Navigating the Fiscal Landscape: An Investor's Guide to Corporate Taxation in Cabo Verde

International investors looking at the mid-Atlantic will find that Cabo Verde offers a tax system shaped by major reforms and targeted benefits. The government's goal is straightforward: move beyond tourism dependence and build a diversified economy by offering competitive tax advantages.

Here's what investors need to know about corporate taxes, incentives, and compliance requirements in 2024–2025.

The General Tax Regime: Rates and Structure

Corporate Income Tax (called Imposto sobre o Rendimento das Pessoas Coletivas or IRPC) forms the core of the tax system. The government has been steadily reducing rates to stay competitive.

• Standard Corporate Rate: Since January 1, 2024, the standard rate is 21% (down from 22% previously, and 25% before 2019).
• The "Fire Tax" Surcharge: Companies operating in the main business centers—Praia (on Santiago Island) and Mindelo (on São Vicente Island)—pay an extra municipal charge called the Taxa de Incêndio. This adds 2% to your tax bill, raising the effective rate in these cities to roughly 21.42%.
• Value Added Tax (VAT): The standard VAT rate is 15% on most goods, services, and imports. Some sectors get lower rates—for example, household electricity and water are taxed at 8%.
• Stamp Duty: This tax applies to legal documents, contracts, and financial transactions, with rates reaching up to 15% depending on the type of transaction.

Strategic Investment Incentives

Cabo Verde has moved beyond generic tax breaks, creating specialized programs to attract foreign investment into key growth sectors.

A. The "Cyber Island" Strategy (Technology Sector) To become a digital hub in West Africa, the government established the Special Economic Zone for Technologies (ZEET).

• Rate: Technology companies operating in ZEET locations (like the TechParks in Praia and Mindelo) pay just 2.5% corporate tax.
• Additional Benefits: These companies also get VAT and customs duty exemptions on essential equipment and materials.

B. The International Business Centre (CIN) This program targets industrial, commercial, and service businesses serving international clients. Tax rates are tied to job creation and run until 2030.

• 5% tax: Create 5 or more jobs.
• 3.5% tax: Create 20 or more jobs.
• 2.5% tax: Create 50 or more jobs.

C. Renewable Energy Incentives Supporting the goal of reaching 50% renewable energy by 2030, the tax code offers strong benefits for green energy projects:

• 10-Year Tax Break: Projects can avoid paying corporate tax entirely for 10 years (the standard rate for this sector would otherwise be 20%).
• Investment Credits: A 30% tax credit on investments, plus VAT relief on imported equipment.

D. Contractual Conventions for Major Projects Large investments—typically over 3 billion CVE (about €27 million) or those considered exceptionally important—can negotiate an Establishment Convention directly with the government. These agreements can provide exemptions from corporate tax, stamp duty, and customs duties for up to 15 years.

3. Taxation on Capital and Dividends

The tax treatment of money flows is designed to encourage reinvestment while remaining attractive for profit repatriation.

• Withholding Tax: Foreign investors generally face a 20% withholding tax on capital income.
• Reduced Rates: A lower 10% withholding rate applies to specific items, including dividends, bond interest, and public debt securities.
• Double Taxation Agreements (DTAs): Cabo Verde has tax treaties with countries like Portugal, Spain, and Macau, which may further reduce withholding rates for investors from these countries.

Small Business and Startups

For investors partnering with smaller local businesses or launching modest ventures, the REMPE regime (Special Regime for Micro and Small Enterprises) matters.

• Companies earning under 10 million CVE annually pay a single 4% tax on gross sales. This replaces corporate tax, VAT, and social security contributions, making compliance much simpler.
• Startups in the "Startup Jovem" program may access additional incentives outlined in the State Budget.

Compliance and International Standards

Cabo Verde is actively upgrading its tax administration to meet international standards.

• Transfer Pricing: Transactions between related companies must follow market-rate principles. The government is strengthening its ability to audit these transactions to prevent tax avoidance.
• BEPS Implementation: The country is adopting international Base Erosion and Profit Shifting (BEPS) standards. It has met minimum requirements on harmful tax practices, though Country-by-Country reporting is still being implemented.
• Digital Filing: Companies using formal accounting systems must submit tax documents electronically.

Note: Investors should verify specific eligibility requirements with Cabo Verde TradeInvest, particularly for "Project of Differentiated Merit" status, which requires minimum investment amounts and job creation targets.