Cabo Verde operates a tax system that includes both direct and indirect taxes. For individuals, the primary direct tax is the Personal Income Tax (Imposto sobre o Rendimento das Pessoas Singulares - IRPS), which is levied on income earned from various sources, including employment. Employers play a crucial role in this system by withholding IRPS and contributing to social security on behalf of their employees. Understanding these obligations is essential for compliant operations within the country.
The social security system in Cabo Verde is managed by the National Social Security Institute (Instituto Nacional de Previdência Social - INPS). Both employers and employees are required to make contributions to fund benefits such as pensions, sickness, and unemployment. These contributions are calculated based on the employee's gross salary, up to a defined ceiling.
Employer Social Security and Payroll Tax Obligations
Employers in Cabo Verde are responsible for contributing to the INPS on behalf of their employees. This contribution is a percentage of the employee's gross salary, subject to a monthly ceiling. The employer's contribution rate is typically higher than the employee's rate.
The standard INPS contribution rates expected for 2025 are:
| Party | Contribution Rate |
|---|---|
| Employer | 15% |
| Employee | 8% |
| Total | 23% |
These rates apply to the employee's gross monthly salary, up to the established social security ceiling. Salaries exceeding this ceiling are only subject to contributions up to the ceiling amount. Employers must register with INPS and make monthly contributions by the specified deadline.
Income Tax Withholding Requirements
Employers are legally required to withhold Personal Income Tax (IRPS) from their employees' salaries each month. This withheld amount is then paid to the tax authorities on behalf of the employee. The amount of IRPS to be withheld depends on the employee's total gross income, their tax bracket, and applicable deductions and allowances.
Cabo Verde's IRPS system is progressive, meaning higher income levels are taxed at higher rates. The tax brackets and rates are subject to change by the government, but the structure typically involves several tiers. The calculation of monthly withholding considers the annual tax rates applied to the annualized monthly income, adjusted for deductions and allowances, and then divided by 12.
An example of potential IRPS tax brackets (based on recent structures, subject to 2025 confirmation):
| Annual Taxable Income (CVE) | Tax Rate |
|---|---|
| Up to 300,000 | 0% |
| 300,001 to 600,000 | 10% |
| 600,001 to 1,200,000 | 15% |
| 1,200,001 to 2,400,000 | 20% |
| 2,400,001 to 4,800,000 | 25% |
| Over 4,800,000 | 27% |
Employers must use the official tax tables and guidelines provided by the tax authority (Direcção Geral dos Impostos - DGI) to accurately calculate the monthly IRPS withholding for each employee.
Employee Tax Deductions and Allowances
Employees in Cabo Verde are entitled to certain deductions and allowances that reduce their taxable income, thereby lowering their IRPS liability. These can include standard deductions or itemized deductions for specific expenses.
Common deductions and allowances that may be available include:
- A standard personal allowance.
- Allowances for dependents (spouse, children).
- Deductions for certain documented expenses such as health, education, and housing (within specified limits).
- Mandatory social security contributions (the employee's 8% share) are typically deductible from gross income for IRPS calculation purposes.
The specific amounts and rules for claiming these deductions and allowances are defined by tax law and should be considered by employers when calculating monthly IRPS withholding, provided the employee has submitted the necessary information and documentation.
Tax Compliance and Reporting Deadlines
Employers in Cabo Verde have strict deadlines for reporting and paying withheld IRPS and social security contributions. Adhering to these deadlines is critical to avoid penalties, interest, and other compliance issues.
Key deadlines typically include:
- Monthly IRPS and INPS Payments: Withheld IRPS and employer/employee INPS contributions must be paid to the respective authorities (DGI and INPS) by a specific date each month, usually around the 15th or 20th of the following month.
- Annual Reporting: Employers are required to submit annual declarations summarizing the total income paid to each employee and the total IRPS withheld during the previous calendar year. This declaration is typically due in the first few months of the new year.
Employers must maintain accurate payroll records, including details of income paid, deductions applied, and taxes withheld for each employee.
Special Tax Considerations for Foreign Workers and Companies
Foreign workers and companies operating in Cabo Verde may face specific tax rules.
- Tax Residence: An individual's tax obligations in Cabo Verde depend on their tax residence status. Residents are generally taxed on their worldwide income, while non-residents are typically taxed only on income sourced within Cabo Verde. A foreign worker may become a tax resident if they spend more than 183 days in Cabo Verde within a 12-month period.
- Non-Resident Income Tax: Income earned by non-residents from employment or services rendered in Cabo Verde is subject to IRPS, often at a flat withholding rate on the gross amount, unless a relevant double taxation treaty provides otherwise.
- Permanent Establishment: Foreign companies are subject to Corporate Income Tax (Imposto sobre o Rendimento das Pessoas Colectivas - IRPC) on profits attributable to a permanent establishment in Cabo Verde. Employing staff locally can be a factor in determining if a permanent establishment exists.
- Social Security: Foreign workers employed by a Cabo Verde entity are generally subject to INPS contributions unless an international social security agreement exempts them (e.g., if they continue contributing in their home country).
Understanding these nuances is vital for foreign businesses employing staff in Cabo Verde and for foreign nationals working in the country. Compliance requires careful consideration of residency rules, treaty provisions, and local registration requirements.
