CABO VERDE LAW AND PRACTICE Contributed by: Nelson Raposo Bernardo, Joana Andrade Correia, Manuel Esteves de Albuquerque and Mafalda Contumélias Batista, Raposo Bernardo & Associado s
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. 5.6 Transfer Pricing There is a transfer pricing regime which estab - lishes that commercial transactions between associated enterprises should be subject to identical terms and conditions to those that would be accepted and agreed between inde - pendent entities (the arm’s length principle). Taxpayers must keep information and documen - tation 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 privi - leged 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 primar - ily on the Economic Community of West African States (ECOWAS) Common External Tariff (TEC), although the nation has not yet fully adopted all of its regional components. The regime of
tax credit is equal to the lesser of (i) the income tax paid abroad or (ii) the CIT fraction calculated before the deduction is given, corresponding to incomes that may be taxed in the country con - cerned, net from any costs or losses, directly or indirectly incurred, for the purposes of its reali - sation. 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 cumulative require - ments: • must be tax resident in Cabo Verde; • must be subject to the normal regime of taxa - tion at the highest corporate tax rate; • must maintain a minimum holding participa - tion of 75%; • all companies must be held by the parent company for more than one year (excluding newly incorporated companies); • cannot be dormant for more than one year; • cannot be dissolved or insolvent; • cannot have tax losses in the three years prior to the regime application, unless the compa - nies have been held by the parent company for more than two years; and • cannot have a tax period different from that of the parent company. Furthermore, the parent company must not be controlled 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.
129 CHAMBERS.COM
Powered by FlippingBook