COVID-19 pandemic-related extraordinary tax measures enacted
Decree-Law 37/2020, of 31 March 2020, published in the Official Gazette, established extraordinary and temporary tax measures, as well as other measures, related to the COVID-19 pandemic, as follows:
Corporate income tax (CIT)
- Postponement to 31 July 2020 of the deadline to file the 2019 CIT return (Modelo 1b) and payment of the CIT due.
- Postponement to September 2020 of the deadline to file the 2019 annual statement of accounting and tax information.
- CIT prepayments due in August and November 2020 can be paid, respectively, in September and December 2020.
- This measure applies to resident taxpayers, as well as to non-residents with permanent establishment (PE) in Cabo Verde, covered by the organised accounting regime.
- The postponement of deadlines applies also to taxpayers which tax year does not correspond to the calendar year (with the necessary adjustments).
Personal income tax (PIT)
- Postponement to November 2020 of the deadline to file the 2019 annual statement of accounting and tax information.
- This measure applies to taxpayers under Category B (business income).
Withholding taxes (WHTs)
- Upon request, WHTs due on income from Category A (employment income), Category B (business income), and Category C (real estate income) placed at the disposal of the respective beneficiary from April 2020 onward can be paid in instalments until 1 December 2020, free of interest and penalties.
- Tax obligations (filing of tax statements) must be complied with within the applicable deadlines.
- The waiving of interest and penalties ceases to apply in case on non-compliance with the deadlines to request the payment in instalments, lack of compliance with tax obligations, or lack of payment within the agreed deadlines.
- The total amount of the tax becomes due in case of lack of payment of three consecutive instalments
Value-added tax (VAT)
- VAT due in respect of March 2020 and following months (including the VAT due in respect of the month of November 2020) can be paid in monthly instalments until 31 December 2020, free from interest and penalties.
- It requires the filing of a request as well as proof of effective and significant loss of activity.
- Effective and significant loss of activity exists in case of a reduction of 30% or more of the turnover (with reference to same period).
- Not applicable in case of VAT due when the reverse-charge mechanism applies (self-assessment of VAT on payments to non-residents, as foreseen in Article 6, no. 6 of the VAT Code).
- Tax obligations (filing of VAT returns) must be complied with within the applicable deadlines.
- The waiving of interest and penalties ceases to apply in case of non-compliance with the deadlines to request the payment in instalments, lack of compliance with tax obligations, or lack of payment within the agreed deadlines.
- The total amount of the tax becomes due in case of lack of payment of three consecutive instalments.
Custom Statistics Taxes (Taxas Estatísticas Aduaneiras)
- Custom Statistics Taxes are suspended in custom clearance procedures, in respect of each addition of goods to the custom declaration and in respect of the custom exemption procedure, and per each request of waiver.
- Custom Statistics Taxes charged per custom exemption procedure applies to individual files of non-residents that return to Cabo Verde, diplomats of Cabo Verde, national policy inspectors, judges, and national police officers.
Single special tax (SST) due by micro and small companies (Tributo Especial Unificado)
- Postponement to 30 June 2020 of the deadline to file the statement of the SST due in respect of the 1st quarter 2020.
- There are no changes to the deadlines to file the statements and payment of the respective tax in respect of the 2nd, 3rd, and 4th quarters 2020.
Ongoing compulsory tax collection procedures
- Compulsory tax collection procedures are suspended in case of renegotiation of the respective payment in extended deadlines.
These measures are effective as of 1 April 2020.
Differentiated Merit Investment Projects - Regime published
Law no. 80/IX/2020, of 26 March 2020, published in the Official Gazette, establishes the regime of Differentiated Merit Investment Projects (Projeto de Mérito Diferenciado or PMD).
The status of PMD is granted to investment projects that cumulatively meet the following requirements:
- Represents an investment equal to or higher than 1.5 billion Cabo Verdean escudos (CVE).
- Contribute, in net terms, to the improvement of the balance of payments.
- Use technology, production, and commercialisation processes that minimise environmental impacts or promote environmental sustainability.
- Have a recognised productive social effect, particularly in the creation of at least five qualified jobs (those that require specialised technical training, either professional or of higher education, including management positions).
- Introduce factors capable of contributing to the improvement of the quality of supplies.
- Fulfil the general requirements to benefit from tax benefits as foreseen in Article 6 of the Tax Benefits Code (Código dos Benefícios Fiscais or CBF), namely:
- Taxation under the organised accounting regime.
- Accounting organised under the Cabo Verde general accounting principles.
- Exclusive use of the online electronic system, made available by the Tax Administration, to comply with tax obligations.
- Indirect methods of taxation are not applicable.
- Inexistence of tax or social security debts.
Investment projects with PMD status are granted the following benefits:
- Tax and custom incentives, foreseen in the CBF, namely:
- Exemption from custom duties on the import of goods and products related with the main purpose of the investment project.
- Exemption from stamp tax on operations related with the financing of the investments.
- Exemption from property transfer tax on the acquisition of real estate for the instalation of the investment project.
- Funding of up to 50% of the costs incurred with training and qualification of human resources during the first year of activity.
PMD status is also granted to investment projects with a value equal to or higher than CVE 500 million if implemented in a municipality with an average gross domestic product (GDP) per capita, in the last three years, lower than the national average. In this case, the investment project must cumulatively meet the criteria referred to in (ii) to (vi) above. Besides the tax and custom incentives foreseen in the CBF, these investment projects benefit from:
- Investment tax credit, as foreseen in the CBF (tax credit of 30% or 50% of the relevant investment).
- Exemption from property transfer tax on the acquisition of real estate used in the main activity (includes any needs for expansion of the activity, and during the first five years following the acquisition of the real estate).
- Funding of up to (0% of the costs incurred with training and qualification of human resources during the first year of activity.
The PMD regime enters into force from 26 April 2020 onward. The tax incentives foreseen apply to investment projects approved following the entry into force of the regime.
COVID-19 pandemic-related extraordinary tax and other measures
At a press conference held on 24 March 2020, the Prime Minister of Cabo Verde announced, among others, the following measures related to the COVID-19 pandemic:
- Payment of VAT and WHTs in instalments.
- Suspension and extension of deadlines of compulsory tax collection procedures.
- Exemption from the payment of social security contributions.
- Measures related with the payment of outstanding invoices and VAT refunds.
The above tax measures have not yet been enacted and shall be included in an Amended State Budget.
Credit institutions with restricted authorisation - Revocation of regime
Law no. 79/IX/2020, of 23 March 2020, published in the Official Gazette, revokes the regime applicable to credit institutions with restricted authorisation (Instituições de crédito de autorização restrita or ICAR), foreseen in Articles 38 to 45 of Law 61/VIII/2014, dated 23 April 2020. This diploma establishes the grounds, guiding principles, and legal framework of the financial system.
ICAR carrying their activity in Cabo Verde benefit from the tax regime foreseen in Article 29 of the CBF, which foresees an exemption from custom duties on the importation of materials and equipment exclusively for the start of their operations; a reduced CIT rate of 10% also applies until 31 December 2021.
A transitional regime is also foreseen, establishing that, until 30 December 2020, ICAR can amend their articles of association and internal organisation as necessary, in order to operate as a generic authorisation financial institution.
Tourist Utility Status - Regime published
Decree no. 22/2020, of 13 March 2020, published in the Official Gazette, establishes the new regime of Tourist Utility Status (Estatuto de Utilidade Turística or EUT) to be granted to tourist resorts and facilities. It sets out the criteria and requirements for the respective granting, revocation, expiration, and renewal.
EUT is granted to tourist resorts and facilities listed in the decree-law. Among others, lodging, travel agencies, tourist operators with head office in Cabo Verde, restaurants and similar business, transport of tourists, and promotors of tourist entertainment activities, including sports, are included.
The following types of EUT are foreseen:
- Installation, granted to new tourist resorts and facilities.
- Operation and exploitation, granted to existing tourist resorts and facilities.
- Refurbishment, granted to existing tourist resorts and facilities in connection with improvements and expansions.
Tourist resorts and facilities with EUT are granted several benefits under the CBF:
- Exemption from custom duties on the import of goods and products related with the main purpose of the investment project.
- Exemption from stamp tax on financing related with the investment.
- Exemption from property tax on the acquisition of real estate exclusively related with the investment project.
Tourist resorts and facilities already granted with the EUT under Law 55/VI/2006, of 10 January 2020, now revoked, should adapt to the new rules until 1 January 2021. Otherwise, the existing EUT shall be revoked.
Incentives to direct investment made in Cabo Verde by emigrants
Law 73/IX/2020, of 2 March, published in the Official Gazette, approves the regime of direct investment made in Cabo Verde by emigrants.
The regime provides for a set of tax incentives to be granted to emigrants that carry out eligible investments in Cabo Verde, namely:
- Exemption from taxation (as foreseen in the Corporate Income Tax Code) of dividends and profits distributed to the emigrant investor, arising from authorised foreign investment;
- Exemption from custom duties on the acquisition of materials from construction, extension of refurbishment of a first residential house, including also furniture, appliances and other imported goods, under certain conditions.
The regime applies to emigrant investors permanently living abroad, as well as to former emigrant pensioners and retired people receiving pensions and similar income from their country of immigration.
The investment on tangible assets or intangibles in Cabo Verde is eligible, under the conditions foreseen in the regime (eg investment in he incorporation of entities or branches in Cabo Verde, acquisition of shareholdings, granting of loans or other forms of financing of entities in which a shareholding is held, etc).
The Law entered into force on 3 March 2020.
2020 State Budget Law approved
On 31 December 2019, the 2020 State Budget Law was published (Law 69/IX/2019). The amendments introduced are all in line with the proposal presented in November 2019, and are in general applicable as from 1 January 2020.
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 PIT 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.
Youth Start-up Program
Incentives for corporate finance
An incentive is proposed under which resident or non-resident entities with PE in Cabo Verde that make:
- cash capital contributions to companies eligible under the Youth Start-up Program, or to
- companies based in a municipal territory with average 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:
- there are no overdue wages
- their tax and contributory situation is regularised
- they are not taxed under indirect tax methods, and
- authorisation 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 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 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
An additional CIT deduction (of 30%) is proposed for costs with certification or accreditation of quality management systems, products, processes, and services made at home or abroad. The competent authority (Instituto de Gestão da Qualidade e da Propriedade or IGQPI) must previously authorise 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 licence and duly authorised 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 authorised by the competent ministry, local authorities, and public transporter, provided that those vehicles are duly licensed and authorised by the competent authorities.
The above incentives shall not apply to vehicles aged more than four years in case of heavy passenger transport vehicles and six 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 licence.
Incentives on the import of transport vehicles for tourists
Same as in 2019, it is proposed to exempt from customs duties, excise duty, and VAT 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 licence 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 two-wheel 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
It is proposed the maintenance of the exemption from customs duties on the import of certain goods related with the digital terrestrial television project. The exemption shall apply to the entity responsible for implementation of the digital terrestrial television 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 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 one 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 CIT 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 six months.
This benefit is not cumulative with the benefit foreseen 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
Interest rate support of 50% is proposed 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 licences 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 licences for boats up to 5 tons, registered in the National Vessel Registration System, and whose holder has more than one boat.
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 (i.e. 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.
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.