Guinea-Bissau VAT Regime Launch Set for 2025: Key Details

November 20, 2024

For several years, Guinea-Bissau has struggled to implement the VAT Law. The implementation was postponed several times, the last attempt being in 2023. After a few years without successfully establishing the VAT regime, the Ministry of Finance set the implementation date 2025.

In addition to setting the implementation date, the Ministry of Finance also urged other governing bodies to take the necessary steps.

The Establishment of VAT Regime

The Guinea-Bissau government and other relevant state bodies approved and adopted the VAT Law in 2022. The VAT Law was drafted following the harmonized model established among the eight Member States of the West African Economic and Monetary Union (UEMOA). Nevertheless, the harmonized model was adapted to meet the specific needs of the Guinea-Bissau market and economy.

The Ministry of Finance stated that January 1, 2025, is the official date for implementing the VAT regime defined under the VAT law. Until then, the General Directorate of Contributions and Taxes (DGCI) must adopt all the required measures and bylaws to ensure an effective and efficient transition to the newly established VAT regime.

Establishing the VAT regime should increase government revenue and budget, make tax collection more efficient, and strengthen the economy in Guinea-Bissau and the UEMOA.

The obligation to register for VAT arises when taxable persons exceed the VAT registration threshold set at FCFA 10 million (around EUR 15,000). However, taxable persons whose turnovers are between FCFA 10 million and FCFA 40 million are subject to a simplified VAT regime. Taxable persons whose turnover is below FCFA 10 million are considered small taxpayers and exempt from VAT.

VAt rates are set at 10% for specified imports, transfers of goods, and provision of services, 19% for other imports, transfers of goods, and services, and 0% for exports.

Conclusion

Establishing and implementing a VAT regime is among the most significant steps in reforming the Guinea-Bissau tax system. The previously established system by the General Tax on Sales and Services needed to be more efficient and in alignment with the harmonized rules determined by the UEMOA directives.

However, considering that previous attempts to implement the VAT regime were unsuccessful, further monitoring is necessary. Also, businesses that still need to prepare for this transition should act quickly to avoid penalties due to non-compliance.

Source: Ministry of Finance, AnswerConnect, General Directorate of Contributions and Taxes - VAT Law no. 4/2022

What is the official implementation date for Guinea-Bissau's Value-Added Tax (VAT) regime?

The VAT regime in Guinea-Bissau is scheduled to be implemented on January 1, 2025. This decision was confirmed by the Ministry of Finance to align with the harmonized model established by the West African Economic and Monetary Union (UEMOA).

What are the primary objectives of introducing the VAT system in Guinea-Bissau?

The introduction of the VAT system aims to enhance tax revenue collection, promote tax justice, and ensure legal compliance. It is designed to replace the existing 19% Sales Tax, known as Imposto Geral Sobre Vendas e Serviços, thereby streamlining the tax system and aligning it with regional standards.

How will the VAT rates be structured under the new regime?

The VAT rates under the new regime include a standard rate of 19% applicable to most goods and services. A reduced rate of 10% applies to basic goods and services, including specified imports. Exports will be taxed at a zero rate. Additionally, a simplified regime with a 5% rate is available for businesses with a turnover of up to FCFA 40 million.

What are the VAT registration thresholds for businesses?

Businesses with taxable supplies exceeding FCFA 10 million (approximately EUR 15,000) over a 12-month period are required to register for VAT. Those with turnovers between FCFA 10 million and FCFA 40 million may opt for a simplified VAT regime, while businesses below the FCFA 10 million threshold are considered small taxpayers and are exempt from VAT.

What measures are being taken to ensure a smooth transition to the VAT system?

The Ministry of Finance has instructed the General Directorate of Contributions and Taxes (DGCI) to adopt all necessary measures and bylaws to facilitate an effective and efficient transition to the new VAT regime. This includes administrative preparations and public awareness campaigns to educate businesses and consumers about the upcoming changes.

How does the new VAT system align with regional tax policies?

The VAT system is harmonized with the UEMOA model, incorporating specific adaptations to meet Guinea-Bissau's unique economic circumstances. This alignment ensures consistency with regional tax policies, promoting economic integration and facilitating cross-border trade within the UEMOA member states.

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