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 D – investment income In general, investment income is subject to a flat rate of 20%, although dividends and interest on bonds are subject to a flat rate of 10%. A special tax regime contained in the Tax Benefits Code provides for the following: • an exemption from taxation on interest on term deposits received by Cabo Verdean emigrants; • income derived from bonds or similar products (except debt securities listed in the securities mar - ket) obtained before 31 December 2017 benefits from a 5% flat rate; and • dividends from shares listed in the stock exchange, placed at the disposal of their holders before 31 December 2017, are exempt from PIT. Category E – capital gains Capital gains earned by individual taxpayers are sub - ject to a flat rate of 1% in the case of gains on the disposal of immovable property, intellectual property or shareholdings. A flat rate of 20% applies in the case of gains on gambling, lottery participation, bet - ting, and prizes awarded in sweepstakes or contests. 5.2 Taxes Applicable to Businesses Cabo Verde’s corporate income tax (CIT), called imposto sobre o rendimento das pessoas colectivas , is levied on profits obtained within the Cabo Verdean territory and those obtained outside by resident com - panies (worldwide principle). Non-resident companies with a permanent establishment (PE) in Cabo Verde are also subject to CIT on Cabo Verdean-source income attributable to the PE. Taxable profit is computed according to the local accounting rules and adjusted for tax purposes. For the purposes of determining taxable income, CIT pay - ers can be taxed under two methods/regimes, as fol - lows. • A special regime for micro and small-sized compa - nies: (a) micro-sized companies are entities that employ up to five persons, with an annual turnover (gross amount of sales and services) that does not exceed CVE5 million;
(b) small-sized companies are entities that employ between six and ten persons, with an annual turnover of between CVE5 million and CVE10 million; and (c) micro and small importers import goods with a customs value that does not exceed the value of turnover on an annual basis for the purpose of qualifying under the simplified scheme for micro and small-sized companies. • A standard organised accounting regime – the standard/normal regime under which the computa - tion of profits follows the local accounting rules. Resident companies are subject to a tax rate of 20%, where taxable income corresponds to the profit minus any tax benefits and any losses carried forward, as stated in the tax return. The tax rate of 20% is also applicable for PEs of non-resident companies. Micro and small-sized companies are subject to SST of 4% levied on the gross amount of sales obtained in each taxable year, to be paid quarterly. The SST replaces the CIT, fire brigade surtax and VAT, as well as the contribution to social security attributable to the company. Non-resident companies without a PE are subject to WHT rates applicable for each income category stipu - lated in the Tax Code, which range between 1% and 20%. The CIT rate is increased by a fire brigade sur - charge, called taxa de incêndio , of 2% on the tax due, leading to a final tax rate of 20.40%. This surcharge is levied in the municipalities of Praia (Island of Santiago) and Mindelo (Island of São Vicente). Permanent Establishment Non-resident companies deemed to have a PE in Cabo Verde are also subject to tax in Cabo Verde. Under Cabo Verdean tax law, a non-resident company is deemed to have a PE if one of the following applies: • it has any fixed installation or permanent repre - sentation located in Cabo Verde through which activities of a commercial, industrial or agricultural nature, fishing or the rendering of services, among others, are carried out (including agricultural, fish - ing and cattle-raising explorations);
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