Sao Tome and PrincipeTax Obligations Detailed

In Sao Tome and Principe, employers face various tax obligations, including social security contributions, corporate income tax, withholding tax, and value-added tax.

Social Security

• Employer Contributions: 8% of the employee's gross salary, paid monthly to the National Institute of Social Security (INSS).
• Employee Contributions: 6% of the employee's gross salary.

Corporate Income Tax (CIT)

• Rate: 25% of taxable profits. Some small businesses may qualify for lower rates.
• Filing and Payment: Generally annual, but specific deadlines and installment options may depend on the business's size and nature.

Withholding Tax

Employers must withhold personal income tax (PIT) from employee salaries and remit it to the tax authorities. The PIT rate is progressive, ranging from 0% to 25%.

Value Added Tax (VAT)

• Standard Rate: 15%. A reduced VAT rate of 10% exists as of June 2023. Businesses with a turnover below STD 1 million per annum are subject to a monthly 7% turnover tax.
• Other Taxes: Depending on the nature of their operations, employers might have to consider and comply with other taxes like property tax. Also, as of today, Sao Tome and Principe has graduated from Least Developed Country (LDC) status. While this is a positive sign of the country's economic improvement and may attract investment, it could also influence future changes in the tax system.

It is crucial for businesses operating or planning to operate in Sao Tome and Principe to stay informed and compliant with all current tax regulations, understanding that these regulations are always subject to change.

Employee tax deductions in Sao Tome and Principe primarily consist of social security contributions, with no specific payroll tax on wages and salaries.

Social Security Contributions

Social security contributions are deducted from employee wages to fund benefits like pensions and healthcare. While the exact percentages are not available in the provided sources, these contributions are mandatory for all employees.

Income Tax (Imposto sobre o Rendimento das Pessoas Singulares - IRPS)

Employees are subject to income tax (IRPS), but this is a separate tax from payroll deductions and is usually filed annually. The 2024 budget introduced a special tax on individual income (IERS) at a rate of 20% on monthly income exceeding STD 50,000.

Other Deductions

Other potential deductions might include those for union dues or specific employee benefits programs. Information regarding these deductions must be clarified with local authorities or payroll specialists.

Employer Responsibilities

Employers are responsible for deducting social security contributions and remitting them to the appropriate authorities. They must also withhold income tax (IRPS) based on the employee's income and tax bracket. It's essential for employers to maintain accurate payroll records and comply with all tax regulations and deadlines.

Tax Year and Deadlines

Sao Tome and Principe's tax year typically aligns with the calendar year. Deadlines for filing and remitting taxes vary depending on the type of tax and the specific regulations. It's crucial for employers to consult official sources or local experts for the most up-to-date information on deadlines. As this information is time-sensitive, consulting official resources is recommended for up-to-date details.

Corporate Taxes

While not directly related to employee deductions, the corporate income tax rate in Sao Tome and Principe is generally 10%. However, specific sectors (tourism, education, health, new technologies, and exports) benefit from accelerated depreciation and amortization. Tax deductions are also available for investments in specialized equipment and employee training. The petroleum sector operates under separate tax regulations, with a 30% income tax rate.

This information is current as of February 5, 2025, and may be subject to change due to legal and regulatory updates. Always consult the most current official sources or local tax advisors for confirmation.

São Tomé and Príncipe implemented a Value Added Tax (VAT) regime on June 1, 2023.

VAT Rates

• Standard Rate: 15% applies to most goods and services.
• Reduced Rate: 7.5% applies to essential food items like beans, bread, corn, pasta, and rice.
• Zero Rate: 0% applies to exports and certain other supplies.
• Turnover Tax: Businesses with annual turnover below STD 1 million are subject to a monthly 7% turnover tax instead of VAT.

Registration Threshold

Businesses with a turnover exceeding STD 1 million per annum are required to register for VAT. Those below this threshold are subject to the turnover tax.

Filing and Payment

• VAT-registered businesses are generally required to file VAT returns monthly.
• The deadline for filing and payment is typically by the end of the month following the reporting period. However, it is essential to consult official sources for the most up-to-date deadlines.

Exempt Goods and Services

• Exports
• Certain basic agricultural products (as determined by Administrative Guideline No. 6 of 2023, effective from June 1, 2023)

Other Indirect Taxes Replaced by VAT

The VAT regime replaced several previous indirect taxes, including:

• General consumption tax
• Tax on traded services
• Tax on alcoholic beverages, spirits, and cigarettes
• Tax on telecommunications and hotel services
• Restaurant tax

Additional Information for Businesses

• Import Tariffs: São Tomé and Príncipe applies import tariffs based on product categories. Some goods, such as milk and wheat, are exempt from import tariffs. Others, such as timber, may be temporarily exempt, depending on government policies aimed at preserving natural resources.
• Free Trade Zones: Foreign companies can operate within designated free trade zones, benefiting from duty-free import of materials for manufacturing goods destined for export.

Note: This information is current as of February 5, 2025, and is subject to change. Always verify with official government resources or a tax advisor for the latest regulations.

São Tomé and Príncipe offers tax incentives to attract investment and stimulate economic growth.

Investment Code and Tax Benefits Code

São Tomé and Príncipe's investment framework is governed by the Investment Code (Decree-Law No 19/2016) and the Tax Benefits Code (Decree-Law No 15/2016). The Investment Code outlines the general terms, conditions, and guarantees for investments, while the Tax Benefits Code details the specific incentives available. Investments valued at €50,000 or more are eligible for incentives under the Tax Benefits Code.

General Tax Incentives

Several general tax incentives are available to investors in São Tomé and Príncipe:

• Exemption from import duties: Goods and equipment imported for new or expanding businesses are exempt from import duties if they cannot be sourced domestically.
• Reduced corporate income tax: A reduced corporate income tax rate of 10% applies to eligible investments, compared to the standard rate of 25%.
• Accelerated depreciation: Investments in sectors like tourism, education, health, new technologies, and export-oriented industries are eligible for accelerated depreciation.
• Deductions from taxable income: Businesses can deduct up to 50% of their investment in specialized equipment from their taxable income for the first five years of operation. This deduction also applies to personal income tax for investments made by individuals.
• Training cost deductions: Costs associated with training São Toméan staff are deductible from taxable income.
• Investment in public infrastructure: Deductions of 100% or 150% of costs related to the construction or restoration of public infrastructure like roads, water supply, electricity, schools, and hospitals are available, with the higher percentage applying to projects in less developed districts (Cantagalo, Lembá, Lobata, Caué, and Príncipe).

Special Tax Incentives

Additional incentives apply to specific sectors:

• Agriculture, agro-construction, cattle raising, and fisheries: These sectors benefit from a 50% reduction in the corporate income tax rate for the first seven years of operation, reduced stamp duty on banking operations related to importing foreign capital, and exemption from income tax on capital application.

• Local and International Trading: Enterprises active in local trading can benefit from a 50% reduction in corporate or personal income tax for the first five years. Enterprises involved in international trading are subject to a flat 5% income tax rate. It's important to note that investments under the simplified regime (for investments between €50,000 and €249,999) receive only 50% of the incentives described in the Tax Benefits Code.

Temporary Law on Incentives for Investments

A more recent law, Law 9/2023, allows the government to grant additional incentives beyond those in the Tax Benefits Code in exceptional circumstances. These are typically granted to projects of national interest in areas like food supply and production, health, education, energy, and ICT, or those with a significant impact on foreign currency mobilization.

Application Procedure

To access tax incentives, investors must obtain a Private Investment Registration Certificate (CRIP) from the Agency for Private Investment and Promotion (APCI) after their investment project is approved. The specific application procedures and documentation requirements can be obtained from the APCI.

Please note that this information is current as of February 5, 2025, and may be subject to change.