Important changes to various tax laws were recently enacted through Law No. 86/IX/2020, of 28 April 2020. The changes aim mainly at strengthening transparency, fight tax evasion and avoidance and the efficiency of the tax administration. Some of the measures follow international commitments accepted by Cape Verde, including with the European Union. The new law came into force on 29 April 2020.
We have highlighted some of the changes below due to their relevance:
1.Special Legal Regime for Micro and Small Enterprises (“MPEs”)
- Redefinition of the list of activities excluded from this regime, now including, for example, companies whose main or secondary activity is the provision of real estate services;
- Implementation of new reporting obligations, and mandatory availability of electronic payment mechanism and of a bank account allocated to transactions made by MPEs;
- Changes to eligibility requirements for exemption or reduction of the 4% rate of Special Unified Tax.
2. Tax Benefits Code
- Decrease in the percentage of relevant investments carried out under the Investment Law for purposes of investment tax credit;
- Investments carried out under the Investment Law no longer exempt from custom duties and shall now be subject to a minimum rate;
- Increase of the minimum investment levels and of the number of jobs created for access to contractual tax benefits granted under an Establishment Convention;
- Introduction of three new types of investment: Differentiated Merit Project, Emigrant Investor Status and Special Economic Zone, as well as the repeal of tax benefits to internationalization;
- Changes to tax benefits granted to entities licensed with the International Business Centre of Cape Verde (CIN) and conditions of access to the regime, including regarding jobs created;
- Elimination of the exemption on taxation of capital gains obtained by resident entities or non-resident entities with a permanent establishment in Cape Verde, where the shareholding’s assets are constituted, directly or indirectly, in more than 50% by real estate in Cape Verde;
- Assignment of IRPC benefits to cooperatives that fulfil certain requirements.
3. Corporate Income Tax Code (“IRPC”)
- Changes to the permanent establishment concept;
- Elimination of the exemption on taxation of capital gains arising from the sale of participating interests by non-residents in entities which assets are constituted, directly or indirectly, in more than 50% by real estate in Cape Verde;
- Creation of new tax reporting obligations with respect to the Cape Verdean final parent entity, or Cape Verdean replacing parent entity, of a multinational group, which total consolidated income is equal to or greater than 750 million euros (“Country-by-Country Report”).
4. Personal Income Tax Code (“IRPS”)
- Elimination of the exemption over real estate income derived from touristic exploitation of properties which are part of hotel establishments, when these properties are part of projects or establishments that benefit from IRPC incentives;
- Elimination of the exemption on taxation of capital gains arising from the sale of participating interests in entities which assets are constituted, directly or indirectly, in more than 50% by real estate in Cape Verde;
5. General Tax Code
- Mandatory availability of electronic payment mechanism in each commercial establishment.
6. Legal Regime for Non-Customs Tax Offences
- Heavier penalties for non-compliance with tax obligations and introduction of measures aimed at reducing tax fraud and evasion, notably through the provision of new tax offenses and an increase in fines for some tax offences;
- Enactment of new tax offenses for non-compliance with reporting rules by financial institutions, or due to lack of organization and delivery of the transfer pricing file.
7. Stamp Duty Code
- Stamp Duty exemption on consideration for financial services related to checks issued by credit and equivalent institutions or with their intermediation.
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