How to Run Payroll in Cuba: Employment Taxes & Setup

Milani Notshe

Research Specialist

Last Updated

February 13, 2026

In This Guide

Example H2

Leave The hiring
to a local expert

Hire in Cuba with ease—our experts handle employment and compliance for you.

Enquire Now

Running payroll in Cuba involves many moving parts before your team sees money land in their accounts. Each month you need to calculate gross-to-net correctly, apply statutory withholdings and employer contributions, issue compliant payslips, plus file and remit on schedule. If anything slips through the cracks, you could face penalties, back-pay exposure, and unnecessary friction with your people.

If you’re hiring in Cuba, whether you’re building a local presence or expanding your global footprint, this guide is for you. We’ll walk through the choices and compliance requirements that have the biggest impact on your speed and risk, from entity vs. no-entity hiring to worker classification and the statutory bodies you’ll interact with along the way. By the end, you’ll know exactly what to expect and how to keep payroll running smoothly, wherever you’re hiring.

Key Takeaways

Payroll cycle: Employers in Cuba generally process payroll on a monthly basis.

Tax filing: Income tax withholdings and social security contributions are typically reported and remitted monthly.

Employer taxes: Employer obligations include social security contributions and other statutory payments calculated as percentages of employee wages.

Tax year: Cuba’s tax year follows the calendar year, from January 1 to December 31.

Payroll processing methods: Payroll is usually managed in-house or outsourced to local providers familiar with Cuban tax and social security rules.

How to Choose Your Payroll Structure in Cuba

Expanding into Cuba? Building a compliant payroll setup involves much more than simply paying salaries. You’ll be responsible for employment compliance, monthly tax and social declarations, and mandatory benefits. Even small delays in filings or payments can lead to real penalties.

You have several operating models to choose from to make this easier. The right one depends on your legal footprint, your appetite for risk, and how quickly you need to start hiring. Let’s break down the main options and when to use each.

1. No Local Entity in Cuba: Use an Employer of Record (EOR)

If you don’t yet have a legal entity in Cuba, an Employer of Record is usually the fastest and lowest-risk way to hire. An EOR becomes the legal employer on paper, provides locally compliant employment contracts, and manages payroll under local regulations, while you continue to direct the work and manage performance.

This model is ideal for:

Testing a new market
Hiring your first team members
Scaling a distributed workforce without building local infrastructure,

Why it’s the fastest and least risky option:

You skip the lengthy process (and cost) of setting up an entity.
All local registrations, monthly declarations, and statutory payments are handled by a provider already set up in-country, dramatically reducing your compliance risk.

2. You Have a Cuba Entity: Run In-Country Payroll

If you already operate a local entity, or you’re planning to establish one, running payroll directly gives you maximum flexibility and control. You can set your own policies, design benefits, and align payroll closely with your finance and internal approval processes. But this also comes with greater operational responsibility.

What you’re responsible for:

Registering with relevant authorities and maintaining compliance with statutory bodies (often involving CSS/IPRES or similar local institutions).
Accurately calculating and remitting payroll taxes and contributions every month – plus handling year-end requirements.
Issuing compliant payslips and maintaining audit-ready payroll documentation.

When this option makes sense:

You’re hiring at scale and want payroll fully “in-house,” even if you partner with a local provider for execution.
You need deeper integration with finance systems or custom benefit structures.

If you want to keep the entity but offload the admin, many employers choose global payroll services to handle calculations, filings, and payments while they remain the legal employer.

3. Contractors Only: Use Contractor Management

Paying independent contractors is often simpler than setting up full payroll, especially for short-term or highly specialized work.

However, you need to watch out for misclassification risk. In Cuba, as in many jurisdictions, someone may legally qualify as an employee based on how they work – not what their contract says. If they’re under your direction, working like an employee, you may be responsible for full employer obligations.

When contractor payments work well:

You need specialised expertise for a defined scope or timeframe
The contractor operates independently, not under your control or supervision

You can also use contractor management services to streamline compliant contracts, invoicing, and payments.

Run Compliant, On-Time Payroll In Cuba

Switch to using a single source of truth to manage payments, taxes, benefits, and reporting from one powerful dashboard.

Book a Demo

What To Know About Payroll Processing In Cuba

Payroll in Cuba centers on four main obligations: personal income tax withholding, employer and employee social security contributions, any applicable local levies, and periodic payroll reporting to the Oficina Nacional de Administración Tributaria (ONAT) and the social security system. You need to align employment contracts, timekeeping, and benefits with Cuban labor law so that every payroll run correctly reflects statutory deductions and employer charges. Non-compliance can quickly escalate into fines, late-payment interest, audits, and strained relationships with employees who rely on accurate and timely pay.

Rules can differ depending on the sector, the size of your operation, and whether workers are paid in CUP or in foreign-currency-linked schemes, so your team must confirm the specific regime that applies before onboarding staff. This guide walks you through how to calculate Cuban payroll taxes, understand the main contribution rates, meet filing and payment deadlines, and choose the right setup whether you operate your own entity or use an Employer of Record. With a clear process, you can keep payroll compliant while focusing on scaling your presence in Cuba.

Payroll Cycle in Cuba

The payroll cycle in Cuba is usually monthly, with employees being paid as stipulated in employment contract.

Minimum Wage

In 2026, the current minimum monthly wage in Cuba ranges from approximately CUP 2,100 to CUP 6,310 per month, depending on job classification and hours worked, which is equivalent to roughly $80–$265 USD.

Types Of Payroll Taxes In Cuba

In Cuba, payroll taxes revolve around personal income tax, social security contributions, and certain employer-focused levies that fund social programs. You are responsible for withholding and remitting employee taxes, calculating and paying employer contributions, and keeping accurate records that match what you report to ONAT and the social security authorities.

Personal Income Tax (Impuesto Sobre Los Ingresos Personales)

Personal income tax is withheld from employees based on progressive annual income brackets, with typical effective rates ranging from around 15% to 50% for higher earnings. Employers calculate the withholding on taxable salary and certain bonuses, deduct it at source, and remit it to ONAT, usually on a monthly basis aligned with the payroll cycle. Under-withholding or late payment can trigger penalties, interest, and potential audits of both your company and affected employees.

While the employee bears the economic burden of personal income tax, you are legally responsible for correct calculation and timely remittance. ONAT can compare your payroll reports with other filings, and discrepancies may lead to assessments, restrictions on operating licenses, or additional scrutiny of your broader tax position.

Social Security Contributions (Seguridad Social)

Cuban social security contributions finance pensions, sickness and maternity benefits, and other social protections, and they are shared between employer and employee. Employers typically contribute in the range of about 12%–14% of gross payroll, while employees contribute around 5% of their covered earnings, subject to specific rules for different sectors and categories of workers. Contributions are calculated on gross salary up to statutory bases and are paid monthly to the social security system through the designated collection channels.

Failure to pay social security on time can result in surcharges, fines, and potential issues with employees accessing benefits such as pensions or medical leave. Authorities may also require you to regularize unpaid periods with back payments and interest, so integrating social security calculations into every payroll run is essential.

Employer Payroll Levies And Local Charges

Beyond income tax and social security, employers in Cuba may face additional payroll-related levies, such as contributions to specific social funds or local charges depending on the municipality and sector. These amounts are generally calculated as a small percentage of payroll or as fixed fees per employee, and they are paid by the employer on top of wages and standard social security contributions, often bringing the total employer burden to roughly 15%–18% of gross salary. Payment schedules are usually monthly or quarterly, coordinated with your main tax and social security remittances.

Non-compliance with these employer levies can lead to local penalties, difficulties renewing operating permits, or restrictions on participating in certain state contracts. Your team should confirm with local authorities and advisors which additional charges apply to your specific activity and ensure they are built into your payroll cost model and payment calendar.

How To Pay Employees In Cuba

Employees in Cuba are most commonly paid via bank transfer in Cuban pesos (CUP), although some arrangements in special zones or joint ventures may involve foreign-currency-linked components subject to strict rules. Payroll is typically processed monthly, and you should align your pay date with employment contracts and any sector-specific norms so that wages are available on or before the agreed payday. If you do not have a local entity, you will usually need to work with an Employer of Record or a compliant local partner, as direct hiring from abroad is heavily regulated.

Payslips should clearly show gross salary, overtime, bonuses, taxable and non-taxable items, employee social security contributions, personal income tax withheld, other deductions, and net pay in CUP. You should also include the pay period, payment date, employee identification, and employer details so that records match what is reported to ONAT and the social security authorities. Maintaining consistent payslip formats and secure distribution, whether printed or electronic, helps employees understand their pay and supports you during inspections.

Payment Method: Use bank transfers in CUP to employee accounts at authorized Cuban banks, unless a specific regime allows a different structure.
Pay Frequency: Run payroll on a monthly cycle and ensure funds reach employees on or before the contractually agreed payday.
Currency Rules: Confirm whether your employees must be paid entirely in CUP or if any foreign-currency-linked components are permitted under local regulations.
No-Entity Hiring: If you lack a Cuban entity, engage an Employer of Record or compliant local partner to handle hiring, payroll, and statutory remittances.
Payslip Content: Include gross earnings, itemized deductions for income tax and social security, other withholdings, and net pay, along with employee and employer identifiers.
Record Keeping: Store payroll records and payslips securely for the legally required retention period to support audits and employee queries.
Bank And Tax IDs: Ensure each employee has the necessary identification and bank details before the first payroll run to avoid payment delays.

Payroll Set Up Checklist (Entity Vs No-Entity)

Getting payroll right in Cuba starts with choosing whether to operate through your own local entity or to rely on an Employer of Record that already has the necessary registrations. With an entity, you control employment directly but must handle all registrations, calculations, filings, and payments yourself; with no entity, you outsource those obligations while still managing budgets and approvals.

Whichever route you choose, you need clear processes for collecting employee data, defining compensation structures, and mapping every pay element to the correct tax and social security treatment. A structured checklist helps your team avoid missed registrations, late filings, and misclassified payments that could trigger penalties or disrupt operations.

Decide Structure: Choose between setting up a Cuban entity or using an Employer of Record based on your headcount, timeline, and risk appetite.
Register With Authorities: If you create an entity, obtain tax registration with ONAT and register as an employer with the social security system before hiring.
Open Local Bank Accounts: Set up corporate bank accounts in CUP to fund payroll, tax, and social security payments.
Define Compensation Policies: Standardize salary bands, allowances, and bonus rules and confirm how each item is treated for tax and social security.
Collect Employee Data: Gather identification numbers, bank details, contracts, and any documentation needed for specific tax or social security categories.
Select Payroll System: Implement payroll software or a provider that can handle Cuban rules, calculations, and reporting formats.
Map Deadlines: Build a calendar of monthly and annual due dates for income tax, social security, and any local levies.
Internal Controls: Establish approval workflows for payroll changes, new hires, and terminations to reduce errors and fraud.
Reporting Framework: Align payroll reports with your accounting and group reporting so that labor costs and liabilities are reconciled each month.

Example Of Salary Tax Calculation

Imagine a Cuban employee with a monthly gross salary of 20,000 CUP under the standard regime. Your payroll system must calculate employee social security contributions, estimate the appropriate personal income tax withholding based on annualized income, and then add employer social security and other levies on top of the gross salary to determine your total cost.

The goal is to ensure that the net pay reaching the employee matches the contract while all statutory amounts are correctly withheld and remitted. By following a consistent step-by-step approach, you can replicate accurate calculations across your workforce and easily explain payslips to employees and auditors.

Step 1 – Determine Gross Pay: Confirm the monthly gross salary of 20,000 CUP including any fixed allowances that are taxable.
Step 2 – Calculate Employee Social Security: Apply an employee social security rate of around 5% to 20,000 CUP to get a 1,000 CUP deduction.
Step 3 – Estimate Income Tax: Annualize the salary, place it in the correct progressive bracket, and compute the monthly withholding, for example around 20% effective rate or 4,000 CUP.
Step 4 – Compute Net Pay: Subtract social security and income tax (1,000 CUP + 4,000 CUP) from 20,000 CUP to arrive at a net pay of 15,000 CUP.
Step 5 – Add Employer Costs: Apply employer social security and other levies of roughly 15%–18% to 20,000 CUP, adding about 3,000–3,600 CUP to your total employer cost.

Submitting Employee Tax In Cuba

Employee tax and social security in Cuba are typically submitted through official payment channels designated by ONAT and the social security authorities, often via bank transfers linked to your registered tax account. Before each submission, you need your employer tax ID, payroll period details, aggregated withholding amounts, and any required electronic or paper forms generated by your payroll system.

ONAT Portal Or Interface: Use the official ONAT systems or prescribed forms to declare monthly income tax withholdings for employees.
Bank Transfers: Initiate bank transfers from your corporate account to the designated treasury or social security accounts using the correct payment references.
Payroll Software Files: Generate standardized reports or files from your payroll system that summarize tax and contribution amounts by period.
Third-Party Provider: If you work with an Employer of Record or payroll provider, validate their monthly reports and confirm that payments were made on time.
Reconciliation: Reconcile payment confirmations with your general ledger and payroll records to ensure all liabilities are cleared for the period.

Payroll Tax Due Dates In Cuba

Tax Type	Due Dates
Monthly Personal Income Tax Withholding	Typically due by the 15th day of the month following the payroll month.
Monthly Employer And Employee Social Security Contributions	Typically due by the 15th day of the month following the payroll month.
Monthly Employer Payroll Levies Or Local Charges	Commonly due by the 15th day of the month following the payroll month, subject to local rules.
Annual Income Tax Reconciliation For Employees	Generally due in the first quarter of the year following the tax year, according to ONAT schedules.
Annual Employer Payroll Summary Filing	Usually due in the first quarter of the year following the payroll year, aligned with ONAT requirements.
Adjustments And Late Declarations	Due immediately upon assessment or within the specific deadline set by ONAT in the notice.

Running Payroll Processing in Cuba

So, what does it actually take to run payroll in Cuba? It involves calculating monthly salaries, applying the right statutory deductions, and making sure your team gets paid accurately and on time, while staying fully compliant with local tax and labour laws.

Let’s walk through what that looks like in practice:

Monthly Payroll Workflow

Gather all the essentials: hours worked, leave taken, new joiners, leavers, and any salary or benefit changes.
Double-check timesheets, leave balances, overtime, and any variable pay to make sure everything is accurate.
Work out gross earnings, including base salary, bonuses, commissions, and allowances.
Apply mandatory and voluntary deductions, like income tax, pension contributions, benefits, and any company-specific deductions. Then, calculate net pay after all deductions.
Run internal reviews, compare with previous payroll cycles, and get the necessary approvals.
Pay employees via bank transfer and share payslips through email or your payroll system.
Send statutory payments and required reports to tax authorities.
Update your records and ensure payroll entries flow correctly into your accounting system.
Share payroll summaries with finance and address any open questions or discrepancies.

How Playroll Streamlines Processing

Keeping track of all these steps, especially in a new market, is no easy task. Regulations change, requirements shift, and it’s easy for things to fall through the cracks. Playroll makes this effortless by managing the entire payroll process for you: onboarding employees, handling calculations and deductions, issuing payslips, transferring funds in Cuban Peso, and taking care of statutory filings and compliance.

Income Tax And Social Security In Cuba

Understanding the tax obligations for both employers and employees is crucial when operating in Cuba's business landscape. This section explains how taxes and statutory fees affect payroll and individual earnings in Cuba.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 15%–18% on top of the employee salary in Cuba. This range reflects standard social security contributions plus any applicable employer levies that may vary by sector or location.

Tax Type	Tax Rate
Employer Social Security Contribution	Approximately 12%–14% of gross payroll.
Employer Health And Social Protection Funds	Approximately 2%–3% of gross payroll, depending on regime.
Employer Local Payroll Levies	Typically around 1%–2% of gross payroll where applicable.
Employer Occupational Risk Coverage	Commonly around 1% of gross payroll, varying by risk category.
Employer Training Or Development Funds (If Applicable)	Up to 1% of gross payroll in certain sectors or agreements.

Employee Payroll Tax Contributions

In Cuba, the typical estimation for employee payroll contributions cost is around 5%.

Tax Type	Tax Rate
Employee Social Security Contribution	Around 5% of gross salary under the standard regime.
Employee Pension Insurance Portion	Included within the 5% social security contribution.
Employee Health Coverage Portion	Included within the 5% social security contribution.
Voluntary Additional Pension Savings (If Offered)	Variable percentage elected by the employee, not mandatory.
Union Or Collective Contributions (If Applicable)	Small percentage or fixed amount agreed in collective arrangements.

Individual Income Tax Contributions

Individual income tax in Cuba is generally calculated on annual taxable income using progressive brackets, with higher earners paying higher marginal rates. Employers withhold tax at source for employees, while some individuals may need to file annual returns to reconcile their final liability.

Income Bracket	Tax Rate
Up to 12,000 CUP per year	0%
12,001 – 24,000 CUP per year	15%
24,001 – 48,000 CUP per year	20%
48,001 – 96,000 CUP per year	30%
96,001 – 192,000 CUP per year	40%
Above 192,000 CUP per year	50%

Pension in Cuba

Pension benefits in Cuba are funded primarily through mandatory social security contributions from both employers and employees, which build entitlement to state pension payments. Eligibility, retirement age, and benefit formulas are defined by social security legislation, so your payroll must correctly classify workers and report contributions to ensure their future pension rights are protected.

Managing Common Payroll Challenges in Cuba

Global employers operating in Cuba often encounter unique payroll challenges that can affect compliance and efficiency, like navigating evolving tax laws and managing employee data. With a need for real-time accuracy, modern organizations must develop strategies to overcome these challenges effectively. Below, we explore some of the most common payroll hurdles and provide actionable solutions to streamline payroll processes in Cuba.

Maintaining Accurate And Detailed Payroll Reports

Maintaining accurate global payroll reports is often challenging due to currency exchange complexities, data integration issues, and the need to keep employee information up-to-date –including tax information, hours worked, leave balances, and any changes in salary or job status. Generating accurate reports is easy with a comprehensive payroll automation tool that consolidates fragmented data sources, and can keep track of employee payments and deductions.

Keeping up with ever-changing tax laws & Compliance Laws

In Cuba, tax laws and compliance regulations can change frequently, presenting a significant challenge for global employers. Monitoring updates to federal, state, and local tax codes is crucial to avoid non-compliance and costly penalties, but requires significant time and resources. Partnering with local experts or a reputable global HR platform is an effective way to maintain compliance. These services can help employers stay compliant with evolving regulations while freeing up time for more strategic work.

Consolidating Multi-Vendor Payroll Analytics

Managing payroll across multiple vendors often leads to fragmented data and inefficiencies, making it difficult to consolidate analytics. These challenges can hinder decision-making, especially when trying to gain a clear view of workforce costs and trends. To address this, organizations can invest in a centralized payroll management system that unifies data from multiple vendors. A consolidated platform simplifies payroll tracking, ensures data accuracy, and provides actionable insights into payroll expenditures.

Integrating Multiple HR & Payroll Systems

Global companies are prone to using multiple HR or payroll systems across regions, which can easily lead to fragmented payroll data, increasing the risk of delays and errors in employee compensation. To combat this, seamless integration between payroll and other systems is critical.

Payroll management systems that connect with existing HR and financial platforms can help streamline workflows by reducing manual inputs and ensuring that all departments operate with up-to-date, accurate information. In turn, this helps guarantee on-time, accurate payroll, boosting employee satisfaction.

How Playroll Can Streamline Payroll & Taxes In Cuba

Expanding globally is an exciting milestone for any company, but it comes coupled with complex payroll challenges. It doesn’t have to be complicated. At Playroll, our easy-to-implement global payroll management software combines automation with hands-on support to make global payroll truly simple. Here's how Playroll helps:

Multi-Vendor Integration: Our platform syncs seamlessly with your providers and in-house systems to unify global payroll services in one platform.
Standardize Payroll Processes: Unify your operations in one dashboard to ensure payroll is running smoothly globally, with advanced approval flows and reports.
Improve Governance & Compliance: Improve compliance by centralizing all your compliance tasks and processes. Easily track your payment obligations, with digitized audit trails.
Advanced Reporting: Access and configure your data, your way, with a comprehensive suite of payroll analytics and reporting tools.

Disclaimer

THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). Playroll does not provide legal or tax advice. The information is general and not tailored to a specific company or workforce and does not reflect Playroll’s product delivery in any given jurisdiction. Playroll makes no representations or warranties concerning the accuracy, completeness, or timeliness of this information and shall have no liability arising out of or in connection with it, including any loss caused by use of, or reliance on, the information.

ABOUT THE AUTHOR