O\u00a0Special Regime for Micro and Small Enterprises (REMPE)<\/a><\/strong>, approved by the\u00a0Law No. 70\/VIII\/2014, of 26 August<\/a><\/strong>, represents a key milestone in Cape Verde\u2019s economic policy. Its main aim is to promote competitiveness, productivity and, crucially, the\u00a0formalisation<\/strong>\u00a0and the development of Cape Verdean micro and small enterprises (MSEs).\u00a0\u00a0\u00a0<\/p>\n\n\n\n This scheme establishes a simplified tax system, sparing micro-enterprises (MPEs) from the complexities of the standard Single Income Tax (IUR\/IRPC) regime and Value Added Tax (VAT), replacing multiple taxes with a single, low-cost tax. The REMPE is therefore a legal and fiscal instrument designed to reduce the barriers to compliance<\/em> and to promote formal entrepreneurship across the archipelago.<\/sup> <\/p>\n\n\n\n Membership of REMPE is voluntary (for companies that meet the requirements) and depends entirely on the business unit\u2019s annual gross turnover and the number of employees.\u00a0\u00a0\u00a0<\/p>\n\n\n\n Law No. 70\/VIII\/2014 sets out clear criteria for classification:<\/p>\n\n\n\n Companies whose share capital is held by a natural person who is already a partner in another company not classified as a micro-enterprise are excluded from the special scheme.<\/p>\n\n\n\n The major tax benefit of REMPE lies in the\u00a0Special Unified Tax (TEU)<\/a><\/strong>, which replaces the Single Income Tax (IUR\/IRPC), Value Added Tax (VAT) and Stamp Duty (among others).\u00a0\u00a0\u00a0<\/p>\n\n\n\n Its calculation structure is remarkably simple:<\/p>\n\n\n\n This tax simplification, which is levied on turnover rather than on taxable profit (as under the organised accounting regime), ensures predictability and drastically reduces the need for complex tax planning.\u00a0\u00a0\u00a0<\/p>\n\n\n\n The specific nature of REMPE entails a significant simplification of ancillary obligations, thereby reducing the costs of compliance<\/em> administrative and accounting.<\/p>\n\n\n\n Companies covered by REMPE are not required to keep organised accounts<\/strong> in accordance with the Accounting and Financial Reporting Standards System (SNCRF). Consequently, these companies are also not required to appoint a chartered accountant (TOC) to record and certify their financial information.<\/sup> This is a major incentive for micro-entrepreneurs, who can thus avoid the fixed costs associated with formal bookkeeping. <\/p>\n\n\n\n The exemption from the requirement to keep organised accounts does not, however, remove the obligation to keep records and to fulfil periodic tax obligations. Micro-enterprises must <\/sup>: <\/p>\n\n\n\n Quarterly payments must be accompanied by purchase and sales ledgers, ensuring basic monitoring of economic activity, even in the absence of a formal accounting system.\u00a0\u00a0\u00a0<\/p>\n\n\n\n The greatest complexity of REMPE lies in its impact on transactions Business-to-Business<\/em> (B2B), resulting from the replacement of VAT with the TEU. This is the tax cost<\/strong> simplification, and the main factor to be taken into account when deciding whether to join the scheme.<\/p>\n\n\n\n The companies covered by REMPE are excluded from the right to a deduction<\/strong> of the input VAT on their purchases. The VAT at 15% (standard rate) paid on inputs<\/em> (raw materials, services, equipment) ceases to be a neutral tax and becomes a final cost<\/strong> for SMEs.<\/p>\n\n\n\n For micro-enterprises with high capital investment (fixed assets) or VAT-intensive operating expenses, this loss of neutrality may negate the benefit of the TEU\u2019s 4% rate, making the organised accounting scheme more advantageous, as the latter allows for the deduction of all operating expenses, including VAT.<\/sup> <\/p>\n\n\n\n The most significant consequence for the B2B market is that invoices issued by REMPE companies do not entitle the purchaser to deduct VAT<\/strong>.<\/p>\n\n\n\n This rule stems from the fact that the TEU (4%) replaces VAT (15%). Invoices issued by the MPE must contain the express wording \u00abUnified Special Tax\u00bb.<\/p>\n\n\n\nEligibility criteria and structure of the Unified Special Tax (TEU)<\/h2>\n\n\n\n
1. Definition of Micro and Small Enterprises<\/h3>\n\n\n\n
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2. The Special Unified Tax (TEU)<\/h3>\n\n\n\n
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Incidental obligations and administrative simplification<\/h2>\n\n\n\n
1. Exemption from the requirement to keep organised accounts<\/h3>\n\n\n\n
2. Registration and payment obligations<\/h3>\n\n\n\n
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O\u00a0Trade-off<\/em>\u00a0B2B: Exclusion of VAT deduction and the impact on the business sector<\/h2>\n\n\n\n
1. Loss of the right to deduct input VAT<\/h3>\n\n\n\n
2. Non-pass-through for the purchaser (B2B) \u2013 Article 18 of the CIVA<\/h3>\n\n\n\n
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Conclusions and strategic recommendations<\/h2>\n\n\n\n