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Beneficial Ownership of Companies in Cape Verde

The Republic of Cape Verde has implemented various withholding tax (WHT) rates on different types of income, including dividends, interest, royalties, and services. The WHT rates vary depending on whether a tax treaty exists between Cape Verde and the recipient’s country.

Withholding Tax Rates

Here are some examples of WHT rates applicable in Cape Verde:

  • Dividend payments: 20% for non-treaty countries, and lower rates ranging from 5% to 10% for treaty countries such as Angola, Mauritius, and Portugal.
  • Interest payments: 20%, except for bond interest which is subject to a 10% WHT rate.
  • Royalty payments: 20% WHT rate.
  • Rental payments made by companies: 10% WHT rate.
  • Payments of services between resident companies: generally exempt from WHT, but payments to non-resident entities are subject to a 15% WHT rate unless waived under the applicable tax treaty.

Tax Treaties

Cape Verde has tax treaties with countries such as Angola, Equatorial Guinea, and Senegal that provide reduced WHT rates for certain types of income. For example:

  • Interest paid by public bodies is exempt from WHT in these countries.
  • Other benefits may be available depending on the specific treaty.

Beneficial Ownership Requirements

To qualify for an exemption from WHT, a company must hold a direct or indirect participation in the share capital or voting rights of at least 5% for 24 months prior to the date on which the profits are made available.

Technical Services and WHT Exemptions

The tax rate on technical services is capped at 10%, and beneficial ownership requirements apply to WHT exemptions. Companies that directly own at least 25% of the share capital of the company paying the dividends may be exempt from WHT or subject to a reduced rate, depending on the country’s tax treaty with Cape Verde.

Conclusion

Understanding the WHT rates and beneficial ownership requirements is crucial for companies operating in Cape Verde to minimize their tax liability and ensure compliance with local laws. By taking these factors into account, businesses can avoid potential penalties and optimize their financial performance.