CABO VERDE Law and Practice Contributed by: Nelson Raposo Bernardo, Joana Andrade Correia, Manuel Esteves de Albuquerque and Júlio Martins Júnior, Raposo Bernardo & Associados
5.6 Transfer Pricing There is a transfer pricing regime which establishes that commercial transactions between associated enterprises should be subject to identical terms and conditions to those that would be accepted and agreed between independent entities (the arm’s length principle). Taxpayers must keep information and documentation regarding their transfer pricing policies on hand. The following taxpayers must prepare a transfer pricing documentation file: • entities classified as “Large Taxpayers”; • entities considered to be taxed under a privileged tax regime, as defined in the General Tax Code; • PEs of non-resident entities; and • other entities designated as such by the tax authorities. 5.7 Anti-Evasion Rules Cabo Verdean law provides for anti-evasion rules. 5.8 Tariffs Cabo Verde’s tariff regime is fairly open and liberal, with its customs regime based primarily on the Eco - nomic Community of West African States (ECOWAS) Common External Tariff (TEC), although the nation has not yet fully adopted all of its regional compo - nents. The regime of national tariffs and customs is regulated by the Customs Code ( Código Aduaneiro ), complemented by specific taxation tools like Import Duty ( Direitos de Importação ) and other indirect taxes like VAT (IVA). Structure of Import Duties Import duties in Cabo Verde tend to range between 0% and 50% of the goods’ value, depending on their nature and classification. The standard structure has the following layers: • Import Duty ( Direito de Importação ) is an ad valo - rem tax on the cost, insurance and freight value; • Environmental Tax ( Taxa Ecológica ) is applied to some products – eg, cars, plastics or second-hand electrical goods;
tion calculated before the deduction is given, corre - sponding to incomes that may be taxed in the country concerned, net from any costs or losses, directly or indirectly incurred, for the purposes of its realisation. Foreign tax credit cannot exceed the tax outlined in
the tax treaty, if applicable. 5.4 Tax Consolidation
The group taxation regime may apply if one of the companies directly or indirectly holds at least 75% of the statutory capital of the others and more than 50% of the voting rights. The option to apply this special taxation regime for groups of companies can only be made when such groups meet the following cumula - tive requirements: • tax resident in Cabo Verde; • subject to the normal regime of taxation at the highest corporate tax rate; • maintain a minimum holding participation of 75%; • all companies have been held by the parent company for more than one year (excluding newly incorporated companies); • not dormant for more than one year; • not dissolved or insolvent; • no tax losses in the three years prior to the regime application, unless the companies have been held by the parent company for more than two years; and • the tax period is not different from that of the par - ent company. Furthermore, the parent company must not be con - trolled by any other Cabo Verde-resident company that meets the criteria to be a parent company, and should not have opted out of this regime in the past three years. 5.5 Thin Capitalisation Rules and Other Limitations There is a limitation on the tax deductibility of net financing expenses, which are only deductible up to the higher of the following limits: • CVE110 million; or • 30% of earnings before depreciation, net financing expenses and taxes.
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