March 2019: Cabo Verde - Senegal double taxation treaty approved for ratification
Parliament’s Resolution no. 110/IX/2019 was published in the Official Gazette of 15 March 2019. It approves for ratification the Convention between Cabo Verde and Senegal for the avoidance of double taxation and prevention of fiscal evasion on matter of taxes on income (tax treaty).
The tax treaty foresees among other measures:
- Dividends – rate of 10%;
- Interest – rate of 10%
- Royalties – rate of 10%.
The tax treaty is not yet in force.
February 2019: Cabo Verde - Spain double taxation treaty approved for ratification
Parliament’s Resolution no. 106/IX/2019 was published in the Official Gazette of 15 February 2019. It approves for ratification the Convention between Cabo Verde and Spain for the avoidance of double taxation and prevention of fiscal evasion on matter of taxes on income (tax treaty).
The tax treaty foresees among other measures:
- Dividends – rate of 0% in case the beneficial owner is a company (except if composed by natural persons) that owns directly at least 25% of the share capital of the company thar pays the dividends; 10% in the remainder cases;
- Interest and royalties – rate of 5%.
The tax treaty is not yet in force.
December 2018: State Budget Law for 2019 published
Law no. 44/IX/2018, of 31 December, which approves the State Budget for 2019, effective as from 1 January 2019, has been published.. We summarize as follows the main amendments to the Cabo Verde tax law:
Corporate Income Tax
Reduction of the Corporate Income Tax (CIT) rate - The CIT rate applicable to entities taxed under the organised accounting regime was reduced to 22% (previously, 25%).
Tax Benefits Code
International Business Center
Within the context of the International Business (IBC) Center special tax regime, it was increased the job creation requirement, from five to ten jobs in the case of companies licensed in the International Industrial Center (ICI) and International Trade Center (ITC) and from two to four in the case of companies licensed in the International Service Center (ISC).
The remainder CIT benefits to the income resulting from activities carried out with other entities licensed and operating in the IBC, as well as with non-resident entities, have remained in force.
Regarding transfer pricing, autonomous taxation, assessment and payment rules, the general rules provided for in the CIT Code shall apply. This rule was not previously foreseen in the IBC regime.
Maritime transport (Tonnage tax)
It was introduced a special regime for the assessment of the taxable profit applicable to maritime transport activities (tonnage tax). The taxable profit shall be determined by applying the following daily amounts to each eligible ship or vessel:
||Daily taxable income for each 100 net tonnes
|Up to 1,000 net tonnes
|From 1,001 to 10,000 net tonnes
|From10,001 to 25,000 net tonnes
|Above 25,000 net tonnes
No deductions are allowed to the taxable profit assessed. The taxable profit assessed is subject to CIT at the rates applicable to entities licensed in the IBC. No tax credits are available.
Retirement, Education and Retirement/Education Savings Plans and Funds
The limit of Personal Income Tax (PIT) deduction was increased to CVE 100,000 (previously, CVE 75,000) in respect of amounts invested by taxpayers in each tax year in Retirement Savings Plans (RSP), Education Savings Plans (ESP) and Retirement/Education Savings Funds (R/ESP).
The limit of the PIT exemption was increased to CVE 75,000 (previously, CVE 50,000) regarding the income received from Retirement Savings Funds (RSF), Education Savings Funds (ESF) and Retirement/Education Savings Funds (R/ESF).
Credit institutions with restricted authorisation
Previously designated “international financial institutions” have been renamed to “credit institutions with restricted authorisation”. These are now subject to CIT at the rate of 10% (previously, 2.5%) – this rate shall apply up to 31 December 2021, and shall be levied on profits derived from activities carried out with non-resident entities. Profits realized by these entities from 1 January 2022 onwards shall be taxed at the standard rate in force in Cabo Verde.
Effective 1 January 2019 onwards, the following exemptions previously granted to these entities have been revoked:
- Exemption from Stamp Duty in all acts and operations carried out by those institutions, or in which their clients intervene and,
- Exemption from withholding tax on income earned by clients of those institutions, namely non-resident natural and legal persons, or resident natural and legal persons in respect of investments held abroad.
The general Cabo Verde tax regime applies to new credit institutions with restricted authorisation, licensed from 1 January 2019 onwards.
Transformation into generic authorization banks
Restricted authorization banks already established and authorized to operate in the Cabo Verde financial system can request the Central Bank (Banco de Cabo Verde) to be transform into generic authorization banks up to 30 June 2019, and proceed in carrying out financial transactions with residents.
Incentives for savings and credit cooperatives and microbanks
The following benefits are granted to savings and credit cooperatives and microbanks, created under Law no. 83 / VIII / 2015, of 16 January, as amended by Law no. 12 / IX / 2017, of 2 August:
- Exemption from CIT for a three-year period as from the start of their, from 1 January 2019 onwards; the exemption shall apply provided that there has been no distribution of profits or if profits have been reinvested in social projects carried out by non-profit organizations registered in the Non-Governmental Organizations’ platform;
- Exemption from customs duties on the import of materials and supplied to be used exclusively for their installation;
- Exemption from customs duties, value added tax (VAT) and excise duty on the import of one vehicle, aged not more than five years, exclusively allocated to the respective activities.
Incentives on the import of heavy passenger vehicles for collective transport of passengers, passenger vehicles for executive transport and taxis
The following exemptions from customs duties, excise duty and VAT, on the importation of vehicles aged more than six years, are granted:
- Heavy passenger vehicles for collective transport of passengers comprising more than 30 seats including driver, when imported by duly licensed companies operating in the respective sector;
- New passenger vehicles, intended for executive transport, carried out by the holders of the respective license and duly authorized by the General Direction of Road Transport;
- Heavy passenger vehicles for collective transport of passengers comprising more than 15 seats including driver, when imported by public transporter with the respective permit, that is in the process of replacing licensed vehicles, as foreseen in the General Legal Regime of Transport in Motor Vehicles (“Regime Jurídico Geral de Transportes em Veículos Motorizados”);
- Heavy passenger vehicles, intended for school transport, duly equipped, comprising more than 23 seats including driver, when imported by educational entity duly authorized by the competent ministry, local authorities and public transporter, provided that those vehicles are duly licensed and authorized by the competent authorities.
The exemption from customs duties on the import of new passenger vehicles, as well as equipment, intended exclusively for the taxi service, carried out by holders of the respective taxi license, remains in force.
Incentives on the import of transport vehicles for tourists
The exemption from customs duties, excise duty and VAT on the import of heavy passenger vehicles for collective transport of passengers, remains in force. Eligible transport vehicles must be duly equipped, aged not more than six years, comprising more than 30 seats including driver, intended for exclusive transport of tourists and baggage, when imported by companies holding a license and a tourist transport permit.
Incentives for Young Start-ups
The following incentives are granted to entities that carry out directly and as main activity, an economic activity eligible under the Young Start-up Program, approved by Resolution No. 34/2017 of 25 April:
- CIT rate of 5%, applicable in the first five years of activity, except in the case of information, communication and technology (ICT) and research and development (R&D) activities, whose rate is 2.5%, regardless of the location of the head office or place of effective management;
- Exemption from customs duties, excise duty and VAT on the import of one vehicle for the transport of goods, comprising up to three seats in the cabin, including the driver, with a maximum age of five years, intended exclusively for the respective activity;
- Exemption from import duties on the import of raw and subsidiary materials, materials and finished and semi-finished products intended for incorporation into products manufactured within the scope of industrial projects; the incentive shall apply provided that the entities are certified and registered at the Industrial Registry, during the installation, expansion or remodeling phase;
- Financial incentives, support for capacity-building and other institutional support provided for in legislation of micro and small companies;
- Exemption from Stamp Duty on financing agreements for the development of the respective activities;
- Reduction of 50% of the fees due on notarial acts and registrations due on the purchase and sale of real estate for the respective installation.
It is established that eligible companies whose place of effective management is located outside the municipalities of Praia, São Vicente, Sal and Boa Vista, shall benefit from a tax credit of 50% of the CIT assessed (not applicable to ICT and R&D).
It is also establishedthat eligible companies shall benefit from the incentives provided for in article 13 (exemption from property tax), article 15 (exemption from customs duties) and article 32 (training, internships and scholarships) of the Tax Benefits Code, as well as of the incentives foreseen for employers hiring young people.
Finally, it is established that eligible companies benefiting shall be subject to the payment of autonomous taxation under the general terms foreseen in the CIT Code.
Incentives for employers hiring young people
Natural and legal persons, taxed under the organised accounting regime and that hire young people aged not more than 35 years for a first, job shall continue to be exempt from social security contributions. The employer is also required to have paid the contributions due by the employee to the social security.
Direct incentive to professional internships
Natural and legal persons taxed under the organised accounting regime may benefit from a tax credit on the CIT assessed of CVE 20,000, for each trainee hired for a minimum of six months.
This benefit shall not be cumulative with the benefit foresee in article 33 of the Tax Benefits Code (training, internships and scholarships – costs with hiring young people aged not more than 35 years).
Interest rate support for micro production of renewable energies
It was introduced an interest rate support, in 50%, on the interest on loans borrowed from financial institutions by families and by duly incorporated micro and small companies for the acquisition of equipment and installation services, aimed at the micro production of renewable energy, in accordance with the applicable legislation.
This support shall apply to final consumers covered by the normal low voltage category.