Guinea-Bissau – Introduction of the VAT regime

The number of countries that are implementing the VAT regime is continuously growing. Guinea-Bissau is one of the latest countries in the African region to adopt this type of indirect tax framework. This West African country has set the first tangible path towards introducing the modern VAT regime at the beginning of 2022 through Law no.4/2022. 

More than two years later, in October 2024, the Ministry of Finance adopted the missing implementing Decree that sets the terms and conditions for introducing the VAT regime. 

Timeline 

The starting date for the implementation of the VAT regime was set at January 1, 2025. 

VAT Framework and Impact 

The General Tax on Sales and Services (IGV) has existed since the 1990s. Even though introducing this type of tax brought many benefits to the state coffers, the deficiencies related to its implementation and contributions to the overall business environment showed the necessity for modernization and replacement. The shift from IGV to VAT was a logical step towards harmonization with the uniform indirect tax model adopted throughout many West African countries.

The idea is that, gradually, all economic operators, both local and foreign, should adhere to the VAT regime. The goal is that the playing field for domestic and foreign suppliers of goods or services should be equal. However, the Decree states that this idea will be realized through a phased roll-out of the mandate. 

In the first phase, the VAT mandate will cover – local supplies of taxable goods and services and imports of goods and services under specific rules. The Law has set forth different turnover thresholds under which economic persons could remain outside the scope of mandatory VAT registration. 

In this sense, the VAT Law instructs that economic operators whose annual turnover exceeds FCFA 40 million must adhere to the standard VAT regime. Those whose yearly turnover from taxable supplies is between FCFA 10 and 40 million could conform to the simplified VAT regime. In contrast, those whose turnover is less than FCFA 10 million aren’t obliged to comply with the VAT regime (regime for small taxpayers).

Concerning the VAT Rates, the following ones have been set in place:

• Standard Rate – 19% (other supplies);
• Reduced Rate – 10% (specific imports, essential goods and services);
• Zero Rate – 0% (exports).

The replacement of the General Tax on Sales and Services (IGV) with the VAT regime will unquestionably significantly impact the taxable persons in the scope of the new regulation. Considering the phased implementation of the VAT mechanism and the continuous expansion of the scope of taxpayers that its rules will impact, foreign e-commerce suppliers and digital providers should monitor the relevant tax news from verified sources. The local VAT rules will likely also put their operations under its radar.