On 12 March 2021, Cape Verde approved the ratification of the pending tax treaty with Equatorial Guinea. We have summarised some important aspects of the treaty below.
Treaty Status & Entry Into Force
This treaty is the first of its kind signed between the two countries.
The next step is the exchange of ratification instruments.
After ratification instruments are exchanged, the treaty will enter into force after 30 days and will apply as from 1 January of the year following its entry into force.
Related Reading: “Cape Verde – Spain Treaty Enters Into Force”
Taxes Covered
For Cape Verde:
- Income Tax
- Individual Income Tax
For Equatorial Guinea:
- Corporate Income Tax
- Minimum Tax
- Individual Income Tax
- Employer contributions
- Capital Gains Tax – but only on developed and undeveloped land
Permanent Establishment
A permanent establishment will be constituted if an enterprise furnishes services for the same or a connected project for a period aggregating more than 6 months within any 12 months.
These services may be furnished by employees or other engaged personnel.
Withholding Taxes
Royalties – 10%
Dividends – 10%
Interest – 10%
Technical services – 10%
Business Profits (Article 7)
Article 7 of the tax treaty provides for a special limiting provision.
It states that taxing rights will be granted to say Cape Verde on profits attributable to the sale of goods or merchandise or other business activity carried on in Cape Verde by a resident of Equatorial Guinea if the same or similar goods or merchandise or business activities are also sold or carried out by a Permanent Establishment maintained by the Equatorial Guinea resident in Cape Verde.
The reverse also applies.
Related Reading: “Cape Verde – Negotiation of A Tax Treaty With Switzerland”
Tax Education For Professionals
