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Cabo Verde Corporate - Tax credits and incentives

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Foreign Investor Status (Estatuto do Investidor Externo)

The Foreign Investor Status, which has granted some tax benefits at the level of the investor (e.g. exemption from WHT on distribution of profits and on interest related to the financing of the investment) was revoked by the New Investment Law effective as from 1 January 2013. The tax benefits already granted or for which recognition has been requested prior to the entry into force of the Tax Benefits Code (TBC) and the Investment Code are maintained. Investment projects submitted for analysis and approval to the competent authorities prior to the entry into force of the Tax Benefits Code continue to be regulated under the legislation in force at the date of the respective submission.

Contractual tax benefits

There are exceptional incentives, regarding customs duties, CIT, personal income tax (PIT), property tax, and stamp duty, to investments that fulfil all of the following conditions:

  • Investment value over CVE 550 million (or CVE 275 million if carried out outside the municipalities of the Praia, Sal, and Boavista).
  • Relevant investment for the promotion and acceleration of economic development, under the government's program.
  • Creation of at least ten jobs.

The concession of contractual tax benefits is subject to approval by the Council of Ministers upon agreement.

Industrial activity

The following tax and customs benefits are provided for industrial activity:

CIT benefits

A CIT credit is available for up to 50% of the eligible investments made in an industrial activity. Any unused tax credit may be carried forward for ten years, subject to certain limitations.

Eligible investments include the acquisition of new fixed assets, patents, and licences regarding technologies.

IUP benefits

Industrial activities may benefit from an exemption from IUP on the acquisition of immovable property used exclusively for industrial purposes; however, the recognition of such tax exemption should be approved by the municipality.

Customs duty benefits

Industrial activities benefit from an exemption from customs duties on the import of construction material, machines, utensils, semi and finished materials, products, and raw materials used in the production of goods.

Stamp duty benefits

Financing transactions of industrial projects are exempt from stamp duty.

International Business Centre (IBC) of Cabo Verde

The Cabo Verdean Agency for Foreign Investment is the entity responsible for granting the licences to operate within the IBC, upon previous proposal of the Zona Franca Comercial S.A.. The following tax benefits are applicable to entities licensed to operate in the IBC on income from industrial or business activities and services in respect of operations carried out with other IBC licensed entities or with non-residents entities (without a PE in Cabo Verde).

Note that these tax benefits are not applicable to entities engaged in tourism, banking and insurance, real estate, or construction.

CIT benefits

Reduced CIT rates of 5%, 3.5%, or 2.5% are applicable to entities that create respectively 10, 20, or 50 jobs.

The CIT rate is 2.5% in case of the creation of 4 jobs for entities licensed to operate within the International Service Centre.

Entities licensed to operate within the IBC are granted to benefit from reduced CIT rates until 2030.

Shareholders benefits

Shareholders of the entities licensed to operate within the IBC are exempt from taxation on dividends and interest received.

VAT and customs duty benefits

All the exemptions foreseen in the VAT regulation and customs law apply.

An exemption from customs duties applies with respect to certain goods, equipment, and materials used within the scope of the activity developed and licensed under the IBC.

Maritime transport (Tonnage tax)

Cabo Verdean tax legislation foreseen a special regime for the assessment of the taxable profit applicable to maritime transport activities (tonnage tax).

Entities licensed in the IBC that carry out activities related to the international maritime transport of persons or goods may opt for a special regime for the assessment of the taxable profit, provided that they fulfill the following conditions:

  • All the ships and vessels owned by the taxpayer must be registered in the International Register of Ships of Cabo Verde (further regulation shall be published), and all the activity carried out must be eligible;
  • At least 85% of the total income derives from activities carried out with other entities licensed and operating in the IBC or with non-resident entities.

Under the tonnage tax regime, the taxable profit shall be determined by applying the following daily amounts to each eligible ship or vessel:

 

Net tonnage Daily taxable income for each 100 net tonnes
Up to 1,000 net tonnes CVE 646
From 1,001 to 10,000 net tonnes CVE 566
From10,001 to 25,000 net tonnes CVE 307 
Above 25,000 net tonnes CVE 103 

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.

In the case of changing from the tonnage tax regime to the general CIT regime, the tax value of the assets held corresponds to the one resulting from the application of the general rules foreseen in the CIT Code, as if the taxpayer had not applied the special regime. Additionally, tax losses or any tax credits carried forward originated during the taxable periods to which the special regime applied are disregarded.

Tax and financial incentives for internationalisation of Cabo Verdean companies

A regime that provides for tax and financial incentives for investment projects in order to promote the internationalisation of Cabo Verdean companies is in force.

The following incentives, to be granted under a contract of not more than three years, apply to internationalisation projects of companies with head office and place of effective management in Cabo Verde that are undertaken before 31 December 2020.

CIT benefits

Investments that are eligible for the regime of tax benefits for internationalisation may benefit from:

  • Reduced CIT rate of up to 50%, applicable until the term of the investment contract.
  • Exemption from CIT on income obtained by qualified expatriate employees.

Additionally, a deduction for creation of employment ranging between CVE 26,000 and CVE 35,000 for each new job created may apply.

IUP benefits

An exemption from IUP may be available on the acquisition of immovable property for the establishment or expansion of the activity of the investor.

VAT and customs duty benefits

Exemptions provided for in the VAT Code apply, as well as customs duties incentives as provided for in the general applicable legislation.

Stamp duty and other benefits

An exemption from stamp duty is available on the incorporation of companies on an increase of share capital of existing companies, and on financing transactions.

An exemption from notary and registration fees is available on the incorporation and registration of companies.

Touristic Utility Status (Estatuto de Utilidade Turística)

Cabo Verde may grant Touristic Utility Status to certain touristic projects. Touristic Utility Status is granted to the following types of touristic projects:

  • Installation: Granted to new touristic projects.
  • Functioning: Granted to touristic projects starting to operate.
  • Refurbishment: Granted to touristic projects in case of refurbishment projects with a value of at least 25% of the initial investment.

Touristic Utility Status generally allows for the following tax incentives and benefits:

  • CIT credit of up to 50% of the eligible investments made in tourism, touristic promotion activities, and real estate tourism project investment.
  • Exemption from IUP on the acquisition of real estate used for construction and installation of touristic projects if granted by the municipality.
  • Exemption from customs duties on the importation of materials and equipment used in touristic projects.
  • Exemptions from stamp duty on the financing of tourism investments.

Tax incentives for renewable energies

There is a regime for promotion, encouragement, and access, licensing, and exploitation inherent to the exercise of independent production and self-production of electricity based on renewable energy sources.

Water, wind, solar, biomass, biogas or industrial, agricultural or urban waste, oceans and tides, and geothermal are to be considered sources of renewable energy. Under the regime, renewable energy producers may benefit from the following.

CIT benefits

A CIT credit is available for up to 50% of the eligible investments made in renewable energies projects.

Customs duty benefits

An exemption from customs duties and other customs charges applies on the importation of capital goods, raw materials and supplies, finished and semi-finished products, and other materials that are incorporated or used in the production of goods or services involved in the production of electrical energy from renewable sources.

IUP and stamp duty

Exemptions from IUP and stamp duty are granted on the acquisition of immovable property and other assets related to the investment project or its financing.

Shipping transport industry incentive

CIT benefits

A CIT credit is available for up to 50% of the eligible investments made in shipping, air, and sea transportation projects.

Customs duty benefits

An exemption from customs duties applies on the importation of shipping material for the maintenance, production, and repair of shipping and respective equipment.

IUP and stamp duty

Exemptions from IUP and stamp duty are granted on the acquisition of immovable property and other assets related to the investment project or its financing.

Job creation incentives

Entities taxed under the verification method are entitled to deduct the following amounts for each created permanent job:

  • CVE 26,000 for each job created in the municipalities of Boa Vista, Praia, and Sal.
  • CVE 30,000 for each job created in the remaining municipalities.
  • CVE 35,000 in case of a disabled person.

Media, telecommunications, and internet

Importation of goods, materials, equipment, vehicles, and other equipment exclusively for the purpose of telecommunications and media are exempt from customs duties.

Incentives on the import of vehicles

The following exemptions from customs duties, excise duty and VAT are grated:

- 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 six years.on the import of heavy passenger vehicles for collective transport of passengers, 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

It is granted 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 five 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 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.

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).

Eligible companies shall benefit from the incentives provided for in article 13 (exemption from property tax), article 15 (exemption from customs duties) and article 332 (training, internships and scholarships) of the Tax Benefits Code, as well as of the incentives foreseen for employers hiring young people.

Eligible companies benefiting shall be subject to the payment of autonomous taxation under the general terms foreseen in the CIT Code.

Interest rate support for microproduction of renewable energies

It is granted 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 microproduction 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 five tons

It is granted an exemption from payment of fees in obtaining fishing icenses for boats up to five tons, registered in the National Vessel Registration System and whose holder has more than one boat.

Tax benefits to the financial sector

The Tax Benefit Code has several measures in the financial sector, as follows.

Financial investments

Income derived from certificates of deposit and long-term bank deposits benefit from a CIT exemption of up to 75% (depending on the maturity date of the deposits).

Securities market (bonds)

Income derived from bonds or similar products (except public debt securities) listed in the securities market obtained until 31 December 2025 benefit from a 5% CIT flat rate.

Additionally, dividends from shares listed in the stock exchange, placed at the disposal of its holders until 31 December 2025, are exempt from CIT.

Investment funds (securities and real estate funds)

Income derived from securities funds, when established and operating under the Cabo Verdean legislation, is taxed as follows:

  • Income obtained in the Cabo Verdean territory is exempt from CIT (except capital gains).
  • Foreign income is subject to a 10% CIT flat rate (except capital gains).
  • Capital gains are subject to a 10% CIT rate.

Income derived from real estate funds, established under the Cabo Verdean legislation, is taxed as follows:

  • Real estate income benefits from a 10% CIT rate (after deduction of the respective expenses).
  • Capital gains benefit from a 15% CIT rate over 50% of the income, resulting in an effective rate of 7.5%.

Income received by unit holders in securities funds and real estate investment funds, established under Cabo Verdean legislation, is exempt from CIT.

Venture capital funds

Income derived from venture capital funds, established under Cabo Verdean legislation, as well as income received by the unit holders in venture capital funds, is exempt from CIT.

Credit institutions with restricted authorisation

It is granted the following tax benefits applicable to credit institutions with restricted authorization, foreseen by Law no. 61/VIII/2014, of 23 April:

  • CIT rate of 10%, applicable up to 31 December 2021, levied on profits derived from activities carried out with non-resident entities; profits realized from 1 January 2022 onwards shall be taxed at the standard rate in force;
  • exemption from customs duties on the import of materials and supplies intended exclusively for the installation of those institutions.

Restricted authorization banks already established and authorized to operate in the Cabo Verdean financial system can request the Central Bank (Banco de Cabo Verde) to transform into generic authorization banks up to June 30, 2019, and proceed to carry out financial transactions with residents.

Loans from non-resident financial institutions

Interest from loans granted by non-resident financial institutions to resident credit institutions is exempt from CIT, provided that such interest is not attributable to the PE of those institutions located in Cabo Verdean territory.

Long-term financial investments

Income from certificates of deposit and long term deposits for a period exceeding five years are taxed at 50% of the value for terms between five and eight years (previously between five and ten years) and 25% of their value for terms of maturity over eight years (previously ten years); these benefits are extended to income from insurance products from insurance companies established in Cabo Verde, provided that it has been contractually fixed that (i) the capital invested is blocked for a minimum period of five years and (ii) the remuneration is due at the end of the contractual period.

Capital gains on sale of shares

Capital gains and capital losses on the sale of share capital or other securities, obtained by residents and non-residents with a PE in Cabo Verde, are exempt from tax if the shares have been held for a consecutive period of at least 12 months. This benefit does not apply to capital gains on the sale of share capital acquired from entities that are subject to a more favourable tax regime.

Securities market

An exemption from income tax is granted for securities issued up to 2020 and negotiated in the secondary market.

Conventional remuneration of share capital

Commercial companies or civil law companies incorporated as commercial companies, cooperatives, public enterprises, and other corporate entities of public or private legal persons, with headquarters or place of effective management in Cabo Verdean territory, may deduct from their taxable profit an amount corresponding to conventional remuneration of share capital. The amount to be deducted corresponds to 10% of the amount of entries made in cash or through the conversion loans from shareholders, within the scope of the incorporation of a company or an increase of the capital, up to CVE 100 million in each fiscal year, provided that certain conditions are met.

Tax benefits with social nature and customs duties benefits

Incentives for employers hiring young people

Individuals and legal persons under the organised accounting regime that hire workers not older than 35 years for a first job are exempt from contributions due by the employer to social security.

This benefit shall only apply to contracts with a duration of one year or more, which relate to workers registered in the social security system and provided that no reduction or elimination of jobs has occurred, and assuming that the employer has paid the contributions due by the employee to social security.

Training, internships, and grants

Companies taxed under the verification method may deduct 150% of the following costs:

  • Costs related to the training of employees.
  • Costs associated with the hiring of young people for internship positions.
  • Costs associated with scholarships granted to students.

Direct incentive to professional internships

Individuals and legal persons under the organised accounting regime may deduct from tax due the amount of CVE 20,000 for each trainee hired with contract duration of at least six months.

Donations

Companies may deduct 130% of the amounts donated to the following entities and activities, up to 1% of the turnover, under certain conditions:

  • Entities that develop, among others, social, cultural, sportive, educational, environmental, scientific, technological work, and health services.
  • State, municipalities, and any other public services.
  • Municipal associations.
  • Foundations.

Customs duties benefits

Under certain conditions, the following business sectors, among others, may benefit from customs duties exemption on the importation of products, materials, and equipment related to the activity/project:

  • Agriculture, livestock, and fishing activity.
  • Civil aeronautics.
  • Diplomatic and consular missions.
  • Aid to economic development.
  • Foreign citizen retired.
  • Sports and musicals.
  • Fire corporation.

Tax benefits to other sectors of investment

Eligible investments made in activities such as information technology and scientific research may benefit from:

  • CIT credit of up to 50%.
  • Exemptions from IUP, stamp duty, and customs duties on the acquisition of immovable property and other assets related to the investment project or its financing.

Tax benefits regarding the Recovery of Business and Insolvency Code

There are CIT, PIT, stamp duty, and property tax benefits for companies under recovery of business and insolvency procedures.

Foreign tax credit

Cabo Verdean tax law allows a foreign tax credit to mitigate the double taxation on foreign income taxed in another jurisdiction. The tax credit is equal to the lesser of: (i) the income tax paid abroad or (ii) the CIT fraction calculated before the deduction is given corresponding to incomes that may be taxed in the country concerned, net from any cost or losses, directly or indirectly incurred, for the purposes of its realisation. Foreign tax credit cannot exceed the tax foreseen in the tax treaty, if applicable.


Last Reviewed - 03 January 2019

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