Cabo Verde's tax system includes various obligations for employers and employees, encompassing social security contributions, payroll taxes, and income tax withholdings. Understanding these regulations is crucial for businesses operating in Cabo Verde to ensure compliance and avoid penalties. The tax framework is designed to fund social security benefits, public services, and infrastructure development within the country. Employers must accurately calculate and remit taxes on behalf of their employees, while employees are entitled to certain deductions and allowances that can reduce their taxable income.
Navigating the tax landscape in Cabo Verde requires attention to detail and adherence to specific deadlines. Both employers and employees have responsibilities in fulfilling their tax obligations, and staying informed about the latest regulations is essential for maintaining compliance. This guide provides an overview of employer tax obligations and employee tax deductions in Cabo Verde for 2025.
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. The employer's contribution rate is a percentage of the employee's gross salary.
- Social Security Contributions: The employer contributes a percentage of the employee's gross salary to the social security system.
- Professional Training Levy: Employers may also be required to contribute to a professional training fund, which supports workforce development initiatives.
- Work Accident Insurance: Employers must provide insurance coverage for work-related accidents and occupational diseases.
| Contribution Type | Rate (Employer) |
|---|---|
| Social Security | 14% |
| Professional Training Levy | Varies |
| Work Accident Insurance | Varies |
Income Tax Withholding Requirements
Employers 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 Calculation: Employers must calculate the taxable income by subtracting allowable deductions and allowances from the employee's gross salary.
- Tax Rate Application: The applicable income tax rate is applied to the taxable income to determine the amount of tax to be withheld.
- Remittance of Withheld Taxes: Employers must remit the withheld income taxes to the tax authorities by the specified deadlines.
The income tax rates for 2025 are as follows:
| Taxable Income (CVE) | Rate |
|---|---|
| 0 - 20,000 | 0% |
| 20,001 - 50,000 | 8% |
| 50,001 - 150,000 | 15% |
| 150,001 - 500,000 | 20% |
| Over 500,000 | 25% |
Employee Tax Deductions and Allowances
Employees in Cabo Verde are entitled to certain tax deductions and allowances that can reduce their taxable income. These deductions may include expenses related to healthcare, education, and housing.
- Healthcare Expenses: Employees may be able to deduct certain healthcare expenses, subject to limitations.
- Education Expenses: Deductions may be available for education-related expenses, such as tuition fees and school supplies.
- Housing Allowances: Certain housing allowances may be tax-exempt, depending on the specific circumstances.
- Social Security Contributions: Employee contributions to social security are typically deductible.
Tax Compliance and Reporting Deadlines
Employers and employees in Cabo Verde must adhere to specific tax compliance and reporting deadlines. Failure to meet these deadlines can result in penalties and interest charges.
- Monthly Tax Returns: Employers are typically required to file monthly tax returns, reporting the income tax withheld from employees' salaries and the social security contributions made on their behalf.
- Annual Tax Returns: Employees are required to file annual income tax returns, reporting their income and claiming any applicable deductions and allowances.
- Payment Deadlines: Taxes must be paid by the specified deadlines to avoid penalties.
Special Tax Considerations for Foreign Workers and Companies
Foreign workers and companies operating in Cabo Verde may be subject to special tax considerations. These considerations may include:
- Tax Treaties: Cabo Verde may have tax treaties with other countries that can affect the taxation of foreign workers and companies.
- Residency Rules: The residency status of foreign workers can impact their tax obligations in Cabo Verde.
- Permanent Establishment: Foreign companies may be subject to tax in Cabo Verde if they have a permanent establishment in the country.
- Expatriate Allowances: Certain allowances paid to expatriate employees may be tax-exempt, subject to specific conditions.
