Cabo Verde

Corporate - Significant developments

Last reviewed - 10 January 2021

October 2020

2021 State Budget – Law proposal presented to the Parliament

 

The Government of Cabo Verde presented the 2021 State Budget Law proposal. We highlight the following tax measures being proposed:

 

I – VAT

 

VAT – Reduced rate applicable to the tourism industry

 

The proposal foresees the reduction to 10% (currently, 15%) of the VAT applicable to:

 

  • Lodging in hotels and similar facilities, as well as catering;
  • Tour operators who are resident micro, small and medium sized companies – on all combined services rendered in Cabo Verde in 2021.

 

II – Tax incentives

 

1. Incentive program Start-up for youngster (“Programa Start-up Jovem”)

 

 (i) Incentives to beneficiaries

 

The proposal foresees the maintenance of the tax incentives applicable to beneficiaries of this measure, as follows:

 

  • 5% Corporate Income Tax (“Imposto sobre o Rendimento das Pessoas Coletivas” or “IRPC”) rate applicable in the first 5 years of activity, from 1 January 2021 onward; this rate applies to information, communication and technology (ICT) and research and development (R&D) enterprises, regardless of the location of the head office or place of effective management;
  • 5% IRPC rate applicable to the remainder eligible enterprises, in the first 5 years of activity, from 1 January 2021 onward;
  • 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;
  • 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 activities).

 

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.

 

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

(ii) Incentives for investment companies

 

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 (conditions apply).

 

This benefit is not cumulative with the tax benefit regarding conventional remuneration of share capital foreseen in article 22 of the Tax Benefits Code.

2. Acquisition of equipment and accounting and invoicing software

 

An additional deduction of 30% is allowed for IRPC purposes in respect of the costs incurred with the acquisition of equipment as well as accounting and invoicing software for the purposes of electronic invoicing and the Standard Audit File for Tax Purposes Cabo Verde (“SAFT-CV).

3. Job creation

(i) Hiring of young people – First job

 

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

(ii) Hiring of unemployed people

 

It is proposed that taxpayers covered by the organised accounting regime shall be entitled to a tax credit of CVE 20,000, per each unemployed person hired for a minimum 12-month period (net job creation is required).

 

This incentive can be cumulative with the job creation incentive foreseen in article 34 of the Tax Benefits Code.

(iii) Professional internships

 

It is proposed the maintenance of the direct incentive to professional internships. IRPC taxpayers as well as individuals taxed under the organised accounting regime may benefit from a tax credit amounting to CVE 20,000, for each trainee hired for a minimum of 6 months.

4. Incentives on the import of transport vehicles for tourists

 

It is proposed to exempt from customs duties, excise duties 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.

5. 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 the referred vehicles from parking fees the referred.

August 2020

2020 Amending State Budget published

Law 100/IX/2020, of 11 August, publishes the 2020 Amending State Budget. In general, all the measures included in the proposal have been enacted and generally apply from 12 August 2020 onward.

July 2020

2020 Amending State Budget – Proposal

The 2020 Amending State Budget Proposal was presented to the Parliament on 1 July 2020. We highlight the main tax measures included in the proposal:

 

I – Incentives

 a) Adjustment of businesses to the context of COVID-19

  • Additional CIT and PIT (taxpayers with organised accounting) deduction of 30% of eligible expenses incurred from 25 April 2020; The following expenses and others, subject to certain conditions, are eligible for this incentive: expenses incurred with the acquisition of personal protective equipment, cleaning equipment, cleaning services, fees charged by certified auditors and accountants for the certification of payments, etc;
  • VAT and custom duty exemption on the import of machinery and materials aimed at preparing premises to cope with the existing rules on matter of sanitisation under the COVID-19 pandemic.

b) Hiring of unemployed people

  • State allowances of up to 50% (capped at CVE 25,000) of the salary received by at least 2 employees, in case of taxpayers (including those taxed under the special regime for micro and small companies) that create 5 or more jobs.

 

II – Corporate Income Tax

  • Tax credit of CVE 20,000 for the hiring of unemployed people for a minimum 12-month period; this benefit is cumulative with the existing benefits for job creation (Article 34 of the Tax Benefits Code);
  • Advance payments owed by CIT taxpayers and due by September and December 2020:
    • Can amount to 10% of the CIT assessed in the previous tax year;
    • Can be waived in case of proof of an effective and significant loss of activity prior to the respective payment date; this occurs if between April 2020 and the payment dates the turnover decreased in at least 40% or more compared with the same period.

 

III – Personal Income Tax

  • Advance payments owed by PIT taxpayers and due by September and December 2020:
    • Can amount to 2.5% of the taxable profit assessed in the previous tax year, and can be made in September and December 2020;
    • Can be waived in case of proof of an effective and significant loss of activity prior to the respective payment date, in the same terms as those established for CIT taxpayers.

IV – VAT / Custom Duties / Stamp Tax

 a) VAT

 

  • Credit on the amount of VAT included in the respective invoice and incurred by qualified farmers on the acquisition of water for exclusive agricultural use.
  • A reduced VAT rate of 10% (15% is the single VAT rate currently applicable) shall apply:
    • To the tourism industry - on the rendering of services related to accommodation in hotels and similarly in  the catering industry;
    • To tour operators who are resident micro, small and medium sized companies – on all combined services rendered in Cabo Verde;
    • To entities with tourist utility status which promote cultural events - on the rendering of the respective services.
  • VAT exemption on the sale of laptops, desktops and tablets by educational and professional training institutions located in Cabo Verde.

 

b) Custom duties and VAT on imports

Exemptions apply to :

  • The Import of photo-voltaic panels, inverters and batteries to store solar power, to be used in the production of water for agricultural purposes;
  • The Import of laptops, desktops and tablets by educational and professional training institutions located in Cabo Verde, as well as by students of such institutions;
  • The Import of optic fibre submarine cables as well as other materials to be used in project EllaLink and in any other projects to connect international submarine cables;
  • The Import of materials and equipment to be used in the maintenance , construction or refurbishment by the central sports institute, of spaces for sports practice, sports associations and sports clubs.

 

c) Stamp Tax

 

  • Exemption on the principal loan, as well as on interest and commissions, on credits granted to Cabo Verde’s educational and professional training institutions and respective students, for the acquisition of laptops, desktops and tablets

 

 

V – Tax debts - Payment in instalments

 

  • Payments of tax debts, including VAT and withholding taxes, originated prior to April 2020, can be made in 60 interest-free instalments (except those already covered by the special regime of regularisation of tax debts, that allowed the payment in instalments until 31 December 2020);

Tax debts under a tax enforcement procedure are suspended in case of renegotiation of an extension period, which cannot exceed 60 instalments (interest free).

June 2020

Special Economic Zones (Zonas Económicas Especiais or ZEEs): Legal regime published

Law 91/2020, of 19 June, published in the Official Gazette, establishes the basis of the legal regime concerning the implementation, organisation, development, and functioning of the ZEEs.

ZEEs are legal persons governed by public law, each created by a specific Strategic Plan (Plano Estratégico). They can be implemented in a given special economic zone that may comprise an island, a set of islands, or a given geographical zone within an island. ZEEs entail the development of the economic activities established in the respective Strategic Plan. ZEEs are subject to tax, parafiscal, customs, and labour special regimes, aiming at taking advantage of the existing conditions in Cabo Verde, as well as promoting economic and business development. The main purpose is to attract investment, promote exportation, and encourage the development of the private investment sector.

ZEEs are covered by the regime of the International Business Centre (Centro Internacional de Negócios or CIN) as established in the Tax Benefits Code (Código dos Benefícios Fiscais or CBF) with any necessary adjustments. Entities licensed to operate in the CIN are, among other benefits, entitled to reduced corporate income tax (CIT) rates, subject to job creation, and customs duties exemptions.

The legal regime of ZEEs entered into force on 20 June 2020.

May 2020

COVID-19: Extraordinary and temporary incentives for the import, production, and transfer of medical devices, personal protective equipment, and other goods

Law no. 88/IX/2020, of 7 May, published in the Official Gazette, establishes an extraordinary and temporary regime of incentives for the import, production, and sale of medical devices (Dispositivos Médicos or DM), personal protective equipment (Equipamentos de Proteção Individual or EPI), and other goods, within the context of COVID-19.

The Law establishes:

  • Exemption from value-added tax (VAT), customs duties, excise duties, and ecological charge, on both the import and local production of DM, EPI, and other goods. This measure is applicable as of 1 April 2020.
  • Exemption from VAT on the transfer of EPI established in the legal diploma, as well as rubbing alcohol and disinfectant gel. This measure is applicable as of 8 May 2020.

April 2020

Amendments to several Tax Codes enacted

Law 86/IX/2020, of 28 April, published in the Official Gazette, amends several Tax Codes. We highlight the following amendments, applicable as of 29 April 2020.

I - Special regime for micro and small companies

Entities excluded from the regime

Among others, the regime does not apply to the entities carrying out their main or secondary activity in the following sectors/fields:

  • Fuel resale (except butane gas).
  • Travel agencies.
  • Real estate services.
  • Promotion and organisation of events.
  • Other activities, as established by decree, in view of their complexity and technicality.
Bank account

Micro and small companies are required to hold at least one bank account, which shall be used for all payments and receipts concerning the business activity.

Payment methods

Micro and small companies are required to make available to their customers the authorised electronic method of payment (largely used).

Payments concerning invoices and other sales documents amounting to 20,000 Cabo Verdean escudos (CVE) or higher are mandatorily made through a payment method that allows for the identification of the recipient (bank transfer, check, or direct debit).

Customs duties exemption

Certified micro and small companies, registered at the industrial record (Cadastro Industrial), are exempt from customs duties on the import of packaging and wrapping materials for goods produced by the company (under a registered industrial project). The exemption applies only during installation and in the first four years following the approval of the project.

II - Tax benefits 

Entitlement to tax benefits

Alongside other existing requirements, the entitlement to the tax benefits stated in the CBF is granted only to CIT or personal income tax (PIT) payers that:

  • have an investment project registered with the single department of investments (Balcão Único de Investimento), and
  • did not hold any participation in another company, whose activity ceased less than five years ago, and was in an irregular tax situation.

Emigrant investors (Investidor Emigrante) should present proof of their status in order to be entitled to the tax benefits established by the CBF.

Investment tax credit

The CIT and PIT credit for investments made under the investment law (Lei de Investimento - Law 13/VIII/2012, of 11 July) is amended as follows:

  • 30% (formerly 50%) in case of eligible investments in the health sector, environment, creative industry, tourism, touristic promotion and real estate, industrial activity, air and sea transportation services, port and airport services, production of renewable energy, production and assembly of renewable energy equipment, research and development (R&D), and development of information and communication technologies.
  • 20% (formerly 30%) in case of eligible investments in other sectors.

The granting of the benefit is subject to the beneficiaries filing the annual tax return form as well as the annual statement of accounting and tax information (formerly, reference was made to a form yet to be approved).

Customs duties benefits

Investments made under the investment law are subject to a reduced 5% customs duties rate (formerly exempt).

Contractual tax benefits (Convenção de Estabelecimento)

Investments carried out under the investment law are entitled to extraordinary incentives. The following conditions are required (alongside with the remaining conditions established in Articles 6 and 16 of the CBF):

  • The promoter of the investment should possess technical and managerial capacities.
  • The invested amount should exceed CVE 3 billion (formerly CVE 550 million); the relevant amount is of CVE 1.5 billion in case of investments located in a municipal area whose average gross domestic product (GDP) per capita is lower than the national average (with reference to the last three years).
  • Create, directly, at least 20 qualified jobs (10 in case of investments located in a municipal area whose average GDP per capita is lower than the national average, with reference to the last three years); a qualified job requires professional or higher education, specialised technical training, certified by a national or foreign entity, including management positions.

The types of incentives granted are established in relation to the respective amount and location. Any exemptions granted cannot exceed five years.

It is now mandatory to demonstrate the amount of tax unpaid as a result of the benefits granted. The respective amount should be detailed in the annex to the financial statements of the year concerned.

Differentiated Merit Investment Projects (Projetos de Mérito Diferenciado or PMDs)

PMDs established in Law 80/IX/2020, of 26 March, are entitled to the following benefits:

  • Reduced customs duty rate of 5% on the import of materials, goods, and equipment mentioned in Article 15 of the CBF.
  • Customs duty exemption on the import of raw materials, consumables, finished and semi-finished materials, and other products to be incorporated in products manufactured by the company; the exemption is also applicable to packaging and wrapping materials used in products manufactured by the company, in case of industrial investment, projects of companies registered in the 'Cadastro Industrial'.
  • CIT credit of 30% of the eligible investments effectively made (capped at 50% of the CIT assessed).
  • Stamp tax exemption on the borrowing of funds for the investment.
  • Property tax (IUP) exemption on the acquisition of real estate exclusively aimed at the installation of the investment project.
  • Other non-tax incentives established in specific legal diplomas.

Alongside the above benefits, for PMDs implemented in municipal areas with a GDP per capita lower than the national average, there are the following added benefits:

  • CIT credit of 40% of the eligible investments effectively made (capped at 50% of the CIT assessed).
  • IUP exemption on the acquisition of real estate used in the development of the company’s main activity, including any developing needs arising throughout the first five years following the acquisition.
International Business Centre (Centro Internacional de Negócios or CIN)

The reduced CIT rates set in Article 19 of the CBF are now applicable to the income derived from all activities carried out by the entities operating in the CIN. Formerly, this benefit was only relevant to income from activities carried out with non-resident or other CIN licensed entities.

The reduced CIT rates that are linked to job creation require the creation of qualified employment.

Specifically, for the International Services Centre (Centro Internacional de Prestação de Serviços), minimum operational expenses relevant to the carrying out of a licensed activity are now required. 

Economic Special Zone (Zona Económica Especial)

The CIN regime shall apply (with the necessary adjustments) to the eligible activities and investments in the Zona Económica Especial (regime yet to be published). Specific conditions should be met.

Capital gains on the sale of shareholdings

There is no longer an exemption from taxation on capital gains realised on the transfer of shareholdings in a company in which more than 50% of the assets owned are composed, directly or indirectly, of real estate located in Cabo Verde (it includes the gains derived from the respective transfer for a consideration).

Incentives to savings and credit cooperatives and micro banks

In 2020, savings and credit cooperatives and micro banks, established in Law 83/VIII/2015, of 16 January (amended by Law 12/IX/2017, of 2 August), are granted the following benefits:

  • CIT exemption for a three-year period, computed as of 1 January 2019, provided that no profits have been distributed or reinvested in social projects carried out by non-profit organisations (registered in the NPO platform).
  • Customs duty exemption on the import of materials and equipment aimed at their installation.
  • Exemption from customs duties, VAT, and excise duties for the import of one vehicle, under five years of age, to be used exclusively in the activities of the entity.

III - Permanent establishment (PE)

Article 8 of the CIT Code has been amended following the amendments to Article 5 of the Organisation for Economic Co-operation and Development (OECD) Model Tax Convention on Income and Capital, as a result of Base Erosion and Profit Shifting (BEPS) Action 7 report on the artificial avoidance of the PE status. The situations of recognition of a PE in Cabo Verde are now broader, including:

  • Commissionaire arrangements.
  • Preparatory or ancillary activities carried out by closely related enterprises through a fixed installation.
  • Independent agents acting exclusively, or almost exclusively, on behalf of one, or more, closely related enterprises.

IV - Income realised by a non-resident

Non-resident without a PE in Cabo Verde

Income from Cabo Verde, sourced and realised by a non-resident without a PE in Cabo Verde, is now subject to a taxation rate of 22% (formerly 25%) in case the withholding tax (WHT) rates mentioned in the law are not applicable.

Income from the transfer of shareholdings

There is no longer an exemption from taxation on gains realised on the transfer of shareholdings in a company in which more than 50% of the assets owned are composed, directly or indirectly, of real estate located in Cabo Verde (including the gains derived from the respective transfer for a consideration).

V - Transfer pricing

Following Cabo Verde’s international commitments, by entering the Inclusive Framework on BEPS, new transfer pricing reporting obligations have been introduced.

Country-by-Country Reporting (Declaração financeira e fiscal por país)

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 750 million euros (EUR) (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.

Article 104-A of the CIT Code details the data that should be reported in the statement. The statement should be filed within the 12 months following the last day of the reporting period of the multinational group of companies concerned.

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 Country-by-Country Reporting (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).

This statement should be filed up to the 31 May of the 12 months following the year to which the information pertains (or the end of the fifth month of the year following the year to which the information pertains in case the tax year is different than the calendar year).

Refusal to file or to prepare the transfer pricing documentation

Entities refusing to file or to prepare the relevant transfer pricing documentation (if not regarded as tax fraud) are liable for a penalty ranging from CVE 100,000 to CVE 2.5 million. Formerly, the penalty for negligent non-filing or late filing of the transfer pricing documentation was set at CVE 375,000.

VI - Personal income tax (PIT)

Non-application of the WHT exemption on real estate income

There is no exemption from PIT WHT on income related to tourism derived from property belonging to a hotel complex (in case of existence of a written agreement) in case an exemption or reduction of the CIT rate applies to the hotel complex (this rule does not apply in case of approved contractual tax benefits, which have been signed by the government prior to this amendment).

Capital gains on the transfer of shareholdings

There is no longer an exemption on taxation on capital gains realised on the transfer of shareholdings in a company in which more than 50% of the assets owned are composed, directly or indirectly, of real estate located in Cabo Verde (it includes the gains derived from the respective transfer for a consideration).

VII - Tax penalties

Availability of electronic methods of payment

Entities failing to provide electronic methods of payment to customers (as established by law) are liable for a penalty ranging from CVE 30,000 to CVE 750,000.

Financial institutions: Common Reporting Standard (CRS) and Foreign Account Tax Compliance Act (FATCA)

New penalties have now been established for financial institutions within the context of the CRS and FATCA:

  • A penalty ranging from CVE 50,000 to CVE 1,500,000 is applicable to financial institutions who fail to file, or delaying the filing, registration, and communication of the information required to be presented to the relevant tax authorities, as indicated in the applicable legislation or international tax agreements or conventions that Cabo Verde is bound by.
  • A penalty ranging from CVE 50,000 to CVE 1,500,000 for omissions or inaccuracies in the information reported by financial institutions, indicated in the applicable legislation or international tax agreement or conventions that Cabo Verde is bound by.
  • A penalty ranging from CVE 50,000 to CVE 1,500,000 is applicable to financial institutions, for lack of compliance with proper due diligence requirements, registration, or improper registration and preservation of documents pertaining to such compliance. The relevant law can be found in the applicable legislation or in international tax arrangements or conventions that Cabo Verde is bound by. 

COVID-19 pandemic-related additional extraordinary measures enacted

Law no. 83/IX/2020, of 4 April, published in the Official Gazette, established new extraordinary and temporary measures, related to the COVID-19 pandemic. This is effective as of 27 March 2020 (20 March 2020 specifically for Boa Vista island).

The following measures are foreseen:

Exemption from social security contributions

  • Exemption from the payment of social security contributions to the National Institute of Social Security (Instituto Nacional de Previdência Social or INPS) in April, May, and June 2020.
  • This measure applies to companies registered in the general mandatory social protection regime, in respect of the amount of contributions under the employer’s responsibility.
  • Available upon request.
  • Requires proof of effective and significant loss of activity to be made towards the competent tax office.
  • Effective and significant loss of activity exists in case of a reduction of 30% or more of the turnover (with reference to the same period).
  • Not applicable to companies of the public sector and financial institutions.
  • Compliance with declarative obligations is required (mandatory submission of wage´s statement).

Suspension of procedural acts

  • The regime of judicial vacation applies to procedural acts taking place in courts, including, among others, the Constitutional Court, the Supreme Court of Justice, and the Tax and Customs’ Courts.
  • Suspension of judicial deadlines in respect of all types of procedures, including, among others, judicial claims, administrative claims, hierarchical appeals, or other procedures of the same nature.
  • Suspension of the statute of limitation on all types of procedures.

Postponement of general meetings

  • Possibility of postponing until 30 June 2020 General Meetings of commercial companies and other companies (as a rule taking place in April or May).

March 2020

COVID-19 pandemic-related extraordinary tax measures enacted

Decree-Law 37/2020, of 31 March, 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 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 31 July 2020 of the deadline to file the 2019 PIT return (Modelo 112) and payment of the PIT due.
  • 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.

Customs Statistics Taxes (Taxas Estatísticas Aduaneiras)

  • Customs Statistics Taxes are suspended in customs clearance procedures, in respect of each addition of goods to the customs declaration and in respect of the customs exemption procedure, and per each request of waiver.
  • Customs Statistics Taxes charged per customs 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, 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:

  1. Represents an investment equal to or higher than CVE 1.5 billion.
  2. Contribute, in net terms, to the improvement of the balance of payments.
  3. Use technology, production, and commercialisation processes that minimise environmental impacts or promote environmental sustainability.
  4. 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).
  5. Introduce factors capable of contributing to the improvement of the quality of supplies.
  6. Fulfil the general requirements to benefit from tax benefits as foreseen in Article 6 of the 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 customs incentives, foreseen in the CBF, namely:
    • Exemption from customs 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 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 customs 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 80% 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:

Tax measures

  • Payment of VAT and WHTs in instalments.
  • Suspension and extension of deadlines of compulsory tax collection procedures.

Other measures

  • 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, 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 customs 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, 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 customs 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 CIT Code) of dividends and profits distributed to the emigrant investor arising from authorised foreign investment.
  • Exemption from customs duties on the acquisition of materials from construction, extension of refurbishment of a first residential house, including 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 (e.g. investment in the 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).

The Law entered into force on 3 March 2020.

December 2019

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 of 1 January 2020.

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 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.

Young 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 Young 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 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 CBF, 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 CBF (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.