This week, the government approved several statutes following the declaration of the state of emergency in the country. Among others, the following statutes were approved: (i) Decree-Law No. 36/2020, of 28 March 2020, which regulates the declaration of the state of emergency; (ii) Decree-Law No. 37/2020, of 31 March 2020, which establishes exceptional measures in respect of social security and taxation; and (iii) Decree-Law No. 38/2020, of 31 March 2020, which establishes exceptional measures for credit protection and a special regime of personal guarantees of the State.
Notable among the approved measures are the following:
(i) Regulation of the declaration of state of emergency
- A ban on flights from countries affected by the pandemic and maritime connections, with the exception of situations of emergency, evacuations of patients and humanitarian aid, and supplies of medicines, goods and products;
- Compulsory quarantine for patients with COVID-19 and citizens under active monitoring, the violation of this obligation constituting a crime of aggravated disobedience;
- The general duty of self-isolation, circulation in public spaces being limited to urgent reasons and for the acquisition of essential goods and services
- The closure of sports and cultural facilities and commercial establishments;
- The closure of public entities, public services of the central and local administration, as well as private companies and other commercial and industrial activities, with the exception of essential services (pharmacies; public and private security; port services; the production, processing and supply of foodstuffs; hygiene and cleaning services; the supply of fuel, gas, water and electricity; the media; banks; telecommunications; etc.), being that their activity shall also be limited to the essential. Each company and entity must submit to the National Civil Protection and Fire Department Service a list of employees that are to perform said essential services;
- Alternative mechanisms of teleworking or similar must be promoted in public entities and private companies;
- The closure of establishments due to the state of emergency cannot serve as cause for termination, prevention of renewal or any other form of cancellation of commercial lease agreements;
- All establishments that remain open to provide essential services must ensure strict compliance with safety and hygiene measures, particularly a minimum distance of two meters between people and a 50% reduction of maximum capacity;
- Due to public health requirements, the provision of any services may be requisitioned, as may the use of movable and immovable property, commercial and industrial establishments and health care units (particularly facilities capable of being converted into spaces of quarantine and isolation – including hotel units), public passenger transport, and clinical analysis laboratories;
- The contracting of public works, the supply of goods and the acquisition of services of an urgent nature may be done by direct award;
- Any licenses, permits or other type of administrative acts, as well as official documents, remain valid regardless of the relevant term.
(ii) Special tax measures
Tax payment moratorium
- The granting of a moratorium on the payment of taxes due from 1 April to 31 December 2020, with interest on late payment being waived, through a business plan application (payment in instalments) to be submitted to the respective tax office by 30 April.
- Resident or non-resident taxable persons / entities with permanent establishment under the organized accounting regime may submit: (i) the annual corporate income tax return related to 2019 and the tax due until 31 July; and (ii) the annual statement of accounting and tax information up to September 2020;
- Taxable persons with Category B income may submit: (i) the annual personal income tax return related to 2019 and the tax due until 31 July; and (ii) the annual statement of accounting and tax information up to November 2020;
- Instalments due in August and November may be paid in September and December 2020;
- Withholding regarding Category A, B and C income received as from April may be paid in instalments until 31 December 2020.
Value Added Tax
- VAT payments in respect of March and subsequent months may be made in monthly instalments until 31 December 2020, upon submission to the respective tax office of a request together with proof of an actual and significant break in activity – corresponding to a reduction of 30% or more of turnover compared to the same period in the previous year.
- Ongoing tax execution proceedings for coercive collection of tax debts may be suspended by means of renegotiation of the debt in a longer instalment plan, though never exceeding 120 instalments; a renegotiation exceeding 60 instalments is only available for exceptional cases and is subject to authorization from the National Director of State Revenue;
- Debts not renegotiated and in default at 31 December 2020 will be subject to tax execution proceedings under the applicable legislation.
(iii) Granting of moratoriums by financial entities
- A moratorium has been approved until 30 September 2020, providing the prohibition of the revocation of contracted lines of credit and the extension or suspension of credit during this period, as detailed below;
- The prohibition until 30 September 2020 of total or partial revocation of contracted lines of credit and loans granted, in the amounts contracted up to 1 April;
- The extension, for a period of 6 months, of all credit with payment of capital at the end of the contract, in force on 1 April, including interest and guarantees;
- In respect of credit with partial repayment of capital or with partial payment of other cash benefits, the suspension of the payment of capital, rents and interest with expected maturity until 30 September 2020, the contractual payment plan for said instalments being automatically extended for a period identical to that of the suspension, in order to ensure that there are no charges other than those that may arise from the variability of the relevant contract’s underlying reference interest rate, while all elements associated with the contracts covered by the measure, including guarantees, are also extended;
- The extension of the period for the payment of capital, rent, interest, commissions and other charges does not give rise to: (i) breach of contract; (ii) activation of early maturity clauses; (iii) suspension of the interest, at the rate of the contract in force, due during the extension period, which will be capitalized in the loan amount with reference to the moment when it falls due; and (iv) the ineffectiveness or termination of guarantees granted by beneficiary entities, namely insurance, deposits and sureties;
- The extension of guarantees does not require any other legal formality and they are fully effective and enforceable to third parties, while the relevant registration, when necessary, should be done by institutions based on the provisions of the Decree-Law No. 38/2020, without the need to present any other document and with the requirement for successive registration being waived;
- All companies may benefit from this moratorium provided same are headquartered in Cape Verde, have not been in arrears or in default for more than 90 days in respect of their financial obligations, are not in a state of insolvency, have their situation in order with the tax authorities and Social Security, and are not part of the financial system;
- In order to access moratoriums, the beneficiary entity must submit (by email or in person) to the lending financial institution a statement that it has applied for a moratorium, signed by its legal representatives, accompanied by documents proving that its tax and contributory situation is in order;
- Financial institutions should implement the measures within a maximum period of 5 business days after receiving the duly accompanied request.
(iv) Special regime of personal guarantees of the State
- Personal guarantees may be provided by the State given the current situation of national economic emergency, within the limits provided for in the State Budget Law;
- Guarantees are authorized by the Minister of Finance and may be provided to companies based in Cape Verde to guarantee credit or financial operations of any kind, to ensure liquidity, or for other purposes;
- The request for the granting of State guarantees should be addressed to the Minister, through the Directorate-General for Treasury and Finance, accompanied by essential information regarding the operation to be guaranteed; additional information may be requested to assess the risk of the operation and to define the conditions of the guarantee to be granted;
- A favorable opinion from the member of the Government overviewing the relevant activity sector is required and should focus on the operation's framework in the context of the Government's policy of responding to the situation of national economic emergency, of the assessment of the relevance of the beneficiary entity for the national economy, as well as the perspective of economic viability of the entity in question and the express need for a personal guarantee from the State.
Additional measures related to labor, energy and access to the law and the courts are yet to be enacted.
Depending on the spread of the pandemic within the country and the need for further restrictions, the authorities may approve additional measures in the coming days.
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