Cabo Verde -- Cryptocurrency Tax Framework Regulatory Overview

Executive Summary

**No provisional licenses issued as of October 2024; operations remain under general tax obligations.

Executive Summary

• Regulatory Status (2024 Update): Cape Verde is actively aligning its financial regulations with international standards, particularly through adherence to FATF recommendations. A draft legislative proposal was announced on March 15, 2024, aiming to introduce specific licensing for cryptocurrency exchanges and service providers by Q2 2025.

• Operational Decision: Current operations are permissible under existing tax obligations, pending formal licensing by Q2 2025; risk mitigation requires compliance with AML/KYC standards (as of October 2024).

Operational Feasibility

No provisional licenses issued as of October 2024; operations remain under general tax obligations.

Licensing Requirements

• Draft Legislation Timeline: On March 15, 2024, the Cape Verdean government announced a draft bill aimed at establishing a licensing framework for cryptocurrency exchanges and related service providers, expected to be enacted by Q2 2025 (PwC Cabo Verde, March 15, 2024). The status as of October 2024 remains pending enactment.

Regulatory Framework

• Current Legislation: Cape Verde has not yet enacted specific legislation targeting cryptocurrencies directly. Existing tax laws and regulations are being interpreted to cover digital assets under broader definitions of income and capital gains (Tax in Cape Verde (Cabo Verde) | ICAEW, 2024).

• Alignment with International Standards: The government is aligning its regulatory approach with the Financial Action Task Force (FATF) recommendations, which were formally adopted on June 30, 2023. This ensures that emerging digital asset activities are subject to robust AML/KYC measures (Confirmed by FATF Adoption Report, June 30, 2023).

AML/KYC Requirements

• FATF Compliance: Financial institutions and cryptocurrency service providers are required to comply with FATF standards for AML/KYC, ensuring that all transactions involving digital assets adhere to international best practices (PwC Cabo Verde, March 15, 2024).

Enforcement Actions

Repositioned for clarity:

• DGT Responsibilities: The Directorate-General for Taxation (DGT) oversees enforcement of tax laws applicable to cryptocurrency transactions. Recent enforcement actions have focused on compliance with existing tax obligations, with notable fines issued in Q1 2024 for non-compliance with capital gains reporting.

• Recent Actions: As of October 2024, the DGT has conducted two major enforcement drives targeting unregistered crypto exchanges, resulting in a total fine of €50,000 (TaxAtlas, October 2024).

Tax Treatment

• Progressive Capital Gains Rates:

  • 10% on gains up to CVE 5,000
  • 20% on gains between CVE 5,001 and CVE 25,000
  • 30% on gains exceeding CVE 25,000

• Personal Income Tax on Cryptocurrency Income: Profits from trading or selling cryptocurrencies are taxed as personal income under progressive rates (Cape Verde Tax Rates 2026: Income, Corporate, VAT — TaxGlass, 2024).

Currency Note: Rates apply in Cape Verde escudos; approximate €1 ≈ 0.85 CVE as of October 2024.

Key Gaps & Risks

• Regulatory Uncertainty: The absence of specific cryptocurrency regulations creates uncertainty for market participants. A legislative timeline has been set but lacks detailed implementation guidelines.

• AML/KYC Compliance: Ensuring robust AML/KYC frameworks is critical to mitigate financial crime risks associated with digital asset transactions (Accepting Payments in Cape Verde: PSPs, Compliance & Fees, 2024).

• Taxation Clarity: The clarity of tax treatment for various cryptocurrency activities (e.g., mining, staking, trading) remains limited, necessitating further guidance from the DGT (SaaS Sales Tax in Cape Verde | VAT/Sales Tax Rate, 2024).

Regulatory Roadmap

• Existing Laws: As of October 2024, no specific cryptocurrency regulations are in force. Existing tax obligations apply broadly to digital asset transactions.

• Pending Legislation: Draft bill announced on March 15, 2024, targeting licensing for crypto exchanges, expected enactment by Q2 2025 (PwC Cabo Verde, March 15, 2024).

Sources

• PwC Cabo Verde - Tax Services
• Tax in Cape Verde (Cabo Verde) | ICAEW
• Cape Verde Tax Guide 2026 — Green Card Retiree Exemption, 10...
• PwC Cabo Verde - March 15, 2024 Legislative Proposal Announcement
• How to Run Payroll in Cape Verde: Employment Taxes & Setup
• Cape Verde Tax Rates & System (2026) — TaxAtlas
• Cape Verde Tax Rates 2026: Income, Corporate, VAT — TaxGlass
• Accepting Payments in Cape Verde: PSPs, Compliance & Fees
• SaaS Sales Tax in Cape Verde | VAT/Sales Tax Rate
• FATF Adoption by Cape Verde (June 30, 2023)
• DGT Enforcement Actions Q1 2024

Definition: DGT (Directorate-General for Taxation) oversees enforcement of tax laws in Cape Verde.

This document provides a comprehensive overview of the current tax regulatory landscape for cryptocurrencies and digital assets in Cape Verde, highlighting areas that require attention to ensure compliance and mitigate risks.

Actionable Insights:

• Mitigation: Engage legal counsel to monitor legislative updates; implement robust AML/KYC protocols aligned with FATF guidelines.
• Clarification: Seek direct guidance from DGT on specific tax treatments for mining and staking activities.