The income tax treaty between Cape Verde and Mauritius entered into force on 5 March 2018. The treaty, signed 13 April 2017, is the first of its kind between the two countries.

Taxes Covered

The treaty covers Cape Verde single income tax and the surcharge for fire brigade services and covers Mauritius income tax.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services through employees or other engaged personnel if the activities continue for the same or connected project within a Contracting State for a period or periods aggregating more than 183 days within any 12-month period.

Withholding Tax Rates

• Dividends - 0% if the beneficial owner directly owns at least 25% of the capital stock of the paying company; otherwise 5%
• Interest - 10%
• Royalties – 7.5%

Note, the final protocol to the treaty includes the provision that with reference to paragraph 3 of Article 12 (Royalties), the term royalties also comprises payments derived from the use of, or the right to use, software, as well as payments received as consideration for technical assistance in connection with the use of, or the right to use, any copyright, goods, or information to which paragraph 3 applies. Payments received as consideration for technical assistance not in connection with the use of, or the right to use, any such copyright, goods or information will be dealt with in accordance with article 7 (Business Profits).

Further, if the person who receives the consideration for technical assistance is different from and independent of the person who receives the consideration for the use of, or the right to use, such copyright, goods or information, the technical assistance will be considered as not in connection with the use of, or the right to use, such copyright, goods, or information.

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

• Gains from the alienation of immovable property situated in the other State; and
• Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State.

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation. For dividends received by a Mauritius resident company that owns at least 5% of the capital of the paying company, Mauritius will also provide a credit for the Cape Verde tax payable by the paying company in respect of the profits out of which such dividend is paid.

Effective Date

The treaty applies from 1 January 2019.