2015/16
FOREWORD A country's tax regime is always a key factor for any business considering moving into new markets. What is the corporate tax rate? Are there any incentives for overseas businesses? Are there double tax treaties in place? How will foreign source income be taxed? Since 1994, the PKF network of independent member firms, administered by PKF International Limited, has produced the PKF Worldwide Tax Guide (WWTG) to provide international businesses with the answers to these key tax questions. As you will appreciate, the production of the WWTG is a huge team effort and we would like to thank all tax experts within PKF member firms who gave up their time to contribute the vital information on their country's taxes that forms the heart of this publication. The PKF Worldwide Tax Guide 2015/16 (WWTG) is an annual publication that provides an overview of the taxation and business regulation regimes of the world's most significant trading countries. In compiling this publication, member firms of the PKF network have based their summaries on information current on 1 January 2015, while also noting imminent changes where necessary. On a country-by-country basis, each summary such as this one, addresses the major taxes applicable to business; how taxable income is determined; sundry other related taxation and business issues; and the country's personal tax regime. The final section of each country summary sets out the Double Tax Treaty and Non-Treaty rates of tax withholding relating to the payment of dividends, interest, royalties and other related payments. While the WWTG should not to be regarded as offering a complete explanation of the taxation issues in each country, we hope readers will use the publication as their first point of reference and then use the services of their local PKF member firm to provide specific information and advice. Services provided by member firms include: Assurance & Advisory; Financial Planning / Wealth Management; Corporate Finance; Management Consultancy; IT Consultancy; Insolvency - Corporate and Personal; Taxation; Forensic Accounting; and, Hotel Consultancy. In addition to the printed version of the WWTG, individual country taxation guides such as this are available in PDF format which can be downloaded from the PKF website at www.pkf.com PKF Worldwide Tax Guide 2015/16 1
IMPORTANT DISCLAIMER This publication should not be regarded as offering a complete explanation of the taxation matters that are contained within this publication. This publication has been sold or distributed on the express terms and understanding that the publishers and the authors are not responsible for the results of any actions which are undertaken on the basis of the information which is contained within this publication, nor for any error in, or omission from, this publication. The publishers and the authors expressly disclaim all and any liability and responsibility to any person, entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this publication. Accordingly no person, entity or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person or firm of advisors, and ensuring that such advice specifically relates to their particular circumstances. PKF International is a family of legally independent member firms administered by PKF International Limited (PKFI). Neither PKFI nor the member firms of the network generally accept any responsibility or liability for the actions or inactions on the part of any individual member firm or firms. PKF INTERNATIONAL LIMITED JUNE 2015 PKF INTERNATIONAL LIMITED All RIGHTS RESERVED USE APPROVED WITH ATTRIBUTION PKF Worldwide Tax Guide 2015/16 2
STRUCTURE OF COUNTRY DESCRIPTIONS A. TAXES PAYABLE COMPANY TAX: GENERAL REGIME VALUE ADDED TAX (VAT) OTHER TAXES: MUNICIPAL TAX ON REAL ESTATE (IUP) STAMP DUTY B. DETERMINATION OF TAXABLE INCOME DEPRECIATION STOCK / INVENTORY LOSSES FOREIGN SOURCED INCOME C. WITHHOLDING TAX D. PERSONAL TAX E. TREATY AND NON-TREATY WITHHOLDING TAX RATES PKF Worldwide Tax Guide 2015/16 3
MEMBER FIRM For further advice or information please contact: City Name Contact information Santa Maria Nuno Justo +238 242 2716 nuno.justo@pkf.pt BASIC FACTS Full name: Republic of Cabo Verde Capital: Praia Main languages: Portuguese, Cape Verdean Creole Population: 512,096 (2013 estimate) Major religion: Christianity Monetary unit: Cape Verdean Escudo (CVE) Internet domain:.cv Int. dialling code: +238 KEY TAX POINTS Resident corporations are subject to Cape Verde corporate income tax (IUR) on their worldwide income. The standard rate of VAT is 15%. Payments between resident companies are generally subject to withholding tax. Income tax is payable by individuals on employment income. Resident individuals are subject to income tax on their worldwide income whilst non-residents are liable to income tax only on income sourced in Cape Verde. A. TAXES PAYABLE COMPANY TAX: GENERAL REGIME Resident corporations are subject to Cape Verde corporate income tax (called Imposto Único sobre os Rendimentos or IUR) on their worldwide income. Resident companies are those which have their head office, or place of effective management, in Cape Verde. Companies, not having their head office or place of effective management in Cape Verde territory, are subject to IUR only on income obtained in Cape Verde. IUR is charged on the profits of: a) A company and other similar entities; b) Individuals treated as companies; PKF Worldwide Tax Guide 2015/16 4
c) Individual enterprises engaged in a commercial, industrial, agricultural, fishing or service activities; and; d) A permanent establishment located in Cape Verdean territory. A territorial taxation system exists in Cape Verde so if the source of income is not within the Cape Verdi territory, no tax is imposed. The tax year usually coincides with the calendar year (1 January to 31 December). Taxable profit is taxed at 25% and is payable as follows: Taxable Persons Resident entities whose main activity is commercial, industrial or agricultural and non-residents with a permanent establishment in Cape Verde Non-profitable entities. Non-resident entities without a permanent establishment. Tax Payment Payments on account in January. The balance is due by the date when the tax return is filed generally 31 May. Tax is payable by the end of the fifth month following the end of the tax year generally 31 May. Tax is payable by the end of the fifth month following the end of the tax year generally 31 May. VALUE ADDED TAX (VAT) Cape Verde has adopted VAT which is a sales tax levied on the supply of goods and services as well as on the import of goods into Cape Verde. The standard rate is 15.5%, with the exception for water and electricity 15% VAT tax rate. VAT exemptions are laid down in particular to medical services, services related to education and social support and vocational training, banking and financial transactions, insurance and reinsurance operations, as well as exemptions for the importation of certain goods. OTHER TAXES: MUNICIPAL TAX ON REAL ESTATE (IUP) The IUP is a municipal tax levied on the value of properties in the territory of each municipality, dividing, in accordance with the classification of buildings in rustic and urban, the value of free transmissions or expensive real estate, the value of corporate transactions subject to public deed, such as social pacts changes, transfer of shares and other like nature, value in use or enjoyment of motor vehicles subject to registration and, finally, capital gains arising from the valuation of land for building, broadcasts of buildings or other real estate. The IUP is payable by the owner of the building at 31 December of the year in the same respect. The standard rate is 1.5%. STAMP DUTY The Stamp Duty (IS) focuses on different tax events, and in particular on financial transactions, corporate transactions, capital transfers and documented legal acts. PKF Worldwide Tax Guide 2015/16 5
Applied different tax rates, depending on the applicable amount, with the up to 15%. B. DETERMINATION OF TAXABLE INCOME Net income, or taxable income, is arrived at by adjusting the accounting profits tor non-taxed income and non-deductible expenses. As a general principle, costs are only deductible when necessarily incurred tor the purpose of producing income. DEPRECIATION Fixed and intangible assets can be depreciated for tax purposes. The depreciation rates are set by specific legislation and include 4% for buildings. No depreciation is allowed on land. The normal method of calculation is the straight-line basis but declining-balance method may be used except for items such as buildings, cars and office furniture. Intangible assets with a limited period of exclusive use may be depreciated for that period, otherwise for 20 years. STOCKS / INVENTORY Inventory must normally be valued at the effective cost of acquisition or production (historic cost). Other methods which may be adopted include: The standard cost method, which must be calculated in accordance with the appropriate technical and accounting principles; The sale price method, based on the market value less a normal profit margin. LOSSES Operating losses incurred by resident companies, may be carried forward to be set off against taxable profits for three years. FOREIGN SOURCED INCOME Resident companies are taxed on their worldwide income. C. WITHHOLDING TAX Payments between resident companies are generally subject to withholding tax. The rates vary between 10% and 20%. D. PERSONAL TAX The Personnel Income Tax will be due by natural persons residing in Cape Verdean territory and, also, by that do not reside in Cape Verde, but obtain income in Cape Verde. Non-resident taxpayers in Cape Verdean territory are subject to IUR solely by income earned in Cape Verde. The income of an individual is taxed by different categories. Regulation of the Personnel Income Tax provides for the following categories: property income, commercial and industrial income, including PKF Worldwide Tax Guide 2015/16 6
capital gains and the provision of services, and income agricultural, livestock and fishing, capital income and other income, such as from the game, lottery and betting, and finally, income from work, dependent and independent, including pensions and annuities or temporary. Taxable income results from the aggregation of the various categories of income, although exempt, earned each year, after the deductions and rebates defined in Regulation IUR. Are taxed by the withholding tax realized capital gains and net of losses realized with the onerous transfer of shares and other securities. In determining the tax base, the gains must be subject to aggregation are considered in 50% of their value. There are specific deductions for each category of income, using as criteria the costs or charges necessary to attain them. Thus, spending on health and education, pensions, housing rents permanent, the housing debt interest, construction and improvement of real estate, the premiums of illness or personal accident insurance, as well as some life insurance, and the amounts invested annually in government bonds and contributions to social security or single social tax for the taxable person or their dependents may be deducted from the taxable income. Can also be deducted from the total income, net of deductions, donations of public interest. The workers, are subject to the payment a tax of 8% - contribution to Social Security. The selfemployed are, in turn, subject to the payment of fees by 11% in restricted scheme, and in the order of 19.5% in extended scheme. The payment of contributions shall take place by the 15th of the month following that to which they relate. Tax returns submitted in paper form are due until 31 March of the subsequent tax year The following progressive tax rates apply in tax year 2015 to the aggregate net results of employment income, business income, investment income (except interest on bonds and deposits), income from land, capital gains and income from pensions: Level Levels Amount Taxes Normal Average 1 To CVE 408,843 CVE 408,843 11.67% 11.67% 2 From CVE 408,843 until CVE 860,163 15.56% 13.71% 3 From CVE 860,163 until CVE 1,720,327 21.39% 17.55% 4 From CVE 1,720,327 until CVE 2,580,490 27.22% 20.77% 5 From CVE 2,580,490 35.00% E. TREATY AND NON-TREATY WITHHOLDING TAX RATES Cape Verde signed agreements to avoid double taxation with Portugal and Macau and an agreement with Spain is in progress. PKF Worldwide Tax Guide 2015/16 7