CABO VERDE Law and Practice Contributed by: Nelson Raposo Bernardo, Joana Andrade Correia, Manuel Esteves de Albuquerque and Júlio Martins Júnior, Raposo Bernardo & Associados
Category B – business and professional income Business and professional income earned by individu - al entrepreneurs is taxed under the following regimes: • standard organised accounting; • Special Regime for Small and Micro-Sized Compa - nies (SRSMC); and • single act ( ato isolado ). Business and professional income earned by individu - al entrepreneurs under standard organised accounting is subject to WHT at the rate of 20% as an advance payment on account of the final annual income tax liability. Net income is computed under the rules applicable to companies, with the adjustments provided for in the PIT Code and subject to income tax at the applicable PIT rates. Net income is computed according to the declara - tion-based method ( método declarativo ), where tax is levied on the aggregate base of the relevant income categories in the household, minus personal deduc - tions and allowances. Business and professional income earned by individu - al entrepreneurs under the SRSMC is subject to a flat rate of 4%. Under this regime, micro and small-sized companies are subject to a Single Special Tax (SST) of 4% levied on the gross amount of sales obtained in each taxable year, to be paid quarterly. SST replaces the corporate income tax (CIT), fire brigade surtax and VAT, as well as the contribution to social security due from the company. Under the PIT Code, a single act is considered a tax - able operation performed twice during the tax year. Category C – rental income Rental income is subject to WHT at the rate of 20% as an advance payment on account of the final annual income tax liability. To compute the net income, tax - payers may deduct maintenance and repair expenses of up to 30% of gross rental income.
salary, bonuses, commissions, pensions, allowances (eg, cost-of-living and housing allowances) and ben - efits in kind (eg, company cars), regardless of where the payment originates. Board members’ remunera - tion is taxed as employment income. The following types of income are exempt from PIT: • per diems for national and international trips, for the portion that does not exceed the limits set for the public services; • lunch allowance, up to CVE250 per day; • the use of a personal car, up to CVE120,000 per year; • a cash shortage allowance, of up to 15% of the monthly salary; • a family allowance, of up to CVE500 per month, for each dependant or equivalent and ancestors; and • redundancy payments, which are taxable on the portion that exceeds one and a half times the aver - age remuneration paid during the last months of employment, multiplied by the number of years of employment. As a rule, the monthly WHT is levied as final taxation, unless the taxpayer opts to file the tax return, in which case the tax withheld has the nature of an advance payment on account of the final annual income tax lia - bility. The monthly tax withholdings due are calculated by applying the following progressive WHT rates and the corresponding deduction to the taxable income: • up to CVE80,000 – WHT is 15% with a CVE5,500 deduction; • CVE80,000 to CVE150,000 – WHT is 21% with a CVE10,300 deduction; and • over CVE150,000 – WHT is 25% with a CVE16,300 deduction. Employees and managers or directors of the com - pany are liable to social security contributions of 8.5% on their gross remuneration. Employers are liable to social security contributions of 16% on the same gross remuneration received by employees and man - agers or directors of the company.
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