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Cabo Verde Corporate - Significant developments

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November 2019: 2020 State Budget Law proposal released

The Cabo Verde 2020 State Budget Law proposal was recently made available at the website of the National Directorate of State Revenue. The main changes proposed are the following:

Tax Benefits Code - Customers of Credit institutions with restricted authorisation

The following exemptions are foreseen applicable to contracts signed until 31 December 2018:

  • Exemption from Personal Income Tax until 2021, on income earned by customers of those institutions, namely non-resident natural and legal persons, or resident natural and legal persons in respect of investments held abroad;
  • Exemption from Stamp Duty on all acts and operations carried out by those institutions, whenever the taxable person is a natural and legal non-resident person, or a resident natural and legal person, in respect of investments held abroad.

Other tax incentives

Youth Start-up Program

   - Incentives for Corporate finance

It is proposed an incentive under which resident or non-resident entities with permanent establishment in Cabo Verde that make:

- cash capital contributions to companies eligible under the Youth Start-up Program, or to

- companies based in municipal territory with average of GDP per capita in the last three years below the national average, as well as to

- micro and small companies,

can deduct part of these contributions up to 2% of tax assessed in the previous tax year, provided that:

a) There are no overdue wages;

b) Their tax and contributory situation is regularized;

c) They not taxed under indirect tax methods;

d) Authorization is granted to all their bank accounts.

The deduction cap shall apply even if the company makes capital contributions in more than one eligible company.

This benefit is not cumulative with the tax benefit regarding conventional remuneration of share capital.

   - Incentives for Young Start-ups

It is proposed the maintenance of the following incentives, applicable 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 5 years of activity, starting 1 January 2019, 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 3 seats in the cabin, including the driver, with a maximum age of 5 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 remodelling 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 proposed 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 proposed that 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 proposed that eligible companies benefiting shall be subject to the payment of autonomous taxation under the general terms foreseen in the CIT Code.

Additional tax deduction of expenses with certification or accreditation

It is proposed an additional CIT deduction (of 30%) of costs with certification or accreditation of quality management systems, products, processes and services made at home or abroad. The competent authority (IGQPI – Instituto de Gestão da Qualidade e da Propriedade) must previously authorize the certification or accreditation.

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 are proposed:

  • On the import of 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;
  • On the import of 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;
  • On the import of 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”)
  • On the import of 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 above incentives shall not apply to vehicles aged more than 4 years, in case of heavy passenger transport vehicles; 6 years in case of other vehicles.

It is proposed to exempt from customs duties 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.

Incentives on the import of transport vehicles for tourists

Same as in 2019, it is proposed to exemptn from customs duties, excise duty and VAT the import of heavy passenger vehicles for collective transport of passengers, duly equipped, aged not more than 6 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 to electric mobility

It is proposed to exempt from VAT and excise duties the import of electric vehicles, including 2-wheelers vehicles.

It is also proposed to exempt from VAT and customs duties the import of new rechargeable batteries for electric vehicles, including their connectors, shields, connecting cables and meters, intended exclusively for charging.

Additionally, it is also proposed to exempt from parking fees the referred  electric vehicles.

Tax incentives to digital terrestrial television (DTT)

It is proposed the maintenance of the exemption from customs duties on the import of certain goods related with the DTT project. The exemption shall apply to the entity responsible for implementation of the DTT project.

It is also proposed the maintenance of the exemption from customs duties on equipment defined by order of the Minister that is responsible for them and the Minister of Finance and (ii) reduction of import duties by 50% on the import of television, which complies with the technical parameters defined by the resolution of the Council of Ministers.

Incentives for employers hiring young people

It is proposed the maintenance of the incentives granted to employers that hire young people. Therefore, natural and legal persons, taxed under the organised accounting regime, that hire young people aged not more than 37 years (previously, 35 years) for a first job, shall continue to be exempt from social security contributions.

This benefit shall only apply to contracts with a duration of 1 year or more, regarding employees registered in the social security system, and provided that there was no reduction or elimination of jobs. The employer is also required to have paid the contributions due by the employee to the social security.

Direct incentive to professional internships

It is proposed the maintenance of the direct incentive to professional internships. Therefore, legal entities subject to Corporate Income Tax and natural 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 6 months.

This benefit shall not cumulate with the benefit foresee in article 30 (b) 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 is proposed an interest rate support iof50%, 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.

Exemption from payment of fees due for fishing licenses of small-scale fishing boats up to 5 tons

It is proposed the maintenance of the exemption from the payment of fees in obtaining fishing licenses for boats up to 5 tons, registered in the National Vessel Registration System and whose holder has more than one boat.

VAT

Special regime for the application of VAT

It is proposed the maintenance of the special regime of application of the VAT, as foreseen in the 2008 State Budget Law, amended by the 2013 State Budget Law (Law no. 23/VIII/2012, of 31 December). Under this regime, the taxable value is assessed based on a percentage of the prices of certain goods as established by the competent administrative authority (fuel, electricity, telecommunications, transportation of passengers, freight shipping and distribution of drinking water).

This regime shall apply until the approval of the new special regime for the application of VAT on the transmission of these goods and services.

Other Levies

Customs statistic levy

It is proposed the maintenance of the customs statistics levy, created by the 2013 State Budget Law.

This charge applies to all public and private entities on all services and operations related with the dispatch of goods.

August 2019: Tax treaty between Cabo Verde and Angola signed

On 8 August 2019, the Vice-Prime Minister and Minister of Finance of Cabo Verde and the Minister of Finance of Angola signed the double taxation agreement (tax treaty) between Cabo Verde and Angola for the avoidance of double taxation and prevention of fiscal evasion on matter of taxes on income.

The tax treaty foresees, among other measures:

  • Dividends taxed at a rate of 5% in case of ownership of the share capital of at least 25% for 365 days, including the day in which dividends are paid; 10% in the remaining situations.
  • Branch profit tax of 10%.
  • Interest taxed at a rate of 8%.
  • Royalties taxed at a rate of 7.5%.
  • Technical services taxed at rate of 5% (includes management services of a technical nature, as well as consultancy services, rendered by technical staff or other staff).

The tax treaty shall enter into force on the date of reception of the last notification related with the procedures applicable under the respective domestic legislation. Its provisions shall apply for the first time as follows:

  • Regarding taxes withheld: In respect of amounts paid or credited after 31 December of the year of exchange of the instruments of ratification.
  • For other income taxes: In respect of income generated in the tax year starting after 31 December of the year of exchange of the instruments of ratification.

The tax treaty is not yet in force.

March 2019: Cabo Verde - Senegal double taxation treaty (DTT) 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 the matter of taxes on income (tax treaty).

The tax treaty foresees, among other measures,:

  • Dividends taxed at the rate of 10%.
  • Interest taxed at the rate of 10%.
  • Royalties taxed at the rate of 10%.

The tax treaty is not yet in force.

February 2019: Cabo Verde - Spain DTT 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 the matter of taxes on income (tax treaty).

The tax treaty foresees, among other measures,:

  • Dividends taxed at the rate of 0% in case the beneficial owner is a company (except if composed of natural persons) that directly owns at least 25% of the share capital of the company that pays the dividends; 10% in the remaining cases.
  • Interest and royalties taxed at the rate of 5%.

The tax treaty is not yet in force.


Last Reviewed - 25 November 2019

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Cabo Verde contacts
Leendert Verschoor Title = Leendert Verschoor width=55px
Leendert VerschoorTax Partner+351 213 599 631
Susana Caetano Title = Susana Caetano width=55px
Susana CaetanoTax Director+351 213 599 674
Adrião Silva Title = Adrião Silva width=55px
Adrião SilvaDirector, Compliance & Corporate Income Tax+351 213 599 625
André Rafael Rodrigues Title = André Rafael Rodrigues width=55px
André Rafael RodriguesManager, Compliance & Corporate Income Tax+351 213 599 617
Francisco Raposo Magalhães Title = Francisco Raposo Magalhães width=55px
Francisco Raposo MagalhãesManager, Compliance & Corporate Income Tax+351 213 599 699
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