Running Payroll in Cape Verde: Employment Taxes & Setup

Payroll in Cape Verde centers on four main obligations: personal income tax (Imposto sobre o Rendimento das Pessoas Singulares – IRPS) withholding, social security contributions to the Instituto Nacional de Previdência Social (INPS), any applicable local levies, and periodic payroll reporting to the tax authority. You need to calculate, withhold, pay, and report these amounts accurately for each pay period, while tracking thresholds and exemptions that can vary by income level and employment type.

Non-compliance can trigger penalties, late-payment interest, audits, and blocked tax clearances, and it can quickly erode employee trust if net pay or benefits are wrong or delayed. This guide walks you through how to structure payroll calculations, understand the main tax rates, meet filing and payment deadlines, and choose the right setup whether you operate via your own entity or an Employer of Record.

Payroll Cycle in Cape Verde

The payroll cycle in Cape Verde is usually monthly, with employees being paid as stipulated in employment contract. The payroll schedule must not exceed more than 31 days from the last payment.

Minimum Wage

The current minimum monthly wage in Cape Verde is CVE 17,000, which is approximately $175 USD.

In Cape Verde, your core payroll tax responsibilities revolve around withholding progressive IRPS on employee earnings, contributing to the INPS social security system, and applying any mandatory insurance or fund contributions tied to employment. Each obligation has its own rate structure, base of calculation, and payment schedule, and authorities actively enforce compliance through fines and interest on late or underpaid amounts.

IRPS – Personal Income Tax Withholding

IRPS is a progressive personal income tax withheld at source on employment income, with marginal rates typically ranging from 16% to 27.5% depending on the employee’s monthly taxable income. You, as the employer, calculate IRPS on gross salary minus allowable deductions, withhold it from the employee, and remit it to the tax authority on a monthly basis.

Failure to withhold or remit IRPS correctly can result in assessments for the unpaid tax, penalties calculated as a percentage of the shortfall, and interest for late payment, and the tax office may also restrict access to tax clearance certificates needed for tenders or financing. Because IRPS is employee-borne, under-withholding can leave staff with unexpected year-end liabilities, while over-withholding can create refund issues and complaints.

INPS Social Security Contributions

Social security contributions finance pensions, sickness, maternity, and other benefits and are paid to INPS by both employer and employee. In 2026, the standard combined rate is typically around 23.5% of gross salary, with employers contributing about 15% and employees contributing about 8.5%, subject to INPS rules and any applicable ceilings.

Employers must calculate contributions on all covered remuneration, withhold the employee share, add the employer share, and pay the total to INPS monthly using the prescribed reference codes. Late or missing payments can lead to surcharges, interest, and potential issues with benefit eligibility for employees, and repeated non-compliance can trigger inspections and legal recovery actions.

Mandatory Accident And Insurance Contributions

Many employers in Cape Verde are required to maintain work accident insurance or sector-specific funds, typically calculated as a small percentage of payroll based on risk classification. These contributions are usually fully employer-funded, with rates often in the low single digits, and premiums are paid monthly or quarterly to the insurer or relevant fund.

Although these charges are not always labeled as taxes, authorities and labor inspectors treat them as statutory obligations, and failure to maintain coverage can result in fines and liability for workplace injuries. Keeping accurate payroll records and classifications helps ensure you are charged the correct percentage and can defend your position during audits or claims.

Employees in Cape Verde are most commonly paid by bank transfer in Cape Verdean escudo (CVE), although cash payments may still occur in smaller businesses where banking access is limited. Payroll is typically processed monthly, and employment contracts or collective agreements may specify a regular payday, often at the end of the month or within the first few days of the following month.

If you do not have a local entity, you can use an Employer of Record to hire and pay staff compliantly, or you can register a local entity and work with a payroll provider to handle calculations and filings. Payslips should clearly show gross salary, taxable base, IRPS withheld, employee INPS contributions, any other deductions, employer contributions for information, and the final net pay, and they should be provided in a durable format employees can store.

• Payment Method: Use bank transfers in CVE as the default method to ensure traceability and easier reconciliation.
• Pay Frequency: Align with a monthly pay cycle and set a consistent payday in contracts and internal policies.
• Payslip Content: Include gross pay, taxable income, IRPS, INPS, other deductions, employer contributions, and net pay.
• Currency Rules: Pay employees in CVE unless a specific, compliant foreign-currency arrangement is agreed and documented.
• No-Entity Hiring: Engage an Employer of Record if you need to hire quickly without registering a Cape Verdean company.
• Bank Setup: Open a local corporate bank account or work with a provider that can fund payroll locally.
• Record Keeping: Store payroll records and payslips securely for the statutory retention period to support audits and employee queries.

Getting payroll set up correctly in Cape Verde determines how smoothly you can hire, pay, and stay compliant with IRPS and INPS obligations. With a local entity, you handle registrations, calculations, and filings directly, while with no entity you typically rely on an Employer of Record that already has the infrastructure and registrations in place.

Choosing between these models affects how quickly you can start hiring, who is legally the employer, and how much internal expertise you need to maintain. A structured checklist helps your team avoid missed registrations, incorrect tax IDs, or late filings that can lead to penalties and operational delays.

• Decide Structure: Choose between setting up a local entity or using an Employer of Record based on headcount, timeline, and long-term plans.
• Register For Tax: Obtain a tax identification number with the Cape Verde tax authority for IRPS withholding obligations.
• Register With INPS: Enroll your entity as an employer with INPS and obtain employer contribution codes.
• Open Bank Account: Set up a local CVE bank account or funding arrangement to pay salaries and remit taxes and contributions.
• Collect Employee Data: Gather employee tax IDs, INPS numbers, contracts, and bank details before first payroll.
• Configure Payroll System: Implement payroll software or a provider that supports Cape Verdean tax tables and INPS rates.
• Define Policies: Document pay dates, overtime rules, allowances, and benefits in line with Cape Verdean labor law.
• Set Approval Workflow: Establish internal cut-offs for timesheets, approvals, and funding to meet monthly deadlines.
• Test Calculations: Run parallel or test payrolls to validate IRPS and INPS calculations before going live.

Example Of Salary Tax Calculation

Imagine a full-time employee in Cape Verde with a monthly gross salary of 80,000 CVE and no special exemptions beyond standard rules. You would first calculate the INPS contributions, then determine the taxable income for IRPS, apply the appropriate progressive rate, and finally arrive at the employee’s net pay.

In practice, your payroll system should automate these steps, but understanding the flow helps you review payslips and answer employee questions. The example below focuses on the sequence rather than exact brackets, so you can adapt it to current official tables.

• Step 1 – Calculate INPS: Apply the employee INPS rate (for example, 8.5%) to 80,000 CVE and withhold that amount from the employee, while also calculating the employer share (for example, 15%).
• Step 2 – Determine Taxable Base: Subtract the employee INPS contribution and any allowable deductions from 80,000 CVE to get the IRPS taxable income.
• Step 3 – Apply IRPS Rate: Use the official IRPS brackets to apply the correct marginal rate (for example, 16% or higher) to the taxable income and compute the IRPS to withhold.
• Step 4 – Compute Net Pay: Subtract employee INPS, IRPS, and any other deductions from the gross salary to arrive at net pay.
• Step 5 – Plan Remittances: Schedule payments of IRPS to the tax authority and total INPS contributions to INPS by their monthly due dates.

Submitting Employee Tax In Cape Verde

To submit payroll taxes in Cape Verde, you typically file monthly declarations with the tax authority and INPS, then pay the corresponding amounts via bank transfer or through approved electronic channels. You will need your employer tax ID, INPS employer number, payroll period details, employee lists, and the breakdown of IRPS and social security contributions.

• Tax Portal Filing: Submit IRPS withholding declarations through the tax authority’s electronic portal where available.
• INPS Reporting: Upload or file monthly INPS contribution reports listing each employee’s earnings and contributions.
• Bank Transfers: Pay IRPS and INPS using bank transfers that reference your tax ID, INPS number, and the relevant period.
• Payroll Software Integration: Use payroll software that can generate compliant files or integrate directly with local portals.
• Third-Party Provider: Consider a local payroll provider or Employer of Record to handle filings and payments on your behalf.

Payroll Tax Due Dates In Cape Verde

Understanding the tax obligations for both employers and employees is crucial when operating in Cape Verde's business landscape. This section explains how taxes and statutory fees affect payroll and individual earnings in Cape Verde.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 15% - 18% on top of the employee salary in Cape Verde. This covers the employer share of INPS social security plus any mandatory insurance or sectoral funds that may apply to your business.

Employee Payroll Tax Contributions

In Cape Verde, the typical estimation for employee payroll contributions cost is around 8.5%.

Individual Income Tax Contributions

Individual income tax in Cape Verde is levied under the IRPS system, using progressive brackets applied to annual or monthly taxable income. Employers withhold IRPS at source, and higher earners pay higher marginal rates within the official brackets.

Pension in Cape Verde

Pension benefits in Cape Verde are primarily funded through mandatory INPS social security contributions from both employers and employees, which build entitlement to old-age, disability, and survivor pensions. Some employers also offer complementary occupational pension or savings plans, which are typically voluntary and subject to their own contribution and vesting rules.