2026 tax reform: what has changed and how it affects your business

O State Budget for 2026 marks a turning point in Cape Verde’s fiscal history. Approved by the Law No. 69/X/2025, dated 31 December, the legislation comes into force on 1 January 2026 and introduces far-reaching changes to the national tax system. For business owners, managers and investors, understanding these changes is not merely a matter of legal compliance: it is a strategic opportunity to tax optimisation, cost reduction and competitive positioning in an economy that is growing at a rate of 4.71 TP3T per year and which received 1.25 million tourists in 2025.

In this article, S&D Consultoria provides a practical and in-depth analysis of all the tax measures in the 2026 State Budget that directly affect businesses in Cape Verde. From the reduction in IRPC to new property tax, passing through the mandatory electronic invoicing and by the global minimum tax For multinational companies, we address each topic using concrete examples, comparative tables and recommendations that can be applied to day-to-day business operations.

1. Overview: why 2026 is a year of tax reform

The 2026 tax reform did not come out of nowhere. It is the result of a process of legislative modernisation that began in 2013, with the adoption of the new General Tax Code, Tax Procedure Code and Tax Enforcement Code . Since then, the Cape Verdean tax system has been progressively updated to meet the challenges of an open economy that is dependent on foreign investment and operates within a context of increasing tax globalisation.

The 2026 State Budget comes at a particularly favourable time for the country. GDP growth has slowed slightly from its peak of 7.31 TP3T recorded in 2024, but remains robust, with projections of 4.71 TP3T in 2026 e 5.01 TP3T in 2027. Tourism, which accounts for 25% of GDP, remains the main driving force, with the Government projecting that it will receive 1.5 million tourists in 2026. Inflation remains under control at 2,6%, and the budget deficit is projected at 0.91 TP3T of GDP.

In this context, the tax changes introduced by the 2026 State Budget pursue three complementary strategic objectives. The first is the a gradual reduction in the tax burden on businesses, reflected in the reduction in the IRPC and the continuation of incentives for recruitment and investment. The second is the modernisation of tax administration, with the expansion of electronic invoicing and the digitisation of tax procedures. The third is the compliance with international standards, in particular through the implementation of the global minimum tax under the OECD’s BEPS Pillar 2 initiative .

For businesses, these three factors send a clear message: 2026 is a year of mandatory adaptation, but also of specific opportunities for those who can anticipate changes and adjust their tax strategy accordingly.

2. IRPC: reduction in the standard rate to 20% and new rules for SMEs

The most significant tax measure for the Cape Verdean business community is, without doubt, the reduction in the standard rate of Corporation Tax (IRPC) from 21% to 20%. Although this reduction appears modest in absolute terms, it forms part of a clear trend towards tax relief that will continue until 2028.

The Government’s rationale is clear: to make Cape Verdean companies more competitive on the international stage, to encourage private investment and to enhance the country’s appeal to foreign capital. With a corporate income tax rate of 20% in 2026, with the expectation that 18% in 2027 e 17% in 2028, Cape Verde is increasingly well-positioned compared with other jurisdictions in the region.

For the micro, small and medium-sized enterprises, the benefit is even more pronounced. The first 50,000 euros of taxable income SMEs and small- and mid-cap companies (Small and Mid-Cap) continue to benefit from a reduced rate of 15%. This means that an SME with profits of up to €50,000 effectively pays less tax than a large company, creating a system of progressive corporate taxation that protects small businesses.

Source: 2026 State Budget · Law No. 69/X/2025

The reduction in IRPC has a direct impact on the tax planning of companies with organised accounting systems. A company with a taxable profit of 10,000,000$00 (ten thousand contos) will pay, in 2026, 200,000$00 less in IRPC than in 2025, simply as a result of the change in the standard rate. Whilst this amount is not earth-shattering for large groups, it could represent a significant injection of liquidity for SMEs operating on tight margins.

In addition to the rate cut, the 2026 State Budget maintains the suspension of the penalty in relation to autonomous taxation for companies reporting losses. Originally provided for in Article 88 of the IRPC Code, this 10 percentage point increase was suspended by the Tripartite Agreement on Wage Increases and Economic Growth in October 2024 and remains in force throughout 2026, protecting companies in difficulty from being penalised twice for tax purposes.

3. End of the IUP: the IPI and ITI, the new property taxes, are introduced

The most far-reaching reform of the tax system in 2026 does not concern the IRPC, but rather the property tax. From 1 January 2026, the history Single Property Tax (IUP) was repealed and replaced by two new tax codes: the Property Tax Code (IPI) and Property Transfer Tax (ITI) Code, both adopted by Laws No. 55/X/2025 and No. 54/X/2025 .

This structural change, which was unanimously approved by the National Assembly , clearly distinguishes between two situations that have hitherto been lumped together under a single tax: the property of a property and the broadcast (purchase and sale) of that same property. The reform is particularly relevant for companies in the property, tourism and construction sectors, but it also affects any company based in its own premises or which carries out property transactions in the course of its business.

3.1. IPI — Property Tax (0.1% per annum)

O IPI is the new annual property tax. It is levied on the taxable value of buildings situated within the national territory and is payable by the owner on 31 December of each year. The The overall rate is 0.1%, with the exception of land, which is subject to 0,15%.

The big change lies in the valuation method. The taxable value will now be determined by a objective assessment formula which takes multiple factors into account, replacing the previous system, which was often out of date and prone to producing distortions. This assessment is carried out by Municipal Assessment Committees, thereby enhancing the transparency of the process .

For a company with an office property valued at 50,000,000$00, the annual IPI will be just 50.000$00 (0.1%), which is significantly lower than the amount it would have paid under the previous IUP.

The IPI also introduces mechanisms for encouraging the productive use of land and from penalties for urban dereliction. Vacant, derelict or dilapidated urban buildings are subject to a increase in the rate, whilst properties used for economic activities may benefit from non-temporary non-subjection during periods of construction or marketing .

3.2. ITI — Property Transfer Tax (~1.5% of the transaction value)

O ITI It applies to transfers of immovable property, whether for consideration or free of charge, and is generally payable by the purchaser. The reference rate stands at around 1.5% of the transaction value, remaining close to the amount paid under the former IUP.

The real innovation of the ITI lies in the expansion of its tax base. In addition to traditional buying and selling, the tax now applies to legally complex transactions that were frequently used to circumvent taxation, such as :

• Preliminary agreements for the sale and purchase of a property, subject to handover to the prospective purchaser;
• Lease with a purchase option;
• Assignments of contractual rights in preliminary agreements;
• Irrevocable powers of attorney with sub-delegation;
• Acquisition of a shareholding in property-owning companies.

ITI’s revenue is channelled back in full to the local authorities, thereby strengthening local financial autonomy and creating an incentive for local authorities to bring the housing stock within their territory into compliance with the law.

Source: Laws No. 54/X/2025 and 55/X/2025 · PwC Cape Verde

4. VAT: What has changed regarding Value Added Tax

O Value Added Tax Code (CIVA) has undergone specific changes as part of the 2026 State Budget, some of which have a direct impact on businesses operating under the standard VAT regime.

The first significant change is the abolition of certain VAT exemptions.

The 2026 State Budget no longer applies the exemption to certain goods set out in paragraphs 1, 4 and 5 of the List annexed to the VAT Code . Although the legislation does not specify exactly which goods are no longer exempt, this amendment broadens the VAT tax base and increases tax revenue, whilst eliminating market distortions between competing products subject to different tax treatments.

The second mandatory change is the use of computer programmes certified by the Tax Authority to prepare accounting records and process electronic invoices and other tax-relevant documents . This measure, which ties in with the electronic invoicing scheme already in place, further advances the digitalisation of tax compliance and reduces the scope for errors and fraud when issuing documents.

On the other hand, the 2026 State Budget extends the application of the reduced VAT rate (6%) three new situations :

• The construction of homes for sale or rent at affordable prices;
• Imports and transfers of works of art carried out by registered art galleries;
• Operations for processing olives into olive oil.

In addition, the VAT exemption remains in place for fertilisers, soil improvers, meal, cereals, seeds and glass bottles used in farming , a benefit that is particularly significant in a country where agriculture employs a significant proportion of the working population and where food security is a strategic priority.

5. Electronic invoicing: the transition period ends in 2026

Electronic invoicing in Cape Verde is no longer an option but has become a mandatory requirement. Since June 2022, all businesses engaged in commercial, industrial, agricultural, fishing, service or letting activities have been required to issue and submit electronic invoices via the system of the National Directorate of State Revenue (DNRE) .

The 2026 State Budget, however, introduces two important changes to this scheme. The first is the extension of the validity period for invoices in PDF format until the end of 2026. Invoices in PDF format will continue to be regarded as electronic invoices for all legal purposes, postponing the deadline to 1 January 2027 the requirement for a qualified digital signature . This measure gives businesses additional time to adapt, but does not remove the need to prepare.

The second update is the postponement of the mandatory use of electronic invoicing for micro, small and medium-sized enterprises in the context of public procurement. The 2026 State Budget maintains the exemption from this obligation until 31 December 2026, with its general application expected to come into force from 1 January 2027.

The 2026 State Budget also postpones the requirement to submit the SAF-T accounting file for the periods from 2027 and subsequent years, to be delivered in 2028 . This postponement mainly affects larger companies with formalised accounting systems, which will have a further year to adapt their information systems to the requirements of the tax authorities.

Source: 2026 State Budget · Law No. 69/X/2025

For businesses, the message is clear: 2026 is the final year of the transition. From 2027, electronic invoicing will be universal, qualified digital signatures will be compulsory and SAF-T compliance will be required. Anyone who fails to prepare in good time risks incurring penalties and avoidable operational difficulties.

6. Global Minimum Tax (Pillar 2): Cape Verde aligns with OECD rules

Perhaps the most innovative tax change in the 2026 State Budget is the introduction of the Qualified Global Minimum Tax (IMG), as part of the international initiative BEPS Pillar 2 from the OECD/G20 . This mechanism, which is already being implemented in more than 140 jurisdictions worldwide, establishes a minimum effective tax rate of 15% on the profits of large multinational groups.

The IMG applies to multinational groups or large national groups whose annual income is equal to or greater than 750.000.000 €. The 15% rate is calculated on the basis of the effective tax rate (ETR) in each jurisdiction where the group operates. If a subsidiary in Cape Verde actually pays less than 15% in tax on its profits, the supplementary tax may be levied in the parent company’s jurisdiction, or, if Cape Verde implements the corresponding domestic mechanism (QDMTT), it will be levied here.

For Cape Verde, this measure has particular significance. The tourism sector, which accounts for around 25% of GDP, is dominated by large international hotel groups that may fall within the scope of Pillar 2. Historically, the country has used tax incentives to attract foreign direct investment, including benefits under the Tax Benefits Code and establishment agreements . With the global minimum tax, some of these incentives may lose their effectiveness, as the top-up tax will make up the difference up to 15% in another jurisdiction.

The 2026 State Budget provides that “the concepts, operation, rules and procedures for assessment and collection will be set out in a separate law and regulations” , which means that the operational implementation of the IMG in Cape Verde is still ongoing. However, the political decision to join the mechanism has been taken, and multinational companies with operations in the archipelago should begin to prepare for this new paradigm of global tax transparency.

Pillar 2 represents both a a challenge and an opportunity to Cape Verde. If the country implements the domestic mechanism (QDMTT) correctly, it will be able to to protect its tax base and ensure that profits generated within the territory contribute to national public finances. If it fails to do so, the supplementary tax will be levied in another country, and Cape Verde will lose potential tax revenue .

7. Carbon levy: the new environmental levy for transport companies

From 1 April 2026, all international air and sea journeys originating in Cape Verde will now include a carbon charge of 550$00 per passenger. The measure, provided for in the 2025 State Budget and now regulated by ministerial order, is intended to fund initiatives to mitigate and adapt to climate change.

In the aviation sector, the levy applies to all commercial tickets for flights departing from domestic airports; airlines are responsible for settling and collecting the levy, which must be itemised on the invoice. In the maritime sector, the tax is levied on the berthing of fossil-fuelled passenger ships at the first Cape Verdean terminal where refuelling, repairs, embarkation or disembarkation take place .

The carbon tax has specific exemptions that businesses need to be aware of: children under the age of two, inter-island flights and ferry services, services covered by public service obligations e emergency landings or dockings for technical or weather-related reasons .

The revenue generated by the carbon levy will be allocated as follows: 95% for the Climate and Environment Fund, aimed at energy transition projects, climate adaptation and sustainability initiatives, and 5% for the bodies responsible for collection (AAC or port authorities) as compensation for management costs .

For air and sea transport companies, this new requirement means adjustments to their invoicing and payment collection systems. Foreign airlines operating in Cape Verde without a permanent establishment in the country are required to appoint a resident representative, jointly and severally liable for payment of the fee .

8. Tax incentives that will remain in place in 2026

Despite the structural changes, the 2026 State Budget retains a wide range of tax incentives which businesses should continue to take advantage of. The continuation of these benefits reflects the Government’s strategy of using tax policy as a means of stimulating investment, recruitment and innovation.

O Tax Incentive for Wage Increases remains in force, allowing companies with organised accounts deduct 200% from the costs associated with pay rises exceeding 4.6%. This mechanism, which benefits both employers and employees, is particularly relevant against a backdrop of rising living costs and inflationary pressures.

Businesses may also continue to benefit from the following measures:

Source: 2026 State Budget · Law No. 69/X/2025

O VAT group scheme, due to come into force on July 2026, is a significant development for corporate groups. This scheme allows for the offsetting of VAT payable or recoverable between companies within the same group in which the parent company holds a direct or indirect stake of at least 75% of capital and which share similar economic objectives and a common management structure . For groups comprising companies in different tax positions (some with VAT payable, others with a VAT credit), this mechanism can lead to a significant improvement in liquidity.

9. REMPE: The Simplified Scheme for Micro and Small Businesses

O Special Legal Framework for Micro and Small Enterprises (REMPE), adopted by Law No. 70/VIII/2014, remains one of the cornerstones of tax policy for smaller businesses in Cape Verde . In 2026, the scheme remains essentially unchanged, but the amendments to the 2026 State Budget indirectly affect micro-enterprises covered by this scheme.

The REMPE applies to companies with an annual gross turnover not exceeding 10 million escudos (10,000 contos) and which employ up to 10 workers. These companies pay a Special Unified Tax (TEU) of 4% as a percentage of gross sales, replacing the IRPC, VAT and stamp duty .

Companies covered by REMPE are not required to keep organised accounts nor to hire a qualified accountant, which represents a significant saving in compliance costs. However, the VAT exemption granted by the scheme entails the loss of the right to deduct input VAT in procurement, which can represent a significant cost for companies whose suppliers are subject to standard VAT .

The main indirect change for micro-enterprises in 2026 is the requirement to use software certified by the Tax Authority for the issue of invoices and tax-relevant documents . Although the REMPE scheme has been simplified, the electronic invoicing requirements also apply to micro and small enterprises; it is therefore necessary to ensure that the system for issuing receipts and invoices complies with the requirements of the DNRE.

10. Sectoral Impact: how the reforms affect different types of businesses

The 2026 tax changes do not affect all companies in the same way. The specific impact depends on the sector of activity, the size of the company, its capital structure and the extent to which its operations are internationalised.

10.1. Companies in the property and tourism sectors

For companies in the property sector, the reform of property taxation is the most significant change. The replacement of the IUP with the IPI and ITI requires a review of business models, particularly for companies that hold large property portfolios or act as intermediaries in property transactions. The reduction in the annual rate from 1.5% to 0.1% provides substantial relief for long-term investors, but the broad scope of the ITI may increase transaction costs in complex deals .

In the tourism sector, a combination of various factors creates a landscape of opportunities and challenges. On the one hand, the projected growth of 1.5 million tourists and tax incentives for the diaspora expand the market. On the other hand, the global minimum tax could affect large international hotel groups , and the carbon levy increases airlines’ operating costs .

10.2. SMEs and Micro-enterprises

For SMEs, the reduction in the IRPC from 21% to 20% and the retention of the reduced rate of 15% on the first €50,000 News about taxable income is positive . The continuation of the REMPE scheme with the 4% TEU continues to offer a simplified alternative for micro and small enterprises, although the trade-off involved in losing the VAT deduction must be carefully assessed .

The postponement of mandatory electronic invoicing in public procurement until the end of 2026 gives SMEs a additional adjustment period, but this should not be interpreted as an indefinite postponement. Preparations must begin as early as 2026 to avoid difficulties in 2027 .

10.3. Multinational companies and large corporate groups

For multinational groups with operations in Cape Verde and consolidated turnover in excess of 750 million euros, the introduction of the Global Minimum Tax it is the most significant change . These companies will need to review their tax planning models, assess the effective tax rate paid in Cape Verde and consider implementing the domestic mechanism (QDMTT) to protect the national tax base.

The gradual reduction in the IRPC to 17% until 2028 This puts Cape Verde in a competitive position in terms of nominal taxation, but the interplay between this rate and the Pillar 2 rules requires careful analysis on a case-by-case basis.

11. Practical Checklist: What your company should do in 2026

Given the large number of changes introduced by the 2026 State Budget, the S&D Consultancy prepared a practical checklist to help businesses ensure tax compliance and take advantage of the opportunities presented by the new legal framework.

11.1. First quarter of 2026 (January–March)

Review your company’s tax position in light of the new IRPC rate. If you operate under the organised accounting scheme, update your tax projections to reflect the reduction from 21% to 20%. If you are part of REMPE, please check that your invoicing software is certified by the Tax Authority.

Assess the impact of the property tax reform if your company owns property. Calculate the new annual IPI based on the rate of 0,1% and consider whether the ownership structure of the property assets remains the most efficient .

11.2. Second quarter of 2026 (April–June)

From 1 April, the carbon levy comes into force. If your company operates in the air or sea transport sector, please ensure that your invoicing systems are set up to itemise and collect the 550$00 per passenger. If you are a foreign airline with no establishment in Cape Verde, appoint a resident representative.

Make sure you are prepared for the VAT group scheme if your company is part of an economic group with a shareholding of more than 75%. The scheme comes into force on July 2026.

11.3. Third and fourth quarters of 2026 (July–December)

Make the most of this final year of transition to full electronic invoicing. If you are still using PDF invoices, plan your migration to a system with qualified digital signature throughout 2026, in order to be prepared for the requirement coming into force in January 2027 .

If your company is a multinational with consolidated turnover in excess of 750 million euros, keep an eye out for the publication of the laws and separate regulations that will set out the operational functioning of the Global Minimum Tax in Cape Verde .

12. S&D Consultancy can help your business

The 2026 tax reform is complex, multi-faceted and requires a strategic approach. S&D Consultoria supports companies of all sizes and across all sectors in Cape Verde, offering specialist services in tax consultancy, accountancy, human resources and administrative support.

Our work begins with a personalised tax assessment, where we analyse your company’s current situation and identify opportunities for optimisation. From there, we develop a practical action plan which may include a review of the tax regime (REMPE versus organised accounting), preparation for electronic invoicing, wealth planning in light of the new IPI and ITI taxes, or monitoring investment processes offering tax benefits.

For companies based abroad and foreign investors, we offer a comprehensive service that includes obtaining the NIF, the company registration, the declaration of commencement of business, the application for the Migrant Investor Status and to the Green Card, and structuring the investment from a tax perspective so as to maximise the benefits provided for in the 2026 State Budget .

Please get in touch with us via our website www.consultoria.cv or pop into our office. The first consultation is free and there’s no obligation.