Cape Verde

Rates and scope

The standard VAT rate is 15%. VAT is levied on the supply of goods taking place in the Cape Verdean territory by a taxable person acting as such.

Examples of supply of goods include:

• the transfer of the right to dispose of tangible property as owner

• supplies of electricity, gas, heat and refrigeration

• the actual handing over of goods pursuant to a hire purchase agreement

• the transfer of goods pursuant to a contract under which commission is payable on purchase or sale

• the application of business assets for purposes other than those of the business, where the VAT on those goods was wholly or partially deductible.

VAT is levied on the rendering of services taking place in the Cape Verdean territory by a taxable person acting as such. Services are all operations carried out that are not the supply or importation of goods.

Examples of rendering of services include:

• the use of goods forming part of the assets of a business for the private use of a taxable person or of their staff or, more generally, for purposes other than those of their business, where the VAT on the goods was wholly or partially deductible

• the supply of services carried out free of charge by a taxable person for their private use or for that of their staff or, more generally, for purposes other than those of their business.

The VAT rate is 10% for lodging in hotels and similar facilities, as well as catering and tour operators who are resident micro, small and medium-sized companies — on all combined services rendered in Cabo Verde in 2023.

VAT is also levied on the importation of goods.

Tax registration is done by submitting the application form (form 110) to the competent tax office at the start of activities.

The following persons will be liable for the payment of VAT:

• any person resident in Cape Verde or with a permanent establishment or representing office there, carrying out an economic activity independently and on a regular basis, whatever the purpose, or performing operations on an occasional basis, that are liable to income taxes

• non-residents carrying out taxable transactions if liable to income taxes

• importers (in accordance with the customs legislation)

• any person who unduly charges VAT on an invoice

• the state — provided the activities are not carried out on such a small scale as to be negligible (including telecommunications, water, gas and electricity distribution, transport, ports and airports, TV and radio, and warehousing)

• any person resident in Cape Verde or with a permanent establishment there that acquires services from non-residents, such as consultancy, engineering, accounting, supply of staff, licences etc.

The reverse-charge rules apply to construction services. Invoices issued for construction services in which the reverse-charge rule is applicable, i.e., where the customer is the taxable person, must contain the wording ‘IVA–autoliquidação’.

VAT registration

Compulsory registration

Voluntary registration

Group or branch registration

Non-residents

Non-resident entities without a permanent establishment in Cape Verde who carry out transactions in the territory should appoint a resident legal representative to comply with VAT obligations. The legal representative and the non-resident entity are jointly liable towards the Cape Verdean tax authorities.

If the non-resident entity does not appoint a legal representative in Cape Verde, the taxable entity that purchases the goods or the recipient of the services will be responsible for compliance with the VAT obligations.

Application for registration

The taxpayer must file form 109 in order to obtain a fiscal identification number. Tax registration is done by submitting the application form (form 110) to the competent tax office at the start of activities. The registration number is also the tax number for all taxes (direct and indirect taxes).

Whenever there is a change in any information included in the starting-of-activities return, an amendment return must be submitted within 15 days from the date of the change.

Deregistration

Output tax

Calculation of output tax

Exempt supplies

Exempt supplies include, but are not limited to, supplies of the following goods and services:

• medical services, and closely related activities, carried out by hospitals, clinics and other institutions of a similar nature

• non-commercial activities carried out by public TV and radio entities

• human organs, blood and human milk

• transport services for sick or injured persons in ambulances by duly authorised entities

• goods and services, limited to welfare and social security work provided by public entities or non-profit organisations

• services and goods supplied by nurseries, kindergartens, after-school centres, establishments for abandoned children and teenagers, homes for the aged and invalids, establishments for children and teenagers with disabilities, rehabilitation centres, and other similar establishments owned by public entities or non-profit organisations, duly recognised by the competent authorities

• the supply of services by public entities or non-profit organisations engaged in the pursuit of sports, cultural, and physical education activities

• educational services and goods closely related thereto, carried out by approved entities

• services and goods supplied by public or non-profit entities in relation to conferences, seminars or similar activities of a scientific, cultural, educational or technical character

• intellectual property rights; services supplied by non-profit entities of political, religious, humanitarian, philanthropic, recreational, sport, cultural, environmental, civic or economic interest, in the collective interest of its members, provided that the consideration given by the members is only a fixed fee in terms of the entity’s articles of association

• stamps at their face value

• public service of garbage removal

• funeral services and accessory goods

• banking and financial transactions

• insurance and reinsurance transactions

• lease of immovable property (with some exceptions)

• transactions subject to property tax (IUP)

• betting, lotteries and other forms of gambling

• goods exclusively applied for an exempt activity or an activity for which vat is not deductible

• sand and certain equipment.

Zero-rated supplies

Zero-rated supplies include (but are not limited to) supplies of goods and services for export by the seller or by a third party.

The supply of the following goods in Cape Verde is also zero-rated:

• meat, fish, milk, eggs, fruit and vegetables

• newspapers, magazines and books of a cultural, educational or technical character

• medicines and other pharmaceutical products exclusively for therapeutic and prophylactic purposes.

• seed, fertilisers and fishing tools.

Input tax

Input tax allowed

Input tax expressly denied

Input tax is expressly denied in the following instances:

• passenger vehicles, pleasure boats, helicopters, aircraft and motorcycles

• fuel used for cars, except for diesel, where 50% of the tax is deductible; however, diesel is fully deductible if related to tractors used for agricultural purposes, certain machines and large vehicles

• vehicles licensed for the transportation of goods

• expenses on business trips and transport for entrepreneurs or employees

• lodging, food and drink, tobacco and entertainment expenditure.

Partial exemption

International trade

Imports

Goods imported into Cape Verde are subject to the payment of VAT by the importer. However, the following are exempt (as examples):

• goods that are exempt if supplied within the country

• re-importation of goods by the entity that exported the goods when they are exempt from import duties

• music instruments when imported by music schools and music groups if not made in Cape Verde, if benefit was derived from import duty exemption

• some equipment and machinery if import duty exemption applies

• importation of gold by the Bank of Cape Verde

• importation of goods by entities under projects of international cooperation.

The general rule is that the rendering of services is taxable if the service provider’s head office, permanent establishment or domicile from which the services are rendered is in Cape Verde. However, the following services are always taxable regardless of the place of establishment of the provider of the services (if acquired by a Cape Verde taxpayer):

• services related to immovable property located in Cape Verde, which includes services of architects, on-site supervision, estate agents and experts, consultancy, lawyers, and the preparation and coordination of construction works

• services performed in relation to movable tangible goods if performed totally or mainly in Cape Verde

• services of an artistic, scientific, sports, entertainment, educational or similar nature that take place in Cape Verde

• transport services provided in Cape Verde

• transfers and assignments of copyright, licences, trademarks and similar rights

• advertising services

• telecommunication services

• services of consultants, engineers, consultancy bureau, lawyers and accountants, and other similar service providers, including services related to research and development

• supply of information and data

• banking, financial, insurance and reinsurance operations

• leasing and renting of movable assets

• supply of staff

• the obligation of not exercising (even if partially) a professional activity or a right mentioned on this list

• services by intermediaries acting in the name and on behalf of other persons in the rendering of the above services.

Exports

The following goods are subject to VAT exemption (as examples):

• goods shipped or transported abroad by or on behalf of the seller

• goods shipped or transported abroad by a customer without residence or establishment in Cape Verde, except goods supplied for ships, tourism aircraft or any other means of conveyance for private use

• supply of provisions for vessels used for navigation on the high seas and carrying passengers for reward, or used for the purpose of commercial, industrial or fishing activities, or for rescue or assistance at sea, or for inshore fishing

• supply of goods under diplomatic and consular relations in accordance with international agreements

• supply of provisions to war vessels destined for a port located abroad

• supply of goods to certain international entities

• supply of goods to recognised entities that export the goods abroad in the ambit of their humanitarian, charitable or educational activities.

The following services are subject to VAT exemption (as examples):

• services directly related to goods exempt from tax, whether it is temporary imports or transits, or entered in warehouses subject to the customs regime

• transport of persons proceeding from or going abroad and within the Cape Verdean islands

• works on movable assets acquired or imported for purposes of such works, which are afterwards shipped or transported abroad.

The Cape Verdean VAT legislation provides for a special VAT refund regime for non-resident companies that incur Cape Verdean VAT and do not perform taxable transactions in Cape Verde.

Place, time and value of supplies

Place of supply

VAT is levied on the supply of goods or services carried out in Cape Verde as well as on imports.

In the case of goods, the general rule is that the place of supply is the place where the goods are located at the time when the supply takes place or, where goods are dispatched or transported, the place where the goods are located at the time when dispatched, or where transport of the goods to the customer begins.

In the case of services, the general rule is that the place of supply of services is the place where the supplier has established their business or has a fixed establishment from which the service is supplied, or in the absence of such a place of business or fixed establishment, the place where they have their permanent address or usually reside.

Exceptions to the above rules include:

• services connected with immovable property located outside Cape Verde — place where the property is located

• services relating to movable tangible property performed totally or mainly outside Cape Verde — place where the service takes place

• cultural, artistic, sporting, scientific, educational, entertainment or similar activities, performed outside Cape Verde — place where the service takes place

• transport services — place where the transport takes place in proportion to the distances covered

Time of supply

The general rule is that a supply of goods or services occurs:

• supply of goods — when the goods are delivered to the customer

• supply of services — when the service is concluded

• imports — when the goods are cleared by customs

• supply of goods with transport — when the transport begins

• supply of goods with assembling — time of conclusion

• supply of continuous services — at the expiry of the periods to which payments relate

• supply of goods from principal to commissionaire — when the goods are delivered to the customer.

Value of supply

For the supply of goods and services, the taxable amount includes everything that constitutes consideration obtained or to be obtained by the supplier in return for the supply from the customer or a third party (including any taxes and duties other than VAT, and expenses related to commissions, packaging, transport and insurance paid on behalf of the customer).

In respect of the importation of goods, the taxable amount is the value for customs purposes determined in accordance with the provisions in force in Cape Verde (including customs duties and other import taxes and complementary expenses such as packaging, transport and insurance, up to the first destination of the goods in Cape Verde).

VAT compliance

Accounting basis and tax period

Returns and payment of VAT

The following returns must be submitted:

• Start-of-activity return — to be submitted before starting the activity (form 110); this return should not be submitted if the taxpayer performs one single taxable transaction.

• Amendments return — to be submitted within 15 days after the alteration of any information included in the Declaration of Start of Activity of the taxpayer.

• Closedown return — to be submitted within 30 days after the cessation of activities in Cape Verdean territory.

• Monthly VAT return:

  • to be submitted until the last business day of the following month if the VAT return is filed on paper at the local tax office

  • to be submitted until the last day of the following month when the VAT return is submitted by electronic means.

In these VAT returns, the taxpayer must calculate the VAT due or the VAT credit amount to be refunded under certain conditions or carried forward to the following VAT return.

VAT due by taxpayers for the month must be paid to the competent tax department by the last working day of the following month.

Obligation to submit VAT adjustment maps

Interest and penalties

The non-payment or late payment of the VAT due is subject to a fine that may vary from 100% to 200% of the amount of unpaid tax. In the case of negligent conduct, the fine varies between 10% and 50% of the unpaid tax. This fine cannot exceed (in Cape Verde escudo) CVE40m and cannot be lower than CVE7,000.

Interest may also be applicable if there is an amount of VAT due.

Refunds

Whenever there is a right to deduct VAT, the amount of deductible VAT must be offset against the amount of VAT due on a monthly basis. If the amount of deductible VAT exceeds the amount due, the difference will be deductible within the subsequent months. If, after 12 months, the amount of credit remains outstanding and is higher than CVE50,000, the taxpayer may apply for the relevant refund.

Irrespective of the 12-month term, the taxpayer is allowed to request a VAT refund when:

• it ceases its activities

• it starts carrying on exclusively VAT-exempt transactions with no right to deduction or qualifies under the exemption for simplified regimes

• the amount of credit exceeds the fixed limit of CVE250,000.

The deadline legally established for the tax authorities to refund VAT is the last day of the third following month. If the deadline is not met, interest will be paid upon special request by the taxpayer.

In addition, the Cape Verdean VAT legislation provides for a special VAT refund regime for non-resident companies that incur Cape Verdean VAT and do not perform taxable transactions in Cape Verde.

Objections and appeals

Time limits

The tax liability for any taxpayer is five years. The deadline for the Cape Verdean tax authorities to charge the VAT due is eight years, which means that the tax authorities have five years to notify the taxpayer of any VAT due (the deadline counts from the date the VAT is due) and eight years to effectively charge the VAT due where the deadline counts from the beginning of the year following that in which the VAT was due.

The taxpayer can deduct VAT on invoices issued in the preceding 12 months. A request to the Director of Taxes must be made to allow VAT recovery for the previous four years. Therefore, the taxpayer has five years to deduct any VAT incurred for the provision of taxable transactions.

Tax invoices

Invoices must be issued by any person or entity that carries out an economic activity on an independent basis, whether regularly or occasionally.

For VAT purposes, invoices must be issued no later than the fifth working day following that in which the goods were put at the disposal of the acquirer or the services were supplied. Invoices should be issued in duplicate (the original sent to the client, and the duplicate kept in the taxpayer’s files).

The law imposes control measures over the issuance of invoices, as follows:

• issuing invoices is mandatory for any supply of goods or services

• rectifying documents must contain cross-references to the invoice that is amended, and must explicitly mention the amendment

• the wording ‘equivalent documents’ has been deleted from VAT law.

Invoices must contain the following references:

• name, address and tax registration number of the supplier and customer

• date and unique sequential number

• description or nature of the goods supplied or services rendered, which mentions all required elements to determine the applicable VAT rate

• quantity of the goods supplied or the extent of the services rendered

• price of the goods supplied or the services rendered, and all other elements included in the taxable base (excluding VAT) per VAT rate, or exemption (in the case of services rendered, it may show only the price of the services supplied including VAT, and the applicable VAT rate)

• VAT rate(s) applied and the corresponding VAT amount(s)

• if no VAT has been applied, specific indication of the reason for not charging VAT.

Invoices and other fiscally relevant documents must be issued by electronic means, since 1 July 2021. 

Taxpayers can issue those documents through one of the following systems:

• Electronic invoicing computer system developed or acquired by the taxpayer (certified by the Tax Authorities)

• Public software made available by the Tax Administration on its website.

Credit notes and debit notes

Credit notes are used in the case of the cancellation or reduction of the value of a past operation, adjusting the relevant value. Credit notes must comply with various requirements applicable to invoices and must always make reference to the invoices to which they relate, and explicitly mention the amendment. The rules applicable to credit notes apply to debit notes as well.

VAT may or may not be included on credit notes. Normally, the inclusion of VAT on credit notes does not have a financial effect.

Additional export documentation

Record-keeping

The following records must be kept:

• statutory accounting system — records of all operations according to their VAT treatment, original invoices received and duplicates of invoices issued

• VAT books (for taxable persons without a statutory accounting system) — records of inventories, supplies of goods and finished products, services rendered, operations on fixed assets and inventories, by-products, and consumables as at 31 December each year.

When accounting is carried out through a computer system, all books, records, supporting documents and other documentation related to the programming and treatment of data must be kept for five years.

The accounting documentation must be kept within the country at the company’s head office or by its legal representative, to allow the tax authorities access to the documents when required.

Specific VAT rules

Bad debts

Land and buildings

Leasing

Promotional gifts

Secondhand goods

Second-hand goods are subject to VAT. The tax is applicable to the difference between the sale price and the purchase price. Invoices issued by taxpayers engaged in selling second-hand goods must contain the wording ‘VAT — second-hand goods’ and must not include the VAT amount.

Exports of second-hand goods are, in most cases, zero-rated.

Tourism industry

The tourism industry is very important for Cape Verde’s economy.

As mentioned, the VAT rate is 10% for lodging in hotels and similar facilities, catering and tour operators who are resident micro, small and medium sized companies.

There is a special regime for travel agencies and tour operators. Where these operators deal with clients in their own name and use supplies of goods or services provided by other taxable persons in the provision of travel facilities, VAT is due based on the margin. As for secondhand goods, invoices issued under this regime must not include the VAT amount but should include the statement ‘VAT included’.

Currency conversion

Transfer of a business

Warranty repairs

Other indirect taxes

Import duties

Excise duties

Tourism tax

Customs statistics tax (TEA)