Individual - Income determinationLast reviewed - 05 February 2023
Category A: Employment and pension income
Employment income is specifically defined in the PIT Code and covers all payments in connection with work (employment contract), such as salary, bonuses, commissions, pensions, allowances (e.g. cost-of-living and housing allowances), and benefits in kind (e.g. company cars), regardless of where the payment originates.
Managers or board members’ remuneration is taxed as employment income.
The following types of income are exempt from PIT:
- Per diems for national and international trips, for the portion that does not exceed the limits set for the public services.
- Lunch allowance, up to CVE 250 per day.
- Use of personal car, up to CVE 120,000 per year.
- Cash shortage allowance, up to 15% of the monthly salary.
- Family allowance, up to CVE 500 per month, for each dependant or equivalent and ancestors.
- Redundancy payments are taxable on the portion that exceeds one and a half times the average remuneration paid during the last months of employment, multiplied by the number of years of employment.
Pensions are also subject to taxation. Pension income below CVE 960,000 is exempt from PIT.
Withholding tax (WHT)
Employment and pension income are generally subject to monthly WHT.
As a rule, the monthly WHT is levied as final taxation, unless the taxpayer opts to file the tax return, in which case the tax withheld has the nature of an advance payment on account of the final annual income tax liability.
The monthly tax withholdings due are calculated by applying the following progressive WHT rates and the corresponding deduction to the taxable income:
|Bracket||Taxable income (CVE)||WHT rate (%)||Deduction (CVE)|
Category B: Business and professional income
Business and professional income earned by individual entrepreneurs are taxed under the following regimes:
- Standard organised accounting.
- Special Regime for Small and Micro Sized Companies (SRSMC).
- Single Act (ato isolado).
Business and professional income earned by individual entrepreneurs under standard organised accounting are subject to WHT at the rate of 20% as an advance payment on account of the final annual income tax liability.
Net income is computed under the rules applicable to companies with the adjustments provided for in the PIT Code and subject to income tax at the PIT rates applicable.
Net income is computed according to the declaration-based method (método declarativo) where tax is levied on the aggregate base of the relevant income categories in the household minus personal deductions and allowances.
Business and professional income earned by individual entrepreneurs under the SRSMC are subject to a flat rate of 4%.
Under this regime, micro and small-sized companies are subject to a Single Special Tax (SST) of 4% levied on the gross amount of sales obtained in each taxable year, to be paid quarterly.
SST replaced the corporate income tax (CIT), fire brigade surtax, and VAT, as well as the contribution to social security due by the company.
Under the PIT Code, it is considered as a Single Act a taxable operation performed twice during the tax year.
Category C: Rental income
Rental income is subject to WHT at the rate of 20% as an advance payment on account of the final annual income tax liability. To compute the net income, taxpayers may deduct maintenance and repair expenses of up to 30% of gross rental income.
Category D: Investment income
In general, investment income is subject to a flat rate of 20%; however, some exceptions apply:
- Dividends are subject to a flat rate of 10%.
- Interests on bonds are subject to a flat rate of 10%.
- A special tax regime foreseen in the Tax Benefits Code provides for an exemption from taxation on interest on term deposits received by Cabo Verdean emigrants; income derived from bonds or similar products (except debt securities listed in the securities market) obtained until 31 December 2017 benefits from a 5% flat rate; dividends from shares listed in the stock exchange, placed at the disposal of their holders until 31 December 2017, are exempt from PIT.
Category E: Capital gains
Capital gains earned by individual taxpayers are subject to a flat rate of 1% in the case of gains on the disposal of immovable property, intellectual property, or shareholdings. A flat rate of 20% applies in the case of gains on gambling, lottery, betting, prizes awarded in sweepstakes, or contests.