Cabo Verde's tax system includes various obligations for both employers and employees. Understanding these regulations is crucial for businesses operating in the country to ensure compliance and avoid penalties. The tax framework covers social security contributions, payroll taxes, income tax withholding, and other relevant aspects that affect the financial responsibilities of employers and employees alike.
Navigating the intricacies of Cabo Verde's tax system can be complex, especially for foreign companies. This guide provides a detailed overview of employer tax obligations and employee tax deductions in Cabo Verde for 2025, covering key areas such as social security contributions, income tax withholding, available deductions, compliance deadlines, and special considerations for foreign workers and companies.
Employer Social Security and Payroll Tax Obligations
Employers in Cabo Verde are required to make social security contributions on behalf of their employees. These contributions fund various social programs, including pensions, healthcare, and unemployment benefits.
- Social Security Contributions: The employer's contribution rate is typically a percentage of the employee's gross salary. As of 2025, the employer contribution rate is 14.5%.
- Payroll Tax: In addition to social security, employers may also be subject to other payroll taxes or levies, depending on the specific regulations in place. These taxes are usually a small percentage of the total payroll.
- Professional Training Levy: Employers are required to contribute to a professional training fund, which supports vocational training programs. The contribution rate is 1.5% of the gross salary.
Income Tax Withholding Requirements
Employers in Cabo Verde are responsible for withholding income tax (IRPS - Imposto sobre o Rendimento das Pessoas Singulares) from their employees' salaries and remitting it to the tax authorities. The amount of income tax to be withheld depends on the employee's income level and applicable tax rates.
- Taxable Income: Taxable income includes all forms of compensation, such as salaries, wages, bonuses, and allowances.
- Tax Brackets: Cabo Verde uses a progressive income tax system, where higher income levels are subject to higher tax rates. The tax brackets for 2025 are as follows:
| Taxable Income (CVE) | Tax Rate |
|---|---|
| 0 - 660,000 | 0% |
| 660,001 - 1,200,000 | 15% |
| 1,200,001 - 2,500,000 | 20% |
| Over 2,500,000 | 25% |
- Withholding Calculation: Employers must calculate the amount of income tax to withhold from each employee's salary based on the applicable tax bracket and the employee's taxable income.
Employee Tax Deductions and Allowances
Employees in Cabo Verde may be eligible for certain tax deductions and allowances that can reduce their taxable income and overall tax liability.
- Social Security Contributions: Employee contributions to social security are deductible from their taxable income. The employee contribution rate is 4%.
- Healthcare Expenses: Employees may be able to deduct certain healthcare expenses, subject to specific limits and conditions.
- Education Expenses: Some education-related expenses may also be deductible, depending on the applicable regulations.
- Other Deductions: Other potential deductions may include contributions to pension funds or other approved savings schemes.
Tax Compliance and Reporting Deadlines
Employers in Cabo Verde must comply with specific tax reporting deadlines to avoid penalties.
- Monthly Reporting: Employers are typically required to submit monthly payroll tax reports and remit the withheld income tax and social security contributions to the tax authorities. The deadline for monthly reporting is usually the 15th day of the following month.
- Annual Reporting: Employers must also file an annual tax return summarizing the total income tax withheld and social security contributions made during the year. The deadline for annual reporting is usually in March of the following year.
- Payment Methods: Tax payments can typically be made through authorized banks or online payment platforms.
Special Tax Considerations for Foreign Workers and Companies
Foreign workers and companies operating in Cabo Verde may be subject to specific tax rules and regulations.
- Tax Residency: The tax residency status of foreign workers is determined by the length of their stay in Cabo Verde and other relevant factors. Tax residents are generally subject to tax on their worldwide income, while non-residents are taxed only on income sourced from Cabo Verde.
- Double Taxation Agreements: Cabo Verde has double taxation agreements with some countries, which may provide relief from double taxation for foreign workers and companies.
- Expatriate Allowances: Certain allowances paid to expatriate employees, such as housing or transportation allowances, may be subject to specific tax treatment.
- Permanent Establishment: Foreign companies operating in Cabo Verde may be deemed to have a permanent establishment if they have a fixed place of business in the country. This can trigger corporate tax obligations in Cabo Verde.
