Cabo Verde

The group taxation regime may apply, provided one of the companies directly or indirectly holds at least 75% of the statutory capital of the others and more than 50% of the voting rights.

To be taxed under this regime, the group companies must meet the following conditions:

• Must be tax resident in Cabo Verde.
• Must be subject to the normal regime of taxation at the highest corporate tax rate.
• Must maintain a minimum holding participation of 75%.
• All companies must be held by the parent company for more than one year (excluding newly incorporated companies).
• Cannot be dormant for more than one year.
• Cannot be dissolved or insolvent.
• Cannot have tax losses in the three years prior to the regime application, unless the companies have been held by the parent company for more than two years.
• Cannot have a tax period different from that of the parent company.

Additionally, the parent company:

• should not be controlled by any other Cabo Verde-resident company that fulfils the requirements to be the parent company, and
• should not have opted out from this regime in the three previous years.

When the regime comes to an end or when one company ceases to qualify for this regime, the tax losses obtained during the regime cannot be carried forward and deducted against future individual taxable income of the companies. The parent company is responsible for demonstrating that the requirements for the application of the group taxation regime are met.

Transfer pricing

Commercial transactions between associated enterprises should be subject to identical terms and conditions to those that would be accepted and agreed between independent entities (arm’s-length principle).

Taxpayers must keep information and documentation regarding their transfer pricing policies on hand. The following taxpayers must prepare a transfer pricing documentation file:

• Entities classified as ‘Large Taxpayers’.
• Entities considered taxed under a privileged tax regime, as defined in the General Tax Code.
• PEs of non-resident entities.
• Other entities designated as such by the tax authorities.

Country-by-Country (CbC) Report

New transfer pricing reporting obligations have been introduced.

The following entities are required to file the Declaração financeira e fiscal por país: 

• A parent company, resident for tax purposes in Cabo Verde, that is the ultimate parent of a multinational group of companies with a total consolidated income equal to or higher than EUR 750 million (with reference to the previous tax year); the statement concerns all the entities that are part of that group.
• In the situations established by law, and in respect of each tax year, an entity resident in Cabo Verde that is not the ultimate parent of a multinational group of companies.

Communication of the reporting entity

Any entity that is resident in Cabo Verde, or a PE therein of a non-resident, that is part of a multinational group of companies of which an entity is required to file the CbC Report (as foreseen in the CIT Code) is required to file a statement (through electronic means) in which it identifies itself as the reporting entity, or identifying which entity will report the required information (in the latter case, reference should be made to the country of tax residence).

Limitation on the tax deductibility of net financing expenses

Net financing expenses are only deductible up to the higher of the following limits:

• CVE 110 million.
• 30% of earnings before depreciation, net financing expenses, and taxes.

This provision does not apply to public entities, as per Article 68 §5 of the CIT Code.

Controlled foreign companies (CFCs)

The CIT Code contains specific CFC rules. Profits or income obtained by non-resident entities that are clearly subject to a more favourable tax regime are imputed to the resident taxpayers subject to CIT that hold, either direct or indirectly, even if through a representative, fiduciary, or intermediary, at least 25% of their share capital, voting rights, or attribution rights over the income or the assets of those non-resident entities.