Legal Update/ Cabo Verde: Special Legal Regime for SMEs, Income Tax Codes

Source: Legis-PALOP + TL


Law No. 116 / IX / 2021, of 2 February, which came into force on 1 January, amends various diplomas.

The Income Tax Code for Individuals, approved by Law no. 78 / VIII / 2014, now makes the following income subject to mandatory inclusion:
⦁ Income from dependent work (category A) to which the withholding tax cannot be applied;
⦁ Income earned by resident taxpayers originated in the national territory and withheld below the tax rate due;
⦁ Income from dependent work and property income (categories A and C) whenever there is a mandatory inclusion of income earned by resident taxpayers who originate outside the national territory.
The rates applicable to this income are, since 1 January 2021, the following:
⦁ 16.5% for income up to approximately USD 10,500 (960,000 ECV) per year;
⦁ 23.1% for income between about USD 10,500 (960,000 ECV) and about USD 20,000 (1,800,000 ECV) annually;
⦁ 27.5% for income exceeding about USD 20,000 (ECU 1,800,000) annually;
⦁ 10% for income from categories A and B earned on activities of high added value, with a scientific, artistic or technical character by non-permanent residents in Cape Verdean territory; and
⦁ New rate of 20% for property income (category C), while allowing for the application of the rate of 16.5% mentioned above when applicable, when the holder earns exclusively income from category C .
Owners of property income (category C) are, since January 1, 2021, still subject to the following obligations:
⦁ Register the lease and sublease contracts in the finance departments, until the end of the month following the beginning of the lease or sublease, preferably through the DNRE website when the physical deposit of the contract is not possible;
⦁ Receiving a receipt of all the sums received for the payment of rents (that is, sums specifically received for the lease of a building or rental of machinery and furniture installed in the leased property), even as a deposit, advance or reimbursement of expenses.

Under the Corporate Income Tax Code, approved by Law no. 82 / VIII / 2015, companies that provide computerized accounting systems are now mandated to guarantee the integrity and unalterability of the respective records and data, as well as the exact correspondence of the exported files with the respective tables.

The Legal Regime for Non-Customs Tax Offenses, approved by Legislative Decree no. 3/2014, introduces fines namely for the following infractions, since 1 January 2021:
⦁ Create, use, assign or trade computerized accounting, billing or invoicing software electronically designed with the aim of preventing or changing the determination of the taxpayer ‘s tax status or tax obligation: about USD 2,000 to USD 21,000 (200,000 ECV to 2,000,000);
⦁ Transaction or use of  accounting computer programs or equipment for electronic invoicing or billing that do not meet the legal requirements: USD 2,000 to USD 10,000 (200,000 ECV to 1,000,000 ECV);
⦁ Lack of use of certified accounting programs or equipment for electronic invoicing or billing: USD 1 000 to USD 10 000 (100 000 ECV to 1 000 000 ECV);
⦁ Lack of presentation or untimely presentation to the tax administration of the communication of the identification of the declaring entity or of the financial and tax declaration by country related to the entities of a multinational group: about USD 550 to USD 16 000 (50,000 ECV to 1,500,000 ECV);
⦁ Omissions or inaccuracies relating to the acts, facts or documents relevant to the examination of requests for binding information, provided as a matter of urgency to the National Directorate of State Revenue: approximately USD 550 to USD 16 000 (50 000 ECV to 1 500 000 ECV );
⦁ Lack of registration of contracts or other documents in the tax offices, as well as the lack of communication of information legally provided: about USD 275 to USD 5 500 (25 000 ECV to 500 000 ECV).

The Special Legal Regime for Micro and Small Enterprises, approved by Law no. 70 / VIII / 2014, applicable to micro companies with up to 5 workers and/ or gross annual turnover not exceeding 5 000 000 CVE, or about USD 55,000, and small businesses with between 6-10 employees and/ or gross annual turnover between 5,000,000 CVE and 10,000,000 CVE, or between about USD 55,000 and USD 110,000, maintains the exemption in issuance of invoices for all companies that have a maximum of up to 10 workers and/ or a maximum gross annual turnover of up to approximately USD 110 000, but now subject to new obligations.

Through the amendments referred to above to the Special Legal Regime for Micro and Small Enterprises, the Code of Tax on the Income of Individuals and the Code of Tax on the Income of Legal Persons, a set of provisions is foreseen for electronic tax obligations that are, however, dependent on regulation, respectively in a specific diploma and ordinance of the member of the government responsible for the area of ​​Finance, which have not been published to date:
⦁ The sales receipt or service provided and the invoice must now be issued electronically whenever requested, as well as the receipts issued by the holders of property income;
⦁ Taxpayers who are part of the organized accounting regime and are primarily engaged in a commercial, industrial, agricultural or fishing activity, as well as non-residents with a permanent establishment in the national territory, should start using computer systems capable of exporting accounting files and supporting documents, as well as to communicate the to the tax administration.


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