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Corporate Taxation in Cabo Verde

The Fiscal System in Cabo Verde

Cabo Verde's tax system, administered by the Direcção-Geral dos Impostos (DGI) under the Ministry of Finance, is designed to support the archipelago's growing economy while fostering an investor-friendly environment. As of 2025, the system balances national taxes on income, wealth, and consumption with municipal levies, aiming to attract foreign investment in key sectors like tourism, renewable energy, and fisheries. This article outlines the fiscal framework, focusing on critical taxes for investors, such as Corporate Income Tax (Imposto sobre o Rendimento das Pessoas Colectivas - IRPC), Value Added Tax (Imposto sobre o Valor Acrescentado - IVA), and others, based on current regulations. For entrepreneurs eyeing opportunities in Cabo Verde's vibrant market, understanding these taxes is vital for compliance and strategic planning.

National Taxes

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

  • Corporate Income Tax (Imposto sobre o Rendimento das Pessoas Colectivas - IRPC)

  • Inheritance and Donation Tax (Imposto sobre Sucessões e Doações)

  • Special Gambling Tax (Imposto Especial sobre o Jogo)

  • Value Added Tax (Imposto sobre o Valor Acrescentado - IVA)

  • Customs Duties (Direitos Aduaneiros)

  • Specific Consumption Tax (Imposto Específico sobre o Consumo - IEC)

  • Tax on Onerous Transfers (Imposto sobre Transmissões Onerosas - ITO)

  • Stamp Duty (Imposto do Selo)

Direct Taxes (on Wealth)

  • Personal Income Tax (IRPS): Levied on individual income, including wages, business profits, and investments. Rates are progressive, ranging from 10% to 25% depending on income brackets.

  • Corporate Income Tax (IRPC): Targets corporate profits, detailed below.

  • Inheritance and Donation Tax: Applied to wealth transfers via inheritance or gifts, with rates varying based on the relationship between donor and recipient.

  • Special Gambling Tax: Levied on gaming activities, such as casinos, at specific rates set by the DGI.

Indirect Taxes (on Expenditure)

  • Value Added Tax (IVA): Applied to goods and services, detailed below.

  • Customs Duties: Charged on imports, with rates varying based on product type and trade agreements (e.g., ECOWAS protocols).

  • Specific Consumption Tax (IEC): Targets specific goods like alcohol, tobacco, and luxury items, with rates set by product category.

  • Tax on Onerous Transfers (ITO): Levied on property transfers, detailed below.

  • Stamp Duty: Applied to various documents and transactions, such as contracts and licenses, at fixed or proportional rates.

Municipal Taxes

  • Municipal Property Tax (Imposto Único sobre o Património - IUP): Levied on property ownership, based on the property's assessed value.

  • Municipal Economic Activities Tax: Applied to local business operations, varying by municipality and business type.

Key Taxes for Investors

Corporate Income Tax (IRPC) in Cabo Verde

The Corporate Income Tax (IRPC) is a cornerstone of Cabo Verde's fiscal system, targeting the profits of corporate entities. Administered by the Direcção-Geral dos Impostos (DGI), IRPC applies to both resident and non-resident entities, with rules designed to ensure compliance while supporting the country's investor-friendly environment. Below is a detailed overview for investors navigating this tax.

Scope of IRPC

IRPC is levied on the income of corporate entities, with distinctions based on residency:

  • Resident Entities: Companies with headquarters or effective management in Cabo Verde are taxed on their worldwide income, covering all profits, domestic and foreign.

  • Non-Resident Entities: Those without a Cabo Verdean base are taxed only on income sourced in Cabo Verde, such as revenue from local operations, services, or property.

Exemptions: Public entities, certain non-profits, and specific projects under the Investment Code (e.g., renewable energy or tourism) may qualify for exemptions or reductions, subject to approval by Pro-Empresa.

Taxable Income

Taxable income for IRPC is calculated as:

  • The net income for the fiscal year, adjusted for non-deductible expenses (e.g., fines, undocumented costs).

  • Positive and negative changes in equity during the period, per legal requirements.

Tax Period

  • The standard tax period is the calendar year (January to December).

  • Companies may request a different tax period from the Ministry of Finance, subject to approval, to align with operational needs.

Permanent Establishments (Branches)

Branches of foreign companies are taxed as resident entities, with adaptations to ensure consistency in profit calculation, aligned with the Companies Code and international standards.

Non-Resident Income

For non-residents, taxable profit is determined by:

  • Applying withholding tax rates of 10% to 20%, depending on income type (e.g., dividends, interest, royalties).

  • Using IRPS rules for specific income categories, where applicable.

Tax Rates

The standard IRPC rate is 21%, applied to the taxable income of resident entities and branches. For non-residents:

  • 20% withholding tax applies to:

    • Dividends paid to non-resident shareholders.

    • Interest on loans or supplies.

    • Royalties and service contracts with non-residents.

  • 10% withholding tax applies to specific services, such as:

    • Telecommunications and international transport.

    • Assembly and installation of equipment.

Transfer Pricing Rules

Cabo Verde enforces transfer pricing regulations to prevent profit shifting, particularly for transactions between related parties. The DGI can:

  • Adjust the tax base if transactions do not reflect arm's-length pricing.

  • Require documentation to justify pricing in intra-group dealings, ensuring fair taxation.

Practical Insights for Investors

  • Compliance: File IRPC returns annually by April 30th for the previous year. Non-compliance risks fines or audits by the DGI.

  • Planning: Non-residents should factor withholding taxes into contracts to manage cash flow effectively.

  • Incentives: Investments in priority sectors (e.g., tourism, renewables) may qualify for IRPC reductions or exemptions under the Investment Code, applied through Pro-Empresa.

Understanding IRPC is critical for investors in Cabo Verde's dynamic market. For tailored guidance, consult local tax experts or visit the DGI's portal at www.financas.gov.cv.

Value Added Tax (IVA) in Cabo Verde

Value Added Tax (IVA) is a key component of Cabo Verde's fiscal system, administered by the DGI. It ensures a steady revenue stream while maintaining an investor-friendly environment. This section outlines the essentials of IVA for businesses, particularly in sectors like tourism, trade, or services.

Scope of IVA

IVA is an indirect tax applied to:

  • Transfers of Goods: Sales of tangible products within Cabo Verde.

  • Provision of Services: Services performed for consideration in Cabo Verdean territory.

  • Imports: Goods entering the country, regardless of origin.

The standard IVA rate is 15%, applied uniformly across most taxable transactions.

Calculation and Payment

IVA is calculated monthly, with businesses acting as tax collectors:

  • Mechanism: Businesses deduct IVA paid on purchases (input tax) from IVA collected on sales (output tax), remitting the difference to the DGI.

  • Frequency: IVA returns and payments are due monthly, typically by the 20th of the following month.

Exemptions

Specific exemptions include:

  • Public Entities: The State and public entities are exempt when performing public good activities.

  • Small Businesses: Entities with annual turnover below CVE 10 million (~€90,000) may opt for the Special Regime for Micro and Small Enterprises (REMPE), exempting them from IVA if not engaged in imports/exports.

  • Specific Goods and Services: Exemptions apply to essential goods (e.g., basic food, medical supplies) and services (e.g., healthcare, education).

Practical Insights for Investors

  • Compliance: Businesses must register for a Tax Identification Number (NIF) to manage IVA obligations. Accurate monthly filings are essential to avoid penalties.

  • Incentives: Investments in special economic zones or priority sectors (e.g., renewable energy) may qualify for IVA exemptions via Pro-Empresa.

  • Challenges: Small businesses near the CVE 10 million threshold should monitor turnover to anticipate IVA obligations.

  • Support: The DGI's portal (www.financas.gov.cv) offers forms, NIF verification, and e-filing options, increasingly available in urban centers like Praia and Mindelo.

IVA's 15% rate and clear exemptions make it manageable for investors. Engage local tax advisors for complex operations.

Withholding Tax (WHT)

A standard WHT rate of 20% applies to payments made by resident entities to non-residents for:

  • Dividends, interest, royalties, and capital gains.

  • Service contracts, including technical or professional services.

A reduced 10% WHT rate applies to specific services, such as telecommunications, international transport, or equipment installation. This constitutes the final tax liability for non-residents without a permanent establishment in Cabo Verde.

Social Security Contributions

Social security contributions, managed by the Instituto Nacional de Previdência Social (INPS), are mandatory for employers and employees. The total contribution rate is 24.5% of monthly salaries:

  • Employer: 15%.

  • Employee: 9.5%.

Foreign employees contributing to a similar system in their home country may apply for exemptions, subject to INPS approval.

Investment Incentives and Special Regimes

Cabo Verde offers a range of investment incentives to attract capital, particularly in tourism, renewable energy, and fisheries, under the Investment Code:

  • Tax Credits: Investments in fixed assets may qualify for IRPC credits of 5-15% for up to 5 years, applied via Pro-Empresa.

  • Accelerated Depreciation: Equipment and infrastructure in priority sectors benefit from a 50% increase in depreciation rates.

  • Special Economic Zones (SEZs): Businesses in SEZs, such as on Sal or Boa Vista, may receive IRPC exemptions for up to 10 years, 50% reductions for the next 5 years, and IVA/customs duty exemptions for imported equipment.

  • Large-Scale Projects: Investments exceeding CVE 500 million (~€4.5 million) may qualify for tailored tax breaks, including IRPC and IVA exemptions.

Double Taxation Agreements (DTAs)

Cabo Verde has DTAs with Portugal, Spain, Macau, and several African countries (e.g., Senegal). These agreements reduce withholding taxes on cross-border payments (e.g., dividends, interest, royalties) and prevent double taxation, enhancing attractiveness for investors from these countries. For example, a DTA may lower the 20% WHT on dividends for residents of DTA countries.

Practical Considerations for Investors

  • Tax Incentives: Engage with Pro-Empresa to explore IRPC and IVA exemptions for projects in priority sectors or SEZs.

  • Compliance: Register for a NIF to manage tax obligations. File IRPC annually (by April 30th) and IVA monthly (by the 20th). Non-compliance risks fines or audits.

  • Costs: IRPC (21%) and IVA (15%) are significant, but municipal taxes like IUP are generally low, varying by island.

  • Challenges: Portuguese-language forms and local bureaucracy may require local tax advisors. The "Empresa no Dia" service and Casa do Cidadão simplify compliance.

  • Digital Tools: The DGI's portal (www.financas.gov.cv) provides forms, NIF verification, and e-filing options, with growing accessibility in urban areas.