027. It is part of a regulatory package linked to Decree-Law 120 "On the Cuban State Enterprise System."

Resolution 2/2026 targets state-owned companies and subsidiaries, commercial enterprises—including state micro, small, and medium enterprises (mipymes)—and business groups.

Employee Advances and Financial Implications

A significant aspect for workers is the option to receive profit advances throughout the year, based on first, second, and third-quarter results. These advances can reach up to 50% of the available profit for this purpose, but they are not calculated on all company earnings. Initially, taxes, state capital investment returns or dividends, and other factors such as deferred expenses, surplus income, and unresolved discrepancies must be deducted.

Payments occur in the following quarter and depend on the company's available liquidity. Additionally, these advances are subject to Personal Income Tax and the Special Social Security Contribution, although they are not classified as wages and are exclusively paid in Cuban pesos.

Conditions and Restrictions on Profit Distribution

Firms wishing to distribute profits in advance must meet various criteria, including the absence of overdue tax liabilities. Furthermore, the resolution outlines conditions for entities rated as "Deficient" or "Poor" in audits. Workers not identified as responsible for deficiencies may partake in profit distribution unless poor evaluations result from accounting manipulations that misrepresent the company's actual performance.

Advance payments are not final. Should it be revealed that a company overpaid its workers, it must reclaim the excess and halt further payments until sufficient profits are regenerated.

Reserves and Financial Management

At the fiscal year’s conclusion, the reserved amount for worker profit distribution is determined. Beyond these payments, enterprises can create voluntary reserves from retained earnings after fulfilling fiscal and financial obligations. These reserves require approval from the management board, aligning with the interests of workers, the company, and society, with input from the union and worker participation.

These reserves may cover debts, fund investments, training, graduate programs, science and innovation projects, labor incentives, and even housing projects to stabilize the workforce. They also support creating subsidiaries, state or mixed mipymes, and other financial ventures.

Companies with past losses must allocate part of their retained earnings to offset them before freely using those resources. Directors of business entities can preemptively utilize up to 20% of undistributed retained earnings as voluntary reserves, pending approval. This mechanism excludes resources earmarked for worker profit distribution.

Economic Directives and State Contributions

The resolution also regulates the contribution companies must provide to the state for state investment returns or through dividends. This amount is annually defined in the Economic Plan and State Budget directives and subsequently distributed among relevant entities.

For state banks, a specific provision is set: they must contribute 30% of post-tax profits, although the Central Bank of Cuba may approve a different rate. In 2027, economic entities with shares in commercial enterprises and joint ventures are required to contribute 50% of collected dividends to the State Budget within ten business days of receipt. State mipymes partners and shareholders of new commercial enterprises established after Decree-Law 120’s implementation are exempted.

This resolution is part of the restructuring of the state enterprise system initiated following the INAEE's establishment under Decree 144 of 2026, an entity under the Council of Ministers tasked with guiding the transformation of the state enterprise sector.