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Cabo Verde – 2022 State Budget: highlight of tax measures

03/01/22

In brief

Law 4/X/2021, of 31 December, that entered into force on 1 January 2022, approves the 2022 State Budget (SB2022). We highlight the maintenance in 2022 of several CIT, VAT and other indirect taxes incentives, as well as the introduction of the special VAT regime for e-commerce.

I - Start-up scheme for youngsters (“Programa Start-up Jovem”)

The tax incentives applicable to companies covered by the “Programa Start-up Jovem” are maintained in 2022, as follows:

  • Rate of 2.5% of Corporate Income Tax (“Imposto sobre o Rendimento das Pessoas Coletivas” or “IRPC”) applicable in the first 5 years of activity, from 1 January 2022 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;
  • Rate of 5% of IRPC applicable to the remainder eligible enterprises, in the first 5 years of activity, from 1 January 2022 onward;
  • Credit of 50% of the IRPC assessed in case of eligible companies whose place of effective management is located outside the municipalities of Praia, São Vicente, Sal and Boa Vista (ICT and R&D excluded);
  • 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.

Eligible companies shall also benefit from the incentives provided for in article 13 (exemption from property tax), article 15 (exemption from customs duties) and article 34 (job creation) of the Tax Benefits Code, as well as of the incentives foreseen for employers hiring young people. Eligible companies are subject to the payment of autonomous taxation under the general terms foreseen in the IRPC Code.

II – IRPC credit for companies that provide financing

It is established the maintenance in 2022 of the incentives granted to resident companies and to non resident companies with permanent establishment in Cabo Verde that make cash capital contributions to:

  • Eligible companies covered by the “Programa Start-up Jovem”;
  • Companies based in municipal territory with average of GDP per capita in the last three years below the national average;
  • Micro and small companies.

It is allowed to deduct up to 2% of the IRPC assessed in the previous year, provided that all the requirements foreseen in the SB2022 are met. This benefit cannot cumulate with the tax benefit regarding conventional remuneration of share capital foreseen in Article 22 of the Tax Benefits Code.

III – Tax credit for hiring of trainees and unemployed people

It is established the maintenance in 2022 of the incentives granted in case of hiring of trainees and unemployed people. A tax credit of CVE 20,000 is granted to IRPC taxpayers as well as to individuals with organized accounting, under the following terms:

  • Per trainee hired for a minimum period of 6 months;
  • Per unemployed person hired for a minimum period of 12 months.

IV – IRPC - Additional deduction of costs incurred with equipment and accounting and invoicing software

It is established the maintenance in 2022 of the additional deduction, for IRPC purposes, corresponding to 30% 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);
  • Software migration, training and parameterization of systems and digital certificate for the purposes of electronic invoicing and the SAFT-CV.

V – IRPC - Additional deduction of costs incurred the acquisition of water and electricity

IRPC taxpayers with organised accounting are allowed to consider an additional deduction of 30% of the costs incurred with the acquisition of water and electricity.

VI – Exemption of social security contributions in hiring of young people for first jobs

It is established the maintenance in 2022 of exemption from social security contributions due by employers that hire young people for the first jobs. This incentive applies to corporations as well as to individuals with organised accounting that hire young people aged not more than 37 years for a first job. The remainder requirements established by the SB2022 should be met.

VII – Exemptions and reductions of VAT, excise and import duties on the import of vehicles

It is established the maintenance in 2022 of the following incentives:

  • Exemption from excise duties and 5% reduced rate of import duties on new passenger vehicles to be used exclusively for taxi service;
  • Exemption from VAT and excise duties, and 5% reduced rate of import duties:
    • Heavy vehicles for collective transport of passengers;
    • New passenger vehicles for executive transport;
    • Heavy passenger vehicles for collective transport of tourists and luggage;
  • Exemption from VAT, excise and import duties, and parking fees, for electric vehicles, including new equipment used for the respective charging.

 

I – Reduced VAT rate on the supply of electricity and water

The VAT rate on the supply of electricity and water to end consumers is now 8% (formerly, 15%). This rate applies to facts occurring after 1 January 2022, notwithstanding the rules on chargeability foreseen in Article 8 of the VAT Code.

II – Amendments to the VAT Code

- Issuance of invoices

(i) Information to be included in invoices

Besides the information already foreseen in no. 5 of Article 32 of the VAT Code concerning the issuance of invoices, these shall also include:

  • Date in which the goods are placed at disposal of the acquirer, of the provision of the service or payments taking place prior to the operation, if different from the date of issuance of the invoice;
  • Place of issuance of the document (“Local de Emissão do Documento”) and measurement unit (“Unidade de Medida”), as well as the tax and customs taxonomy of transactions, supplies and products, as established by the Government.

(ii) Issuance of invoices by electronic means

Invoices and amending documents are mandatorily issued by electronic means whenever established by the applicable legislation.

(iii) Property income

Invoices, receipt-invoices or receipts concerning property income, as defined in the PIT Code, shall be issued using a special series. They are required to include among other information the identification of the property, as well as the type, purpose, amount and frequency of the rental.

- Issuance of sales or service tickets in case of waiver of the obligation to issue invoices

Besides the information already foreseen in no. 3 of Article 36 of the VAT Code, sales or service tickets issued in case of waiver of the obligation to issue invoices shall also include the following information:

  • Identification of the respective series;

  • Date in which the goods are placed at disposal of the acquirer, of the provision of the service or payments taking place prior to the operation, if different from the date of issuance of the document;

  • Place of issuance of the document and measurement unit as well as the tax and customs taxonomy of transactions, supplies and products, as established by the Government;

  • The tax identification number of the acquirer upon his request; this information is mandatory in case of sales or services rendered with an amount of CVE 20,000 or higher.

Sales or service tickets are mandatorily issued by electronic means whenever established by the applicable legislation.

- Archiving of electronic documents

Electronic accounting supporting documents should be kept and archived under the terms foreseen in the regulation of electronic invoices and electronic tax relevant documents, as approved by Decree-Law 79/2020, of 12 November.

III – Special VAT regime for e-commerce

The special VAT regime for e-commerce has been approved. This applies to the e-commerce international operations carried out in Cabo Verde by taxpayers included in the list of large e-commerce players, to be prepared by the Ministry of Finance.

The regime includes a definition of international operations of e-commerce, as well as rules regarding the place of supply; taxable event; registration and declaration obligations; applicable rate; payment of tax, and a subsidiary regime applicable in case a registration is not completed. It also includes rules applicable to financial institutions that handle payments to the e-commerce players covered by the subsidiary regime.

IV – Specific charge on tobacco

A charge of CVE 70 is due per package of cigarettes.

V – Amendments to the Common Customs Tariff

The Common Customs Tariff was amended as follows:

  • Increase of the rates of import duties applicable to several products;

  • Introduction of specific rates of excise duties on the import of alcoholic beverages, new vehicles and vehicles aged up to 4 years.




© 
2022 PwC. This communication is of an informative nature and intended for general purposes only. It does not address any particular person or entity nor does it relate to any specific situation or circumstance. PricewaterhouseCoopers Tax Services TLS, Lda. We will not accept any responsibility arising from reliance on information hereby transmitted, which is not intended to be a substitute for specific professional business advice.
 

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