Capital Gains Taxation in Cabo Verde
In Cabo Verde, the taxation of capital gains is governed by the country's Tax Code, specifically Article 24. Capital gains are defined as the profits realized from the sale or disposal of capital assets, including:
- Real estate properties
- Stocks and securities
- Bonds and debentures
- Business assets
There is no distinction made between short-term and long-term capital gains for tax purposes.
Taxable capital gains are calculated as the difference between the selling price of the asset and its acquisition cost. The formula for calculating capital gains is as follows:
Capital Gain = Selling Price - Acquisition Cost - Expenses
Adjustments or deductions may be allowed in the calculation of the gain, including expenses related to the sale (e.g., brokerage fees, legal fees) and any improvements made to the asset during ownership.
In Cabo Verde, capital gains are taxed at a flat rate of 15%. However, certain capital gains may qualify for exemptions or preferential tax treatment under specific provisions of the Tax Code, such as the participation exemption regime for gains derived from qualifying holdings in subsidiaries.
The rationale behind taxing capital gains is to ensure that individuals and businesses contribute their fair share of tax on profits realized from investments and asset disposals. By applying a flat tax rate to capital gains, Cabo Verde aims to maintain a neutral tax treatment across different sources of income and promote investment while generating revenue for the government.
Legal Framework
The taxation of capital gains in Cabo Verde is outlined in the following articles of the Tax Code:
- Article 24: Definition of capital gains and calculation of taxable gain
- Article 25: Tax rates applicable to capital gains
- Article 26: Exemptions and preferential tax treatment for certain capital gains
These provisions aim to regulate and influence investment decisions by providing clear guidelines on the tax treatment of capital gains and incentivizing certain types of investments through exemptions or preferential tax rates.
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