Cabo VerdeTax Obligations Detailed

Employers in Cabo Verde have various tax obligations, including income tax, social security contributions, and other levies.

Income Tax

• Employee Income Tax (IUR): Cabo Verde uses a progressive income tax system. As of 2024, employees earning up to 220,000 CVE annually are exempt. Income between 220,001 and 960,000 CVE is taxed at 16.5%, and income exceeding 960,000 CVE is taxed at 30%. Employers are responsible for withholding this tax and remitting it to the authorities.
• Corporate Income Tax (CIT): Generally, the corporate income tax rate is 25%. Some sources mention 22%. Certain incentives can reduce this rate, sometimes by up to 50% for specific sectors or investments. Small companies might be subject to a simplified tax regime with a rate of 4% on turnover. Prepayments of CIT are typically due quarterly (end of March, July, November). The annual CIT return is generally due by May 31st of the following year.

Social Security

• Employers contribute 15% of the employee's gross salary to the National Institute of Social Security (INPS).
• Employees contribute 8% of their gross salary to INPS.
• These contributions cover pensions, health benefits, and other social security programs. It's crucial to register employees with INPS within 15 business days of their start date.

Other Taxes and Obligations

• Occupational Accident Insurance: Employers contribute 1% of the employee's salary towards this insurance.
• VAT (Value Added Tax): The standard VAT rate is 15%, with a reduced rate of 8% for utilities like electricity and water. Employers involved in supplying or selling goods and services are responsible for collecting and remitting VAT.
• Other Levies: Depending on the industry and business activity, additional taxes such as customs duties (0-50%), special consumption tax (10-150%), property taxes, stamp duty, ecological charges, or tourism tax may apply.
• Withholding Tax: Employers might need to withhold taxes on certain payments to non-residents, including interest, royalties (generally 20%), dividends, and services (potentially 15%).

Payroll and Compliance

• Minimum Wage: As of January 1, 2024, the minimum wage is 15,000 CVE per month.
• Overtime Pay: Standard workweek is 44 hours. Overtime is compensated at 125% of regular hourly rate and capped at 12 hours per week. Some sources state the standard as 38 hours with overtime at 50%.
• 13th-month pay: While not legally required, a 13th-month salary payment is common practice.
• Record Keeping: Employers must maintain accurate payroll and tax records.

This information is for general guidance as of today, February 5, 2025, and may be subject to change. Always consult with local authorities or a tax advisor for the most up-to-date and specific information. Regulations and rates might have been updated since the latest available information in my sources (October 2024, and January 2025 for Tanzania).

Employee tax deductions in Cabo Verde are determined by a progressive income tax system and include social security contributions.

Income Tax (Imposto Único Sobre o Rendimento – IUR)

• Tax-Exempt Threshold: Annual income up to 220,000 CVE is exempt from income tax.

• Tax Brackets: Income exceeding the threshold is taxed according to these brackets (as of 2024):

  • 16.5% on income between 220,001 and 960,000 CVE
  • 30% on income exceeding 960,000 CVE

• Withholding: Employers are responsible for withholding income tax from employee salaries and remitting it to the tax authorities.

Social Security Contributions

• Employee Contribution: Employees contribute 8.5% of their gross salary to the National Institute of Social Security (INPS).
• Employer Contribution: Employers contribute an additional 16% of the employee's gross salary to the INPS.
• Coverage: INPS contributions cover pensions, health benefits, and other social security programs.

Other Deductions

While less common than IUR and INPS, other potential deductions can include:

• Occupational Accident Insurance: Potentially 1% of the employee's gross income.
• Industry-Specific Contributions: Variable rates may apply depending on the employee's industry or sector.

General Tax Information

• Tax Year: The tax year in Cabo Verde runs from January 1st to December 31st.
• Tax Filing Deadline: The deadline to file corporate income tax returns is typically March 31st of the following year. Though specifics for individual income tax returns were not available in the provided sources, it's reasonable to expect a similar timeframe.

It is important to consult official Cabo Verdean government resources for the most up-to-date information. Tax laws and regulations are subject to change. This information is current as of February 5, 2025. It may not reflect the latest updates or specific individual circumstances.

In Cabo Verde, the Value Added Tax (VAT), known as Imposto sobre o Valor Acrescentado (IVA), is a consumption tax applied to most goods and services.

VAT Rates

• Standard Rate: 15% This is the general rate applied to most goods and services.
• Reduced Rate: 8% Applies to the supply of electricity and water to private consumers.
• Tourism Rate: 10% Applies to lodging in hotels and similar facilities, catering, and tour operators that qualify as resident micro, small, or medium-sized companies. This applies to combined services rendered in Cabo Verde. (Applicable in 2023, status for 2025 needs confirmation).

VAT Registration

• Threshold: There isn't a registration threshold for non-resident companies providing taxable goods and services in Cabo Verde. Registration is required.
• Non-Residents providing electronic services: Obligatory for those listed by the Ministry of Finance as large e-commerce players. Non-resident businesses must appoint a local tax representative.

VAT Filing and Payment

• Frequency: Quarterly
• Deadline: The 20th of the month following the reporting quarter.
• E-invoicing: Mandatory for all businesses, including non-residents.

Exempt Goods and Services

• Exempt without credit: Hospital and medical care, certain medical services provided by professionals (doctors, dentists, etc.).
• Exempt with credit (Zero-rated): Essential goods as listed in Annex I of the VAT Code (e.g., certain food items like meat, fish, and milk), Exports, certain international transport services.
• Additional exemptions exist for specific goods and services, particularly those related to international trade and essential sectors.

Other important information for 2025

• Taxable Base for goods with prices determined by public authorities: Varies. For example, 100% for diesel and fuel, 10% for petroleum, 16.65% for butane gas.
• Special Regime for E-commerce: Targets distance sales of goods and services by taxpayers without a physical presence in Cabo Verde to consumers in the country, but only applies to specified large players and doesn't apply to remittances exceeding CVE 10,000 or excisable products.

It's crucial to stay updated on any changes in tax legislation. Contacting the Agência de Receitas de Cabo Verde (ARC) or a tax advisor can be beneficial.

Cabo Verde offers a range of tax incentives to attract foreign investment and stimulate economic growth.

General Tax Incentives

• Dividends and Profits: Exemption from taxation on dividends and profits distributed for five years, or permanently if reinvested. A fixed 10% tax rate applies after the sixth year, unless more advantageous terms are available under a bilateral tax treaty.
• Principal and Interest Payments: Exemption from taxation on principal and interest payments related to foreign investments.
• Corporate Income Tax (CIT): A reduced CIT rate of 22% (down from 25%).
• Personal Income Tax (IRPS): A maximum rate of 24%.
• Tax Installment Payments Waiver: Waiver of tax installment payments for taxpayers with negative results or those who started their business in the previous year.

Sector-Specific Incentives

• Industrial Activities: Corporate tax credits up to 50% of eligible investments, with unused credits carried forward for up to 10 years. Exemptions on property tax for properties solely used for industrial activities, as well as exemptions from customs duties on machinery and raw materials.
• Tourism, Tourism Promotion, Air and Sea Transportation, Renewable Energy, and Information Technology: Corporate income tax credits up to 50% of eligible investments under the Tax Incentives Code.
• Renewable Energy Projects: Corporate income tax credits up to 30% of eligible investments and property tax benefits. Customs tax benefits for renewable energy projects and the acquisition of new electric vehicles for collective passenger transport.

Incentives for Specific Investments

• Investments exceeding $4.8 million USD: Eligibility for contractual benefits such as reductions or exemptions from customs duties, stamp duties, property taxes, and other fiscal duties.
• Research and Development (R&D): Deduction of eligible R&D expenses from CIT due, with a base rate of 40% of expenses incurred in the relevant tax period.
• Start-Ups ("Start-up Jovem"): Tax incentives for young start-up companies.
• Profit Reinvestment: Tax benefits for reinvesting profits.
• Company Financing: Incentives for company financing.

Incentives for Emigrants

• Direct Investment: Exemption from CIT on dividends and profits distributed to emigrant investors from authorized foreign investments. Exemption from customs duties on construction materials, extensions, or refurbishments of a first residential house, including furniture and appliances, under specific conditions.

Free Zone Enterprises

• Tax Incentives: Ten-year exemption from all taxes and duties on income. After the exemption period, a maximum 15% tax rate applies to company profits or distributed dividends. Exemption from indirect taxes and duties (such as stamp duties).
• Customs Incentives: Exemption from customs duties and consumption taxes on imported equipment and construction materials.

Other Incentives

• International Business Center, Special Economic Zones, and Business Internationalization: Tax benefits for investments within these areas.
• Permanent Residence Permits: Available for foreign citizens investing over approximately $2 million USD and for foreign owners of second homes.
• Excise Duty Exemptions: Applicable to assets.

Application Procedures

While specific application procedures are not detailed here, investors are encouraged to contact Cabo Verde TradeInvest, the country's investment promotion agency, for assistance and further information. They offer a "One-Stop Shop for Investments" electronic platform and personalized support.

It's important to note that tax regulations are subject to change. Consulting with a tax professional is recommended for the most up-to-date information and personalized advice. As of today, February 5, 2025, this information is believed to be current and accurate. However, due to the dynamic nature of tax laws, changes may occur.