Cabo Verde is more than an idyllic holiday destination. Often hailed as one of Africa’s most stable democracies, Cabo Verde unites political calm with an impressively growing economic landscape, making it an increasingly attractive destination for global employers. 

The African Development Bank projects a 5.4% growth in 2025 from Cabo Verde’s 2024 GDP of $3 Bn. With increasing investment in digital infrastructure and a strategic location bridging Africa, Europe, and the Americas, it’s becoming an attractive spot for international employers. If you’re considering getting in on the action early and doing business in Cabo Verde, yesterday was the best time. 

However, with unique local regulations and a Portuguese-influenced tax structure, navigating payroll in this island nation can be tricky. This guide breaks down everything you need to know about payroll and income tax in Cabo Verde, helping you stay compliant while building a confident, localized workforce.

What is Payroll Tax in Cabo Verde?

Cabo Verde’s payroll taxes mainly include social security contributions (INPS) and personal income tax (IRPS). Both employers and employees need a clear understanding of these for compliance and effective financial planning.

Social Security Contributions (INPS)

Managed by the Instituto Nacional de Previdência Social (INPS), social security contributions fund various benefits, including:

  • Old-age pensions
  • Survivor benefits
  • Invalidity pensions
  • Maternity leave
  • Sickness and accident benefits
  • Family allowances
  • Unemployment insurance

In Cabo Verde, social security contributions total 24.5%, with employers contributing 16% and employees 8.5%. The specific allocation of these contributions to various benefits is not publicly disclosed.

Mandatory contributions, calculated on gross monthly earnings, must be withheld from employees’ pay by employers. Employers are then responsible for remitting the total contributions to the INPS.

For self-employed persons, the mandatory contribution rate is a fixed 19.5%. 

In 2023, the INPS increased the contributory base from CVE 13,000 to CVE 14,000 following the increase in the national minimum wage. While there is a defined contributory base, there is no definitive cap on social security contributions. This means that contributions are calculated as a percentage of the employee’s gross salary, no matter how high it is. 

Social contributions are levied on all employees, employers, and self-employed persons – nationals and foreigners alike. For foreign workers,  an exemption may only be granted if their home country has a bilateral social security agreement with Cabo Verde. These agreements are designed to avoid double social security contributions and often permit workers to remain covered by their home country’s system for a defined duration. A notable example is the agreement between Cabo Verde and Portugal, which allows for an exemption period of up to 24 months. More on these later.

Personal Income Tax (IRPS)

Cabo Verde operates quite the complex personal income taxation system, known as the Imposto sobre o Rendimento das Pessoas Singulares (IRPS). The IRPS is based on five fundamental categories of income:

1

Employment and Pension Income

  • Includes salaries, wages, bonuses, allowances, and pensions.
  • As a rule, they are subject to progressive monthly withholding tax (WHT) unless the taxpayer opts to file the tax return.

Monthly tax withholdings are determined by applying the following progressive rates and corresponding deductions to taxable income:

BracketIncome Range (CVE)WHT Rate (%)Deduction (CVE)
10 – 80,00015%5,500
280,000 – 150,00021%10,300
3150,000+25%16,300

The deductions above are not from the mandatory social security contributions, as they are not tax-deductible. They are rather mathematically derived standardized offsets built into the WHT system to make the progressive rates work correctly.

For an employee who earns CVE 200,000, for example, here’s what his total taxes would look like:

Component Calculation Amount (CVE)
IRPS (Income Tax) (200,000 × 25%) – 16,300 33,700
INPS (Social Security) 200,000 × 8.5% 17,000
Total Taxes Paid 33,700 + 17,000 50,700

Aside from these built-in deductions, employees may be eligible for other deductions and allowances, such as personal allowances and deductions for dependents, which can further reduce their taxable income.

Calculating payroll taxes yourself can be complicated. Use the Remote People Global Payroll Calculator instead.

2

Business and Professional Income

Covers income from self-employment, business activities, and professional services in Cabo Verde. Taxed at a flat rate of 15%.

3

Capital Income

Generally taxed at a flat rate of 10%. Covers dividends, interest, and other investment returns.

4

Property Income

Covers rental income and other earnings from property. Subject to a withholding tax rate of 20%, with certain exceptions taxed at 10%.

5

Capital Gains

Includes gains from the sale of assets such as real estate or shares.

Capital gains are taxed at different rates depending on the type of asset. Gains from the sale of real estate, intellectual property, or shares are taxed at 1%. Other gains, such as those from gambling, lotteries, betting, and prizes from sweepstakes or contests, are taxed at a flat rate of 20%.

Considering that individuals can indeed earn income across multiple categories, each income type is taxed according to the rules of its respective category. 

Finally, it is important to note that tax resident individuals in Cabo Verde are charged IRPS based on worldwide income and not just income earned in the country. Cabo Verde. For tax purposes in Cabo Verde, an individual is considered a resident if they:

Residency ConditionDescription
Physical PresenceSpends more than 183 days in Cabo Verde during the calendar year
Habitual ResidenceSpends less than 183 days but maintains a residence considered habitual as of December 31

Employer and Employee Responsibilities

Employers must register their companies, themselves, and their employees with the relevant bodies as discussed earlier. They must also deduct 8.5% of the employee’s gross monthly salary and contribute an additional 16% of their own, totaling 24.5% of the gross salary. 

These payments, along with declarations, are due monthly by the 15th of the following month via the INPS portal. Timely and accurate submissions are essential to avoid penalties. 

Employers are also responsible for remitting employees’ monthly personal income withholding tax to the government. Finally, they are expected to store records of payments made and provide employees with payslips whenever they pay salaries.

Employees, on the other hand, have a duty to verify the correct deduction on their payslips. Generally, foreign employees working legally in Cabo Verde are also subject to these contributions, unless exemptions apply under international agreements.

Cabo Verde’s Double Taxation Treaties

As of now, Cabo Verde has only a few Double Taxation Treaties (DTTs) or Double Taxation Avoidance Agreements (DTAAs) to prevent double taxation on the same income.

Cabo Verde has DTTs in force or signed with the following countries:

CountryStatusScope
PortugalIn forceCovers income and corporate tax, dividends, interest, and royalties
Macau (China)SignedSpecific to income derived from business and services
SpainNegotiated (pending ratification)Framework agreed upon, awaiting enforcement

For now, only the agreement with Portugal is legally binding and currently in use.

Industry-Specific Tax Rates

While the general corporate income tax rate is 22%, certain companies benefit from a preferential tax treatment to encourage investment and strategic growth. Here’s a concise overview:

  • Tourism and Hotel Sector: Businesses located within tourism zones or specific designated areas in Cabo Verde may be eligible for lower corporate tax rates or even temporary tax exemptions. Incentives are usually proportional to the investment portfolio size and the number of jobs created.
  • Export-Oriented Industries:  Businesses classified as Free Industrial Zone enterprises or International Services Entities (ISEs) benefit from a tax rate as low as 2.5% for up to ten years, depending on their operations. These businesses have a high competitive advantage not only because of the dirt-cheap tax rates, but also because they are subject to tight eligibility criteria by the Government.
  • Renewable Energy: Cabo Verde lacks a specific reduced corporate income tax rate for renewable energy, but it offers various fiscal incentives. These can include tax credits for renewable energy investments and VAT exemptions on related equipment.  Accelerated depreciation in this sector also allows for faster deduction of asset costs. Eligibility for these incentives often depends on project specifics. Renewable energy developers should consult with government agencies like the Ministry of Industry, Commerce, and Energy for more details.
  • Startups and Microenterprises: Cabo Verde has proposed reforms and pilot projects under the Cabo Verde Digital initiative, which may include tax holidays or relief for new businesses, especially in tech and innovation.

Many of these, however, remain experimental and not yet officially legislated. Interested in setting up shop in one or more of these areas? Read more here.

Simplify Cabo Verde Payroll and Income Tax with Remote People

You’d agree that Cabo Verde’s payroll and income tax rules are particularly complex. Navigating the various contribution plans and personal income tax rules can be difficult. Our payroll service provides an easy solution by handling all aspects of your Cabo Verde payroll on one platform.