Tax Residency in Cabo Verde
Determining tax residency in Cabo Verde is crucial for individuals and entities seeking to understand their tax obligations within the country. The local tax laws establish specific criteria for establishing tax residency, while international tax treaties may introduce modifications or exceptions to these criteria.
Criteria for Tax Residency in Cabo Verde
According to Article 10 of the Cabo Verde Income Tax Code, an individual is considered a tax resident if they meet any of the following conditions:
- Residing in Cabo Verde for more than 183 days in a calendar year
- Having a permanent home in Cabo Verde
- Exercising a professional activity in Cabo Verde
- Receiving income from a source in Cabo Verde
For entities, tax residency is determined based on their legal form and place of management. Companies incorporated in Cabo Verde are considered tax residents, regardless of their place of management. However, companies incorporated outside Cabo Verde are only considered tax residents if their place of management is in Cabo Verde.
Impact of International Tax Treaties
Cabo Verde has entered into several international tax treaties to avoid double taxation and promote cross-border economic activities. These treaties may modify or provide exceptions to the standard criteria for tax residency as defined in domestic law.
For example, the Cabo Verde-Portugal tax treaty provides that an individual is considered a resident of Cabo Verde if they are liable to tax in Cabo Verde because of their domicile, residence, or place of management. The treaty also includes tie-breaker rules for individuals considered residents of both Cabo Verde and Portugal under each country's domestic law.
Rationale and Objectives
The criteria for determining tax residency in Cabo Verde aim to ensure that individuals and entities with significant ties to the country contribute to its tax revenues. By establishing clear rules for tax residency, the legislation prevents tax evasion and ensures that individuals and entities are taxed fairly based on their economic activities within Cabo Verde.
International tax treaties play a crucial role in modifying or providing exceptions to these criteria to prevent double taxation and facilitate cross-border economic activities. These treaties reflect the mutual agreement between Cabo Verde and other countries to enhance tax compliance and promote economic cooperation.
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