Published on and written by Cyril Jarnias
São Tomé and Príncipe is attracting more and more expats, investors, and retirees seeking tropical calm… but behind the beaches and coconut palms lies a tax system best understood before packing your bags. Resident or non-resident status, income tax, VAT, investor benefits, no wealth or inheritance tax: the framework is both simple in some ways and highly technical in others.
This practical guide summarizes what you need to know before leaving, focusing on the essential distinction between passport, residence, and tax residency.
Becoming a tax resident in São Tomé and Príncipe
Before discussing tax rates, you first need to know if you will be considered a tax resident. This status determines whether São Tomé and Príncipe taxes only your local income or your worldwide income.
The basic rules are clear: the system is based on residence, not nationality. In other words, it’s not the passport that triggers taxation, but presence and center of life.
Criteria for tax residency
The law provides several situations in which a person is considered a tax resident. Meeting any one of these criteria is sufficient:
São Tomé and Príncipe considers anyone a tax resident who, during a calendar year, stays more than 180 or 183 days in the territory (continuously or not), has a home as of December 31 intended to be their permanent residence, has their main center of professional or economic activities in the country, or performs public service abroad on behalf of the São Toméan state.
This approach is similar to what exists in many countries: beyond a certain number of days and/or if your vital interests (family, work, assets) are in the country, you become a tax resident.
Resident vs. non-resident: who pays what?
The distinction is clear:
– Residents are taxed on their worldwide income, wherever it is generated.
– Non-residents are only taxed on income from São Toméan sources.
It is therefore not enough to “not work locally” to avoid local tax: if you are a tax resident, your foreign income (salaries, dividends, rents, etc.) is included in the tax base, even if it comes from your home country.
The table below summarizes this difference in treatment.
| Tax status | Tax base | Main filing obligation |
|---|---|---|
| Resident | Worldwide income (all sources) | Annual global return (IRPS) |
| Non-resident | Only local-source income | Generally final withholding at source |
São Toméan passport and citizenship program: what it changes, and especially what it does not change
Key point for citizenship applicants or investors: holding a passport from São Tomé and Príncipe does not automatically make you taxable in the country.
The data from the report are very clear on several points:
– An investor who obtains the passport but lives abroad does not pay tax on their foreign-source income simply because they are a citizen.
– There is no obligation to register with the tax authorities or to file a tax return solely because of citizenship.
– The citizenship-by-investment program imposes no physical presence requirement, either before or after obtaining nationality.
In practice, you become a tax resident only if you meet the presence criteria (more than 180/183 days) or center of interests. The passport alone is not enough.
For the record, the citizenship-by-investment program is based on a non-refundable contribution to the National Transformation Fund, with the following thresholds:
| Applicant type | Minimum contribution (USD) |
|---|---|
| Single applicant | 90,000 |
| Family up to 4 people | 95,000 |
| Additional family member | + $5,000 per person |
In addition, there are government processing fees and document issuance fees. But again, neither the program nor obtaining the passport creates automatic tax residency.
Personal income tax: who is taxed, at what rate, and on what?
Personal income tax (IRPS/IRS) operates on a progressive scale. Several sets of brackets circulate in the sources, but all converge on a top marginal rate of 25%.
Progressive scale: general structure
The system is like that found in many countries: the higher the taxable income, the higher the marginal rate. One consistent bracket set provided by the texts is as follows (amounts in São Toméan dobra, STN):
| Annual taxable income bracket (STN) | Marginal rate | Approximate deductible amount (STN) |
|---|---|---|
| Up to 11,700 | 0% | 0 |
| 11,700 – 50,000 | 10% | 881 |
| 50,000 – 100,000 | 13% | 1,380 |
| 100,000 – 150,000 | 15% | 1,875 |
| 150,000 – 240,000 | 20% | 5,625 |
| Over 240,000 | 25% | 9,000 |
The calculation method often follows the formula “(income x rate) – deduction”, resulting in a progressive scale with allowances per bracket.
Even if precise figures may vary slightly depending on sources or years, the idea remains the same: modest income exempt or lightly taxed, higher income taxed up to 25%.
Income categories: A, B, C, D
São Toméan law classifies income into four categories, which influences the method of taxation and the application of withholding taxes:
Four categories of taxable income defined by the tax administration to classify taxpayer income sources.
Includes salaries, wages, and similar pensions.
Concerns self-employed individuals, sole proprietorships, and certain business activities.
Includes interest, dividends, and rents.
Covers the sale of assets and capital gains.
Categories A, B, and D are generally aggregated at year-end and taxed at the progressive rate, unless withholding is provided as a final levy (common for non-residents). Category C has a more autonomous treatment, especially regarding 15% withholding.
Withholding taxes: how does the 15% work?
One cornerstone of the system is the 15% withholding tax, widely applied to non-residents and certain capital income for residents.
Its operation can be summarized as: the process relies on the interaction between various key elements that complement each other to achieve a common goal.
For residents, the 15% withholding applies as a final tax on non-professional capital income (Category C), and as a prepayment on certain professional income (Category B). For non-residents, it generally constitutes a final tax on most local-source income not linked to a permanent establishment.
The table below illustrates the logic for a non-resident.
| Type of São Toméan-source income | Standard withholding rate | Nature of withholding |
|---|---|---|
| Interest, dividends, capital income (Category C) | 15% | Final tax |
| Certain capital gains (Category D) | 15% | Final tax |
| Rents (if no permanent establishment) | 15% | Final tax |
| Salary income (Category A) | Progressive scale (up to 25%) or monthly rates | Withholding at source, sometimes final |
| Business income (Category B) via permanent establishment | Progressive scale | Tax on net basis |
As soon as a non-resident is subject to the final 15% withholding, they generally have no obligation to file an annual return: everything is settled via tax withheld by the local payer.
Practical examples for an expat
A foreign executive on a short assignment, less than six months, paid by a local entity, will often have their salary taxed via progressive monthly withholding rates up to 23% at source. But as long as they remain a non-resident under the 180/183-day rule, only their local income is taxed.
Conversely, an expat who settles permanently, exceeds 183 days and rents an apartment will see:
– Their local salaries taxed at the progressive scale.
– Their rent received abroad, dividends from their home country, etc., included in the IRPS base as a resident.
– Their São Toméan capital income (e.g., interest from a local savings account) most often taxed at 15% at source, outside the scale.
VAT, corporate income tax, and other major taxes
Beyond personal income tax, settling in São Tomé and Príncipe involves dealing with VAT, corporate income tax, and some specific wealth taxes.
VAT (IVA): 15% standard rate
São Tomé and Príncipe has introduced VAT (Imposto sobre o Valor Acrescentado, IVA) with a standard rate of 15% on most goods and services.
The differentiated rates are as follows:
– 15%: standard rate, applicable to most transactions.
– 7.5%: reduced rate for certain basic food products.
– 0% or exemption: exports and international transport are exempt.
For an expat consumer, VAT is generally “invisible” in daily life, included in prices. For an entrepreneur setting up, it becomes a major cash management and compliance issue (invoicing, returns, VAT deductions on purchases, etc.).
Corporate income tax: 25% standard, 10% or 15% in some cases
Resident companies, or permanent establishments of foreign companies, are taxed at the standard rate of 25% on their profits. This rate has been reduced in the past (from about 45% to 25%), significantly improving the country’s attractiveness.
Investors can benefit from reduced rates in certain sectors or specific regimes.
– 10% for approved investments creating new activities, under the Investment Code (Decree-Law No. 19/2016).
– 15% effective rate or 50% reduction for certain agricultural, livestock, fishing, or agro-industrial projects during the first years (generally 7 years), then a 20-25% reduction on the taxable base for an additional period.
The table below outlines the main schemes.
| Company/Project situation | Indicated CIT rate | Duration / Main conditions |
|---|---|---|
| Standard rate (any regular activity) | 25% | Permanent |
| Approved investment creating new activity | 10% | Investment regime (Investment Code) |
| Agriculture, agro-industry, livestock, fishing | ~12.5% (50% reduction) | First 7 years of activity |
| Agriculture etc., years 8–9 | 20% or base reduction | Approx. 20% reduction on taxable base |
| International trading businesses | 5% | Under specific international trade regime |
| Local trading (internal trading) | 50% reduction CIT/PIT | First 5 years of activity |
Most of these benefits require a formal project, registered with the authorities, often through an Administrative Investment Contract (CAI), and meeting minimum thresholds (e.g., €50,000 initial investment).
Absence of certain taxes: no wealth tax, no widespread inheritance tax
São Tomé and Príncipe also stands out for what it does not tax:
There is no annual wealth tax or national inheritance tax. Additionally, capital gains on assets located abroad are not taxed locally.
These elements can be particularly attractive for individuals with significant assets abroad, subject to the rules of their home country and any applicable tax treaties.
Capital income, rents, and capital gains: what expats often forget
Many expats settling in São Tomé and Príncipe continue to hold real estate or financial assets in their home country. For São Toméan tax residents, these foreign incomes become in principle taxable locally. But for non-residents, only local income is targeted.
Category C: dividends, interest, rents
Capital income is grouped in Category C, which includes:
– Interest from savings accounts, bonds, loans.
– Dividends.
– Rental income (rents), provided they are not reclassified as Category B business activity.
The main regime is as follows:
A 15% withholding tax is applied at source on capital income, for both residents and non-residents, and acts as a final tax.
An interesting special case concerns retirement savings accounts: interest is exempt up to 24,000,000 STN (about €980), then taxed at only 5% beyond that, which is a very favorable regime for long-term savings.
Rental income: 15% for non-residents
The report emphasizes treatment of rents, important for expat property owners:
– Rental income is classified as Category C if not linked to a broader commercial activity.
– Non-residents pay a flat rate of 15% on the gross amount of São Toméan-source rents, via final withholding.
– Residents also often face a 15% withholding, but the qualification (final tax or prepayment) may depend on the link with a Category B professional activity.
For a non-resident expat who owns an apartment in São Tomé rented occasionally, the scheme is therefore simple: 15% on rents, no additional filing obligation.
Category D: capital gains and asset increases
Capital gains and other “asset increases” fall under Category D. The rules are more nuanced:
For non-residents, capital gains from the sale of local real estate or financial assets are subject to a 15% withholding as final tax. In contrast, residents include these gains in the overall IRPS base and are taxed at the progressive scale, unless exemptions apply.
On real estate, there is a mechanism familiar to many expats: a partial exemption for the primary residence.
If an owner sells their main home after having occupied it for at least 5 years, 50% of the capital gain is tax-exempt, the rest is taxed at the usual IRPS rates. If these conditions are not met, the gain is fully taxable according to ordinary rules.
Real estate: SISA, property tax, and acquisition costs
Buying property in São Tomé and Príncipe is relatively open to foreigners, but the real estate taxation is far from negligible. One must distinguish between acquisition (transfer taxes), holding (property tax), and resale (potential capital gains tax or specific local tax).
SISA: real estate transfer tax
When acquiring a property, the buyer is liable for a tax called SISA, equivalent to a transfer tax for valuable consideration. The main rules are:
– Standard rate of 8% on the property value.
– Payment before the deed is signed.
– The base is the declared value or the official value adopted by the administration, whichever is higher.
Certain specific situations exist:
The rate of 10% applies to certain onerous transfers.
In cases where the acquirer or their shareholders are based in low-tax jurisdictions, a higher rate (up to 15%) may apply, reminiscent of anti-tax haven mechanisms present in other countries.
Urban property tax: low but widespread
Once you own property, you will be subject to an annual urban property tax, called “contribuição predial“. Its characteristics are:
Rate applied to the official cadastral value of the building, not its market value, for residential, commercial, industrial buildings, and building plots.
Several types of buildings may be exempt (public buildings, hospitals, churches, etc.), as well as very low-value properties or those used for certain purposes for a limited period (up to 10 years).
Total real estate purchase cost: 15-20% in ancillary fees
Available studies indicate that in practice, total costs related to purchase (taxes, fees, commissions) can represent 15-20% of the property price. They include:
| Cost item | Indicative range |
|---|---|
| SISA (transfer tax) | 8% |
| Stamp duty | ~0.8% |
| Notary fees | 0.5% to 1% |
| Registration fees | 0.3% to 0.8% |
| Lawyer fees | 3% to 5% |
| Agency commission (if applicable) | 5% to 10% |
For an expat, it is therefore prudent to anticipate a substantial extra cost from the acquisition, even if annual taxation (0.1%) remains very moderate.
Double taxation and tax treaties: focus on Portugal and Lusophone countries
For those coming from highly taxed countries (especially Europe), the big question is how to avoid double taxation between São Tomé and Príncipe and their home country.
São Tomé and Príncipe has concluded several double taxation treaties, particularly with Lusophone countries.
Treaty with Portugal: a structuring agreement
A convention to avoid double taxation and prevent tax evasion with respect to taxes on income binds São Tomé and Príncipe and Portugal. It largely follows the OECD model and covers:
Main taxes and associated duties
Personal income tax (IRS/IRPS) is levied on individual income.
Corporate income tax (IRC) concerns business profits.
Certain duties are related to the collection of these taxes, including additional fees or taxes.
This treaty:
It limits withholding tax rates to 10% for dividends, interest, and royalties (15% in some cases), allows Portuguese residents to credit tax paid in São Tomé as a tax credit, and reduces the tax cost of capital flows for Portuguese investors.
Similar agreements exist with Angola and Cabo Verde, favoring investment flows within the Lusophone African space.
Absence of treaties with some countries
Conversely, several major countries do not have a double taxation treaty with São Tomé and Príncipe, including:
– The United States.
– The United Kingdom.
– Canada.
For taxpayers from these countries, they must refer to the domestic law of their state of residence to see if tax paid in São Tomé and Príncipe can be credited as a foreign tax credit, and how filing obligations (including FATCA/FBAR for Americans) stack up.
Social security: INSS contributions and impact for expat employees
Living and working in São Tomé and Príncipe also involves contributing to the social security system (INSS), except in very specific situations (e.g., secondment covered by another system).
Usual contribution rates
Figures vary depending on reforms and sources, but a widely cited scheme is:
– Employer: 8% of gross salary.
– Employee: 6% of gross salary.
– Total 14% social security contributions, deducted from gross salary.
The overall rate of 12% for the upcoming reform breaks down as 7% for employer and 5% for employee.
Combined effect with income tax
For a foreign salaried employee earning a high income and becoming a tax resident, the combined rate of IRPS (up to 25%) and social contributions (6% employee) can lead to an overall burden of around 31-39% if also considering the employer’s share and tax progressivity.
This is not a tax haven in terms of labor taxation, but the system is often lighter than in many European countries, weighed against the level of social benefits (average retirement pensions, for example, are very low, on the order of a few tens of dollars per month).
Advantages and limitations of the system for expats and investors
In the end, what should you remember before settling or investing in São Tomé and Príncipe?
From the perspective of a salaried expat, several striking elements appear:
– No special “expat” regime: no reduced rate, no major specific allowance.
– Classic progressive scale up to 25%.
– Mandatory social contributions via INSS.
– Worldwide taxation if tax resident, which requires coordinating your situation with that of your home country.
For an investor or entrepreneur, the picture is more favorable:
The standard CIT rate is 25%, but priority activities (tourism, agriculture, renewable energy, export) benefit from reduced rates of 10% or 12.5%. Customs duty exemptions apply on equipment for approved projects. Additionally, there are tax credits, accelerated depreciation, and the possibility to negotiate tax holidays (0% CIT for 5 to 10 years) via an Administrative Investment Contract for large projects. The right to repatriate profits, dividends, capital gains, and royalties is permitted, up to 15% of initial capital per year, subject to exchange control regulations and currency availability.
In return, you must accept certain constraints:
The cap of 15% per year on profit transfers can retain a significant portion of profits if the project is highly profitable. Moreover, currency shortages can effectively delay or limit repatriations, even within the legal framework. Finally, most fiscal incentives require a solid dossier, formalization of a project of at least €50,000, and signing a contract with the state.
For returning São Toméan emigrants, the country also offers a specific regime:
– Flat rate of 15% on dividends and profits (after a possible exemption period).
– 100% exemption from customs duties on construction materials for a first residence.
– 50% reduction in customs duties on new vehicles.
What to do before leaving
Before leaving your country to settle in São Tomé and Príncipe, a few practical points deserve special attention.
First, clarify your tax residency status in both countries. It is possible to become a São Toméan tax resident while remaining a resident of your home country under its own legislation, which requires analyzing tax treaties (if they exist) and domestic rules, especially for nationals of countries with worldwide taxation (like the United States).
Next, examine the structure of your income:
Summary of main factors to consider in a comparative analysis between local and foreign assets.
Comparison between local salaries and those paid by a foreign entity, including pay gaps and tax implications.
Analysis of rents and real estate assets, distinguishing local properties from assets held abroad.
Evaluation of the financial portfolio and capital gains, with special attention to international investments.
Examination of entrepreneurial investment projects carried out locally, in relation to local opportunities.
Adapt your strategy accordingly: for example, take advantage of the 15% regime on certain capital income rather than including it in the scale, or, for an investor, structure your project under an approved investment regime to reduce CIT.
Finally, anticipate administrative aspects:
For any interaction with the administration, even as a non-resident, you must obtain a NIF (tax identification number). If you work locally or employ domestic staff, registration with INSS may be necessary. Be sure to meet deadlines, notably the annual return by March 31, as well as prepayment and withholding payments.
São Tomé and Príncipe offers an overall moderate tax framework, with no wealth or inheritance tax, and many incentives for structured investments. But the line between a simple stay, administrative residence, and tax residency is thin: understanding it before leaving is the best way to avoid unpleasant surprises and fully exploit the available benefits.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
