Cabo Verde – 2021 State Budget – Law proposal: highlight of tax measures

(i) Incentive program Start-up for youngster (“Programa Start-up Jovem”)

1. Beneficiaries of Programa Start-up Jovem

The proposal foresees the maintenance of the tax incentives applicable to beneficiaries of this measure, as follows:

• 2.5% Corporate Income Tax (“Imposto sobre o Rendimento das Pessoas Coletivas” or “IRPC”) rate applicable in the first 5 years of activity, from 1 January 2021 onward; this rate applies to information, communication and technology (ICT) and research and development (R&D) enterprises, regardless of the location of the head office or place of effective management;
• 5% IRPC rate applicable to the remainder eligible enterprises, in the first 5 years of activity, from 1 January 2021 onward;
• Exemption from customs duties, excise duty and VAT on the import of one vehicle for the transport of goods, comprising up to 3 seats in the cabin, including the driver, with a maximum age of 5 years, intended exclusively for the respective activity;
• Exemption from import duties on the import of raw and subsidiary materials, materials and finished and semi-finished products intended for incorporation into products manufactured within the scope of industrial projects; the incentive shall apply provided that the entities are certified and registered at the Industrial Registry, during the installation, expansion or remodelling phase;
• Exemption from Stamp Duty on financing agreements for the development of the respective activities;
• Reduction of 50% of the fees due on notarial acts and registrations due on the purchase and sale of real estate for the respective installation.

It is proposed that eligible companies whose place of effective management is located outside the municipalities of Praia, São Vicente, Sal and Boa Vista, shall benefit from a tax credit of 50% of the CIT assessed (not applicable to ICT and R&D activities).

It is also proposed that eligible companies shall benefit from the incentives provided for in article 13 (exemption from property tax), article 15 (exemption from customs duties) and article 32 (training, internships and scholarships) of the Tax Benefits Code, as well as of the incentives foreseen for employers hiring young people.

Eligible companies shall be subject to the payment of autonomous taxation under the general terms foreseen in the IRPC Code.

2. Incentives for investment companies

It is proposed an incentive under which resident or non-resident entities with permanent establishment in Cabo Verde that make cash capital contributions to companies eligible under the Youth Start-up Program or to companies based in municipal territory with average of GDP per capita in the last three years below the national average, as well as to micro and small companies can deduct part of these contributions up to 2% of tax assessed in the previous tax year (conditions apply).

This benefit is not cumulative with the tax benefit regarding conventional remuneration of share capital foreseen in article 22 of the Tax Benefits Code.

(ii) Acquisition of equipment and accounting and invoicing software

An additional deduction of 30% is allowed for IRPC purposes in respect of the costs incurred with the acquisition of equipment as well as accounting and invoicing software for the purposes of electronic invoicing and the Standard Audit File for Tax Purposes Cabo Verde (“SAFT-CV).

(iii) Job creation

1. Hiring of young people – First job

It is proposed the maintenance of the incentives granted to employers that hire young people. Natural and legal persons (the latter being taxed under the organised accounting regime) that hire young people aged not more than 37 years for a first job, shall continue to be exempt from social security contributions.

2. Hiring of unemployed people

It is proposed that taxpayers covered by the organised accounting regime shall be entitled to a tax credit of CVE 20,000, per each unemployed person hired for a minimum 12-month period (net job creation is required).

This incentive can cumulate with the job creation incentive foreseen in article 34 of the Tax Benefits Code.

3. Professional internships

It is proposed the maintenance of the direct incentive to professional internships. IRPC taxpayers as well as individuals taxed under the organised accounting regime may benefit from a tax credit amounting to CVE 20,000, for each trainee hired for a minimum of 6 months.

(iv) Incentives on the import of transport vehicles for tourists

It is proposed to exempt from customs duties, excise duties and VAT the import of heavy passenger vehicles for collective transport of passengers, duly equipped, aged not more than 6 years, comprising more than 30 seats including driver, intended for exclusive transport of tourists and baggage, when imported by companies holding a license and a tourist transport permit.

(v) Electric mobility

It is proposed to exempt from VAT and excise duties the import of electric vehicles, including 2-wheelers vehicles.

It is also proposed to exempt from VAT and customs duties the import of new rechargeable batteries for electric vehicles, including their connectors, shields, connecting cables and meters, intended exclusively for charging.

Additionally, it is also proposed to exempt the referred vehicles from parking fees the referred.