Corporate Income Tax in Cabo Verde: A Comprehensive Overview
Cabo Verde's corporate income tax system is a crucial aspect of the country's fiscal framework. Understanding its intricacies is essential for businesses operating within its borders. This in-depth exploration delves into the calculation methods, applicable tax rates, definitions of taxable income, exemptions, and the legal framework governing these elements.
1. Calculation Methodology
Corporate income tax liability in Cabo Verde is determined through a straightforward process. Companies begin by calculating their accounting profits, typically derived from financial statements prepared in accordance with International Financial Reporting Standards (IFRS) or other applicable accounting standards.
Next, adjustments are made to the accounting profits to arrive at the taxable income. These adjustments consider various tax allowances and deductions permitted under Cabo Verdean tax law. Finally, the applicable corporate income tax rate is applied to the taxable income to determine the tax liability.
2. Applicable Tax Rates
Cabo Verde's corporate income tax rate is a flat 25%. This rate applies to all taxable income earned by corporations, regardless of their size or industry. There are no tiered or graduated tax structures in place.
3. Taxable Income
Taxable income for corporations in Cabo Verde encompasses various types of income, including:
- Trading income
- Investment income
- Capital gains
- Rental income
- Royalties
- Foreign income subject to certain conditions
4. Exemptions
Certain types of income are exempt from corporate income tax in Cabo Verde. These exemptions include:
- Dividends received from participating holdings or certain foreign subsidiaries under the participation exemption regime
- Capital gains derived from the transfer of certain qualifying assets, such as shares in participating holdings
These exemptions aim to promote investment, encourage economic growth, and attract foreign capital to Cabo Verde.
5. Legal Framework
The legal framework for Cabo Verde's corporate income tax system is primarily governed by the Cabo Verde Tax Code. Specific articles and sections relevant to corporate income tax include:
- Article 14: Defines the chargeable income of companies
- Article 15: Provides for deductions allowable from chargeable income
- Article 20: Specifies exemptions from tax on certain types of income
- Article 21: Establishes the corporate income tax rate
These provisions aim to provide a clear and comprehensive framework for the taxation of corporate income in Cabo Verde.
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