Cabo Verde – 2024 State Budget Law proposal approved

The concept of “invoices issued in legal form” that confer the right to deduct the input VAT has been updated to include the invoices issued electronically. 

Additionally, the self-billing regime is introduced, with the possibility for the acquirer of the goods and services to issue the invoices in the name and on behalf of the supplier. In this context, the conditions that must be met when self-issuing the invoices are also foreseen.

a) New incentives 

Exemption from Customs Duties and VAT 

Incentives for the industrial production of inerts

It is proposed to introduce an exemption from Import Duties (ID) and Value Added Tax (VAT)  on the import of machines, equipment and their accessories and separate parts, as well as all types of materials intended for the industrial production of inerts, including extraction of minerals, applicable to projects located in the islands of Brava, Fogo, Maio, São Nicolau and Santo Antão. 

Incentives for waste recycling and the promotion of alternative products to single-use plastic objects 

It is proposed to exempt from ID and VAT the import of:

• Alternative products to single-use plastic products, as detailed in the relevant Decree.
• Machines, equipment and their accessories and separate parts, as well as all types of material intended for recycling waste and the production and marketing of alternative single-use plastic products in the national territory, within the scope of incentives for private investments.

b) Changes to existing regimes

Tax credit for investment

It is proposed to harmonize the percentage of the tax credit available. The percentage shall correspond to 20% of the value of the investments made, regardless of the area of activity (currently, 30% for certain areas of activity and 20% for the remaining areas).

Contractual tax benefits

Within the scope of contractual benefits, it is proposed to extend the CIT exemption beyond five years, subject to compliance with certain conditions.

Incentive for company capitalization 

Amendments are proposed to the regime. An amount corresponding to 10% of the increases in eligible equity shall be deducted for the purposes of the computation of the taxable profit, capped at CVE 20,000,000 – approx. EUR 180,000 EUR (currently, CVE 100,000,000 – approx. EUR 900,000).

For the purposes of the benefit, an increase in eligible equity is considered: 

i.contributions made in cash as part of the incorporation of the company or the increase of share capital;

ii. contributions in kind through the conversion of credit into capital.

iii. share issuance premiums.

iv. application of accounting profits that can be distributed in retained earnings, or directly in reserves or in capital increases.

c) Tax Incentives maintained in 2024

It is proposed to maintain the following tax incentives: 

• R&D tax incentives for companies.
• Incentives to professional activities carried out remotely outside the national territory.
• Incentives for the production of renewable energy. 
• Incentives to electric mobility.

In terms of transfer pricing, the proposed changes seek to emphasize the need for taxpayers to support their linked transactions and ensure that they have economic substance, otherwise the terms and conditions agreed in linked transactions may be subject to adjustment. These changes are in line with the latest international transfer pricing guidelines.

It is proposed to increase to CVE 120 (currently, CVE 90) the specific rate on tobacco due on the import or national production of each cigarette package.

It is proposed to increase specific ICE taxes on alcoholic beverages.