Territoriality. In general, resident individuals are subject to Personal Income Tax (PIT) on their worldwide income. Nonresident individuals are subject to PIT on income received in São Tomé and Príncipe (STP).
Definition of resident. An individual qualifies as resident for PIT purposes if any of the following conditions is met:
- The individual stays in STP for more than 180 days during a calendar year, with or without interruptions.
- As of 31 December, the individual has a local residence available, and it may be presumed that it is his or her intention to keep and occupy such residence as a permanent residence.
- The core of the business or professional activities and/or economic interests of the individual is in STP.
- The individual is a member of a diplomatic or consular mission of STP abroad.
- As at 31 December, the individual is a crew member of a vessel or aircraft operated by an entity with its residence, legal seat or place of effective management in STP.
Income subject to tax. In accordance with the PIT Code, individuals’ income is divided into the following four categories:
- Dependent income and pensions (Category A)
- Business or professional income (Category B)
- Investment income (Category C)
- Capital gains (Category D)
These income categories are discussed below.
Dependent income and pensions (Category A). PIT is imposed on the earned income of employed individuals, in cash or in kind, including, among others, the following:
- Directors’ fees
- Severance payments
- Taxes paid on behalf of the employee (employer cost)
- Other premiums
In general, pensions are also subject to PIT.
The following items are expressly exempt from PIT:
- Contributions made by an employer to a social security scheme to guarantee retirement and disability benefits
- Pensions, up to an annual amount of STD24 million (approximately USD1,108)
- Benefits deriving from the use of social and leisure facilities provided by the employer
- Scholarships provided by the employer, under certain conditions
- Training courses in STP, under certain conditions
- Severance payments, up to the legal limits established in the Labor Law
The following items may be deducted in the computation of the taxable income in Section A:
- Social security contributions
- Union contributions
- Compensation paid by the employee to the employer for contract termination, under certain conditions
- Fifty percent of income derived from pensions, under certain conditions
Business or professional income (Category B). For PIT purposes, business or professional activities are activities that imply the use of human and material resources, with the purpose of producing or distributing goods and services.
All income or benefits paid or offered for disposal of the beneficiary, whatever its name or nature, that result from business or professional activities are included in the taxation of Category B, including the following:
- Income or benefits resulting from the exercise of commercial, industrial, agricultural, forestry or livestock activities
- Income or benefits earned from the rendering of services, including those with a scientific or technical nature, regardless of whether the services are related to an activity mentioned in the first bullet
- Income or benefits from intellectual and industrial property or from the provision of information concerning experience acquired in industrial, commercial or scientific activities, if earned by its original owner
- Income or benefits earned from artistic, sporting and or cultural activities
The following types of income, among others, are also included in Category B:
- Capital and real estate income attributable to business and professional activities
- Capital gains arising from business and professional activities, as defined under the Corporate Income Tax (CIT) Code, including those resulting from the transfer of assets from a company to a natural person
Income obtained exclusively from an agricultural activity benefits from a 50% exemption, after the deduction of any losses.
In general, the taxable income of Category B is computed in accordance with the rules set forth in the CIT Code for Group 1 and Group 2.
Group 1 includes all the taxpayers with a permanent residence in STP and with turnover in the preceding year of higher than STD500 million (approximately USD23,080). Regardless of total turnover, all public entities, joint-stock companies and all nonresident companies with a permanent establishment in STP are included in Group 1.
Group 2 includes all the taxpayers not included in Group 1 as well as taxpayers providing accidental or temporary activities (isolated business or professional acts with no evidence of a repeated and permanent business or professional activity).
The following expenses, among others, are not deductible (even if accounted for as costs):
- Travel and accommodation expenses, to the extent that they exceed 10% of gross income
- Housing expenses (rent, depreciation, water, energy and other expenses), if allocated to the provision of services, to the extent that they exceed 10% of the gross income
Investment income (Category C). Investment income in Category C includes the following:
- Royalties not obtained by an individual other than the owner of the intellectual and industrial property
In general, investment income is income, regardless of its name or nature, arising directly or indirectly from assets or rights, owned by an individual but not allocated to business or professional activities performed by such individual.
No deductions are allowed for income included in Category C. Consequently, the gross amount of such income is subject to PIT. However, only 50% of all forms of capital income included in Category C, including dividends received, is subject to PIT.
Capital gains (Category D). Unless included in Categories B or C, capital gains are included in Category D. They equal the positive difference in the net worth value of the individual, attributable to variations in the composition or valuation of its portfolio of assets.
In accordance with the PIT Code, the gains are computed in accordance with the following rules:
- For the sale of assets, capital gains equal the difference between the sales proceeds and the historical acquisition value.
- In all cases not involving the sale of assets, capital gains equal the sales proceeds for the asset.
For this purpose, the acquisition cost is the transaction value, increased by interest paid in the transaction and reduced by depreciations in accordance with the CIT Code. The sales proceeds equal the transaction value, reduced by investments in the asset and the transaction costs.
No deductions are allowed to income included in Category D. Consequently, the gross amount of such income is subject to PIT.
Capital gains and losses. Capital gains are subject to PIT and are included Category D (see Capital gains [Category DJ).
Deductions. The PIT Code allows the following tax deductions:
- Family deductions
- Double tax relief
- Health deductions
- Education and training deductions
- Property deductions (limited to STD15 million (approximately USD692)
Rates. Income included in Categories A and B is aggregated and subject to PIT at the progressive rates shown in the table below. The PIT Code establishes the following formula to determine annual taxable income for each tax bracket:
Taxable income for bracket = (Amount from first column x
rate from second column) – Amount from third column
Income up to STD11,700,000 is exempt from tax. The following is the tax rate table.
|Taxable income||Tax rate||Amount to deduct|
|Up to 11700000||0||_________________|
|Between 11700001 and 50000000||10||881250|
|Between 50000001 and 100000000||13||1380000|
|Between 100000001 and 150000000||15||1875000|
|Between 150000001 and 240000000||20||5625000|
Individuals may choose to also aggregate the income qualifying as Category D. Otherwise, the gross amount of Category C and Category D income is subject to a final withholding tax of 15%.
Relief for losses. Taxable losses computed for Category B may be carried forward for five years, but may only be offset against the same type of income.
Nonresidents. Nonresidents are subject to PIT on gross income derived in STP. This income is subject to a final withholding tax of 15%.
Inheritance and gift taxes
Beneficiaries of a property or gift are subject to tax in STP, at the moment of transaction, at the following rates, which vary in accordance with the relationship with the donor or deceased:
- 5% if the beneficiary is a lineal descendant or ascendant or spouse
- 10% if the beneficiary is a sister or brother
- 15% for other beneficiaries
The tax is levied on the net value of the assets to be transferred, with deductions for eligible expenses.
Under certain conditions, an amount equivalent to 1,000 national minimum monthly salaries is deducted from the taxable amount. Ministry of Finance Order No. 5/2010 from 13 April 2010 set the national minimum salary at STD715,000. Consequently, the current amount for the deduction is STD715 million.
Contributions. Social security contributions are payable on gross income at a rate of 14% (8% for the employer and 6% withheld from the employee).
Totalization agreements. No totalization agreements are currently in force.
Tax filing and payment procedures
Income included in Categories A, B (only Group 2) and D (if the individual chooses to aggregate this income) must be declared through the submission of a tax return by the end of February of the following year.
Income included in Group 1 of Category B must be declared by the end of April of the following year.
The following individuals are not required to file a tax return:
- Individuals who only received income included in Category A that is subject to withholding tax from a single entity
- Individuals subject to the final withholding tax rate
The tax payable, reduced by withholding tax, must be paid by the end of September of the year in which the return is submitted.
In accordance with the provisions of the CIT Code, individuals with income in Category B are required to make three advance payments (in June, September and December), in an amount corresponding to 75% of the tax payable for the preceding year. These advance payments may be waived in certain conditions. Any excessive advance payments results in a refund at the end of the year.
Double tax relief and tax treaties
STP signed its first tax treaty with Portugal in March 2015. However, this treaty is not yet in force.
Temporary visas may be granted to foreign citizens to engage in, among others, cultural, study, sports or business activities (to the extent that a work visa is not required for such activities).
A multiple-entry visa is valid for 180 days, while the single-entry visa is valid for 30 days.
Work visas (and/or permits)
No specific work visa is issued in STP. Foreign citizens must obtain a residence visa to be able to work in STP (either as dependent or independent workers).
Residence visa (and/or permits)
On request, yearly residence visas may be granted to foreign citizens.
After final approval, the residence visa is valid for one year, with the possibility of renewals for equal periods.