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Cape Verde

Country Name: Republic of Cabo Verde (Cape Verde)
Currency: Cape Verdean Escudo (CVE)
Primary Tax Authority: Directorate-General of Taxes (Direção Geral de Contribuições e Impostos – DGCI)
Key Legislation:

  • Income Tax Code
  • Corporate Tax Code
  • Value Added Tax (VAT) Code
  • Customs Code

Fiscal Authority Allocation

Centralized Fiscal System:
Cape Verde operates a centralized tax system, with the Directorate-General of Taxes (DGCI) responsible for administering and collecting taxes, including corporate income tax (CIT), personal income tax (PIT), and value-added tax (VAT). Local governments have limited taxing authority, with the central government managing the collection of most taxes.

Corporate Income Tax (CIT)

Standard Rate: 22%
Cape Verde levies a corporate income tax rate of 22% on the net taxable income of resident companies. Non-resident companies are taxed on Cape Verde-sourced income.

Corporate Forms and Taxation:

  1. Corporation (Sociedade por Quotas or Sociedade Anónima): The most common corporate forms, subject to the 22% CIT rate.
  2. International Business Center Companies: Companies registered under the International Business Center (IBC) regime benefit from preferential tax rates and may be subject to reduced CIT rates or exemptions for a specified period.
  3. Branches of Foreign Companies: Taxed at the same CIT rate on Cape Verde-sourced income.

Exemptions and Incentives:

  • Tax Holidays: Companies in key sectors such as tourism, renewable energy, and manufacturing may qualify for tax holidays ranging from 5 to 10 years.
  • Special Economic Zones (SEZ): Companies operating in SEZs benefit from reduced CIT rates and customs duty exemptions.

Goods and Services Tax (GST) / Value-Added Tax (VAT)

Standard Rate: 15%
Cape Verde applies a VAT rate of 15% on most goods and services. VAT is levied on the sale of goods, provision of services, and imports.

Reduced Rate: A reduced VAT rate of 6% applies to certain essential goods and services, including food and medical supplies.
Exemptions: Healthcare services, educational services, and certain financial services are exempt from VAT. Exports are zero-rated, allowing businesses to reclaim VAT paid on inputs used to produce exported goods.

Personal Income Tax (PIT)

Progressive Rates:
Cape Verde applies progressive personal income tax rates as follows:

  • Up to CVE 150,000: 0%
  • CVE 150,001 to CVE 500,000: 11%
  • CVE 500,001 to CVE 1,500,000: 23%
  • Above CVE 1,500,000: 27%

Dividends:
Dividends paid to residents are subject to a 10% withholding tax, while dividends paid to non-residents are subject to a 15% withholding tax.

Additional Mandatory Contributions

Social Security Contributions:
Employers and employees are required to make contributions to Cape Verde’s social security system, which covers pensions, healthcare, and unemployment benefits.

  • Employer Contribution: 15% of gross salary.
  • Employee Contribution: 8% of gross salary.

Withholding Taxes

  • Dividends: 10% for residents, 15% for non-residents.
  • Interest: 15%
  • Royalties: 15%
    Withholding tax rates may be reduced under Cape Verde’s double taxation agreements (DTAs).

Transfer Pricing Rules

Cape Verde follows the OECD transfer pricing guidelines. Related-party transactions must comply with the arm’s-length principle, and companies must maintain documentation to support their transfer pricing arrangements.

Special Tax Regimes

  • International Business Center (IBC): Companies registered under Cape Verde’s IBC regime benefit from reduced tax rates and exemptions on certain types of income, particularly income earned from international activities.
  • Tourism and Renewable Energy Incentives: Cape Verde offers tax holidays, customs duty exemptions, and reduced CIT rates for companies investing in the tourism and renewable energy sectors.
  • Free Trade Zones: Companies operating in Cape Verde’s free trade zones benefit from full or partial exemptions on CIT, customs duties, and VAT for a specified period.

Other Taxes

  • Property Tax: Property taxes are levied annually based on the market value of real estate. Rates range from 0.5% to 3%, depending on the property’s use and value.
  • Customs Duties: Import duties are levied on goods brought into Cape Verde, with rates generally ranging from 5% to 30%, depending on the type of goods.
  • Excise Taxes: Excise taxes are applied to specific goods such as alcohol, tobacco, and petroleum products.

Double Taxation Agreements (DTAs)

Cape Verde has signed several double taxation agreements with countries such as Portugal, Spain, and other Portuguese-speaking countries. These agreements help reduce withholding taxes on dividends, interest, and royalties, and prevent the double taxation of cross-border income.

Local Taxes

Local governments in Cape Verde have limited authority to impose taxes. All major taxes, including VAT, CIT, and PIT, are administered by the central government through the DGCI.

Compliance and Reporting

Annual Filing:
Corporate tax returns must be filed by March 31st of the following tax year. Personal income tax returns are due by the same date. The tax year in Cape Verde follows the calendar year.

Penalties for Late Filing:
Penalties for non-compliance or late filing include interest on overdue taxes and fines. Interest on unpaid taxes is typically set at 1.5% per month, with additional penalties for significant delays.

Recent Developments

Economic Diversification:
Cape Verde has been actively working to diversify its economy beyond tourism by promoting investments in renewable energy, information technology, and agriculture. The government offers a variety of tax incentives to attract foreign direct investment (FDI) in these sectors, including tax holidays and customs duty exemptions.

Sustainability and Renewable Energy:
The government has set ambitious goals for renewable energy production and has been promoting investments in solar, wind, and hydroelectric power projects. Tax incentives are available for renewable energy companies, including CIT reductions and VAT exemptions on equipment.

Tourism Development:
Tourism remains a major driver of economic growth in Cape Verde, and the government offers attractive tax incentives to developers and operators in this sector. These include VAT exemptions, reduced CIT rates, and customs duty exemptions for tourism-related investments.

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