Amendments to the Special Legal Regime for Micro and Small Companies
Micro and small companies have played a significant role in generating and maintaining work in Cape Verde, actively participating in the country’s national product, preserving the stability and dynamics of the economy in the market and therefore they have deserved special attention from the Government.
However, as the UN states, “Smaller companies may be agile in response to a changing world, but their size also makes them vulnerable.”
Thus, in order to guarantee their protection, Law No. 70/VIII/14, of August 26, was approved, which establishes the special legal regime for micro and small companies.
Since its publication, this law has undergone some changes, the most recent being through Law number 86/IX/2020, of 28 April, with the purpose of fostering the promotion of competitiveness, productivity, formalization and development of these companies.
In summary terms, we can list the main changes brought by Law 86/IX/2020, of 28 April:
- Entities whose partner or owner has had a stake in the capital of another company with an irregular tax situation and which ceased activity less than 5 years previously are excluded from the scope of application of the law.
- It was established the application of the simplified customs clearance regime to micro importers who are registered and certified.
- It is stipulated that the turnover in commission contracts is constituted by the value of the respective commission, without prejudice to the turnover being constituted by the product of the sale of goods and services, without deduction of discounts as the case may be.
- It established the assets to be considered as the object of transmission.
- Excluded from the simplified regime, in the following economic exercise, micro and small importers whenever the volume of imported goods exceeds annually 5,000,000$00 or 10,000,000$00, respectively.
- It has established the subsistence of the obligation to file a declaration even if there are no taxable operations in the corresponding period, except in the case of micro-enterprises, which are exempt from the payment of the unified special tax. These are now obliged to file an annual turnover declaration and respective annexes of clients and suppliers in the month of January.
- It stipulated that the purchase registration books and sales registration book are replaced by computer records which constitute the annexes to the declaration.
- It established the obligation of these companies to have at least one bank account, through which all payments and receipts relating to their business activity must be handled; as well as the right of the Tax Administration to access this information or bank documents from these accounts for confirmation or inspection of the amounts declared.
- It established the obligation of these companies to provide customers with the electronic means of payment in which all transactions must be carried out.
- It was stipulated that payments equal to or above 20.000 thousand escudos must be made through a payment method that allows the identification of the respective recipient.
- It established the possibility for the National Director of State Revenue to grant these companies exemption from customs duties on the import of some goods during the installation phase and the first four years.
- It has introduced the possibility for a single micro-company, once a certain requirement is met, to be exempted from the payment of the TEU, when the partner does not have a social participation in another company that benefits from the special tax regime and when the company has not been subject to a company transformation in the last 3 years.
- Provision has been made for the possibility for such companies, provided certain requirements are met, to benefit from a 25% reduction in turnover for the purposes of applying the unified special tax rate, for two years.
- Finally, the possibility of cumulating the fine with some accessory sanctions was foreseen, and the definitive withdrawal from the simplified regime was implemented as one of those accessory sanctions.
In conclusion, we can say that micro and small businesses play a relevant role in the Cape Verdean economy, even more so in times of uncertainty that we are currently experiencing due to the Covid-19 Pandemic, not only because of their degree of employability, but also because of their participation in the domestic product, among other factors that drive the economy, and this, because of their flexibility and innovative capacity to respond to the various shocks