Benefits of Making Business in Cuba | Buy & Sell Business

1. BENEFITS OF MAKING BUSINESS IN CUBA

2. At MergersCorp M&A International we help our clients confidentially buy and sell privately held businesses, aligning the interests of all parties for mutual success and satisfaction. It is our goal to make the process of either buying a new business or selling your current business as smooth and efficient as possible. We know how important confidentiality is to our sellers and we treat it with the utmost importance. WWW.MERGERSCORP.COM

3. BENEFITS OF MAKING BUSINESS IN CUBA WWW.MERGERSCORP.COM

4. Country Overview The island of Cuba is the largest island in Cuba and in the Caribbean, with an area of 105,006 square kilometers (40,543 sq mi), and the second-most populous after Hispaniola, with over 11 million inhabitants. Cuba, country of the West Indies, the largest single island of the archipelago, and one of the more-influential states of the Caribbean region. It became the Spanish empire’s most-important source of raw sugar in the 18th century and later earned the sobriquet “Pearl of the Antilles.” Cuba was home to several groups of indigenous people before Christopher Columbus and his crew landed there in 1492, claiming the land for the Spanish crown. The native population was quickly decimated by disease and forced labor, and Spain imported African slaves to grow sugar cane and tobacco. Slavery was only abolished on the island in 1886. Cuba developed a close relationship with the Soviet Union, which provided its fellow communist state with economic and military support. In 1962, the Soviet Union placed nuclear missiles in Cuba, sparking the Cuban Missile Crisis, which led the US and USSR to the brink of a nuclear war. After 13 tense days, the missiles were withdrawn from the island.

5. Executive Summary Cuba, country of the West Indies, the largest single island of the archipelago, and one of the more-influential states of the Caribbean region. It became the Spanish empire’s most- important source of raw sugar in the 18th century and later earned the sobriquet “Pearl of the Antilles.” Cuba's Communist government has survived more than 50 years of US sanctions intended to topple veteran leader Fidel Castro. It also defied predictions that it would not survive the collapse of its one-time supporter, the Soviet Union. Since the fall of the US- backed dictatorship of Fulgencio Batista in 1959, Cuba has been a one-party state led by Mr. Castro and - since February 2008 - by his chosen successor and younger brother, Raul. Fidel Castro exercised control over virtually all aspects of Cuban life through the Communist Party and its affiliated mass organisations, the government bureaucracy and the state security apparatus. Exploiting the Cold War, Fidel Castro was for decades able to rely on strong Soviet backing, including annual subsidies worth $4-5 billion, and succeed in building reputable health and education systems. But, at least partly because of the US trade sanctions, he failed to diversify the economy. The US and Cuba agreed in 2014 to normalize relations.

6. Introduction – Doing business in Cuba President Obama’s push to open trade with Cuba has many U.S. small businesses itching to plant their flag on Cuban soil. But is now the right time? Here are the pros and cons of doing business in Cuba. For the vast majority of American companies, doing business with Cuba remains illegal. The economic embargo still stands (though companies such as Caterpillar and Colgate-Palmolive have spent hundreds of thousands of dollars lobbying for an opening of Cuba). That said, the Obama administration has made a few changes. In addition to lifting some travel restrictions, American financial institutions can establish accounts with their Cuban counterparts and telecommunication firms can export to and install equipment on the island.

7. Conducting business in Cuba Joint Venture: the most common type of foreign investment. It is represented by a Cuban corporation with registered shares that belong to national investors, as well as foreign ones. Joint ventures can open offices, branches and subsidiaries inside Cuba and abroad, and they can partake in companies abroad. International Economic Association Agreement: it represents the agreement between one or several Cuban investors with a single or more foreign investors for the undertaking activities that fit an international economic association. According to the Cuban laws, such agreements include: • Risk contracts for the exploitation of non-renewable natural resources; • Construction; • Agricultural production; • Hotel services and management; • Contracts for the provision of professional services; • Other activities. Our Cuban company formation experts can provide further information to foreign investors interested in these types of agreements.

8. Taxation in Cuba The Sales Tax Rate in Cuba stands at 20 percent. Income tax is levied to natural persons who engage on economic activities outside employment for the government. The Sales Tax Rate in Cuba stands at 20 percent. Cuba Sales Tax Rate - VAT - data, historical chart, and calendar of releases - was last updated on February of 2020 from its official source. In Cuba, the sales tax rate is a tax charged to consumers based on the purchase price of certain goods and services. The benchmark we use for the sales tax rate refers to the highest rate. Revenues from the Sales Tax Rate are an important source of income for the government of Cuba. Residents of Cuba pay income tax (impuesto) at anything from 10% to 50%, depending upon the level of their income. Anybody who earns up to 3000 CUP each year will pay at the lowest rate, then for every extra 3000 CUP that is earned the rate goes up by 5%, until it reaches the maximum of 50%. There is no VAT in Cuba but there is a sales tax whose rate varies depending on the type of the product. A tax rate of 2% is applied on wholesale sales, 10% on retail sales and 10% on services.

9. Trade Cuba is the 138th largest export economy in the world and the 75th most complex economy according to the Economic Complexity Index (ECI). In 2017, Cuba exported $1.41B and imported $6.21B, resulting in a negative trade balance of $4.8B. In 2017 the GDP of Cuba was $96.9B and its GDP per capita was $8.43k. The top exports of Cuba are Raw Sugar ($514M), Rolled Tobacco ($264M), Nickel Mattes ($140M), Hard Liquor ($109M) and Crustaceans ($78.1M), using the 1992 revision of the HS (Harmonized System) classification. Its top imports are Poultry Meat ($246M), Refined Petroleum ($243M), Crude Petroleum ($208M), Wheat ($176M) and Concentrated Milk ($164M). The top export destinations of Cuba are China($379M), Spain ($184M), Germany ($82.3M), Indonesi a ($55.4M) and Singapore ($52.4M). The top import origins are China ($1.35B), Spain($1.01B), Mexico ($356M), Algeria ($3 53M) and Brazil ($345M).

10. Banking in Cuba The national financial and banking system, whose governing body is the Banco Central de Cuba (Central Bank of Cuba), comprises nine commercial banks, 15 non-banking financial institutions, 10 representative offices of foreign banks in Cuba, and three representative offices of non-banking financial institutions. The insurance activity in the country can be carried out by public corporations, mutual and state companies, recognizing that the work of insurance entities shall be kept within the bounds of insurance and reinsurance operations. The Ministry of Finance and Prices (MFP by its Spanish initials) is the governing body of the insurance activity in the national territory. Cuba has a strong tradition of banking. Its first bank began operating in 1832, and by 1959 Cuba had over 49 commercial banks.

11. Our M&A Process NEGOTIATION & CLOSE POST MERGER INTEGRATION (PMI) INTEGRATION (PMI) POST MERGER TARGET APPRAISAL APPROACH DUE DILIGENCE Key Areas  Target & market analysis;  Initial assessment of synergies & value drivers;  Indicative valuation;  Go or No-Go decision;  Preparation of transaction documents (NDA – Non- disclosure Agreement/LOI- Letter of Intent);  Select Transaction team;  Appoint advisors;  Consider funding ability.  Initial approach letter;  Signing of NDA;  Prepare & share initial information requests;  Formulation of LOI (Letter of Intent) & possible negotiations;  Initial meeting and Q&A;  Circulate information on the Target to the Transaction team.  Set scope of due diligence;  Set up VDR (virtual data room);  Coordinating of due diligence, further meetings and Q&A sessions;  Consider points relevant to the Post-Merger (PMI) phase;  Revisit indicative valuation & prepare detailed valuation based on due diligence findings;  SPA negotiations with the seller;  Development of final structure (share/asset deal) and final valuation;  Approvals;  Signing of SPA & Close.  Consider the extent of integration;  Development of 100 Day PMI Plan;  Consider short & long term objectives;  Estimate requirements to capture synergies;  Determine resource needs & optimal allocation. Parties Involved  CFO;  Head of M&A;  Accountants;  Corporate finance advisors;  Consultants.  Senior management;  CEO, CFO, CTO;  Strategy director;  Head of M&A;  Head of Business Development;  Consultants.  Company general counsel;  Lawyers;  Senior management.  Company general counsel;  Lawyers;  Senior management/HR. 11 © Midaxo 2018 www.midaxo.com

12. Looking to Buy or Sell a Business? CONTACT US NOW FOR A FREE BUSINESS VALUATION WWW.MERGERSCORP.COM

13. MergersCorp.com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Member firms of the MergersCorp network of independent firms are affiliated with MergersCorp International. MergersCorp International provides no client services. No member firm has any authority to obligate or bind MergersCorp International or any other member firm vis-à-vis third parties, nor does MergersCorp International have any such authority to obligate or bind any member firm. Copyright © 2020 MergersCorp International. All rights reserved. 13 © Midaxo 2018 www.midaxo.com