Investing In... 2021

Last Updated January 20, 2021

Cabo Verde

Law and Practice

Authors



Raposo Bernardo & Associados is an international full-service law firm, with practices in Africa (Angola, Cabo Verde, Guinea Bissau, Mozambique, and São Tomé and Príncipe) and Europe (Portugal, Poland and Spain). In Cabo Verde, with a team of 12 lawyers locally and abroad, the firm offers more than 20 years of local experience by participating in the most innovative and relevant projects, regularly representing the interests of national and international players, investment and commercial banks, investment funds, financial intermediaries, governmental entities, and public sector and private agents in legal matters concerning banking, energy, aviation, pharmaceuticals, tourism and leisure, and construction and infrastructure. The firm’s expertise includes advising on operations such as corporate finance and major project finance; large M&A transactions; privatisations; PPP projects; large infrastructure projects; drafts of banking, financial markets and insurance legislation; and working closely with major international law firms.

The laws of Cabo Verde are based on the civil law system. There is a set of legal codes that are constantly updated and which establish legal procedures.

The Constitution of Cabo Verde and relevant legislation provide for a judiciary independent from the executive.

The judicial system in Cabo Verde is based on three levels of appreciation by different courts:

  • first instance courts (trial court);
  • Court of Appeal; and
  • the Supreme Court.

As a rule, any case shall be presented at the first instance courts and, depending on several requisites (such as the value of the case or the subject matter), the party that loses the case may appeal to the Court of Appeal and, after (as a second level of appeal), to the Supreme Court, which only analyses questions of law.

As a rule, foreign investment does not require review or approval from national authorities. However, if the investor desires to take advantage of tax, customs, administrative and licensing benefits, the investor may opt to submit the investment project to approval by Cape Verde Trade Invest (CVTI); see also 7.1 Applicable Regulator and Process Overview.

There may be mandatory registration/approvals for specific activities that are applicable both for foreign and domestic investment, as follows:

  • banking and finance – Central Bank of Cabo Verde;
  • aviation – Civil Aviation Authority;
  • tourism – Institute of Tourism;
  • maritime – Maritime and Port Institute;
  • telecommunications – Multisectoral Economy Regulation Agency.

Projects that may involve environmental issues are also subject to prior approval by the National Environment Directorate.

All investors, regardless of their nationality, have the same rights and are subject to the same duties and obligations under the laws of Cabo Verde. A national partner is not required and there are no limitations to the distribution of profits or dividends abroad.

The rules governing foreign investment are similar to those applicable to domestic investment. No special registration or notification to any authority regarding foreign investment is required.

Cape Verde has been severely affected by the COVID-19 crisis. The country has a strong dependence on the international market, particularly in the tourism sector, which contributes strongly to its GDP. The Cape Verdean government implemented a set of measures to support the company in order to minimise the impacts of this crisis. These are measures that consist of a bank moratorium and support to maintain jobs.

Consequently, there was a significant reduction in foreign direct investment. Notwithstanding, some positive signs have recently emerged in the field of tourism and the maritime sector.

Cabo Verde is open and welcome to foreign investment, and in that respect there are a set of incentives in place. There is an extensive reform under way that aims to transform the public administration with a focus on digital relationship processes with citizens and companies. The goal is to create a better economic environment in what has been called the “new normal”. Furthermore, it is expected that there will be heavy foreign investment in the health sector in order to improve the local population's safety as well as creating a trustworthy environment for sectors such as tourism, hospitality and transportation. Utilities will also be under the spotlight, as always.

See the Cabo Verde Trends & Developments chapter in this guide for further investment-related information.

The most common structures used for transactions in Cabo Verde are public limited companies (sociedade anónima) or limited companies (sociedade por quotas). These structures are the most relevant provided in the Cabo Verde Companies Code and are frequently chosen by foreign investors aiming to invest within the country.

The choice of one of these structures depends on many factors, such as the type of business to be implemented, the simplicity or size of the operations, the amount of capital to be invested, the possibility to transfer ownership freely and disclosure rules about the aforesaid ownership.

The key considerations for a foreign investor in selecting a transaction structure are the following.

Public Limited Companies (Sociedade Anónima)

A public limited company has the following characteristics.

  • Minimum share capital – EUR0.01.
  • Minimum number of shareholders – two. A single-shareholder public limited company incorporation is permitted if the single shareholder is another company.
  • Forms of incorporation – as a general rule, public limited companies are incorporated by means of a private document (articles of association). Additional formalities may apply if the shareholders perform contributions is in kind.
  • Transfers of shares – as a rule, transfer of shares is free and may be carried out by means of an agreement between the parties.
  • Shareholders’ liability – limited to capital subscribed, but shareholders are jointly and severally liable for all contributions foreseen in by-laws.
  • Flexibility of capital – only registered shares are allowed. Registered shares are transferred by endorsing the share certificate in the name of the transferee and notice must be given to the company for the purposes of registration in the share book. Book-entry shares are transferred by registration in the transferee’s bank account. The only limit on the free transfer of shares may arise from any pre-emption rights that have been established by the shareholders in the articles of association.

Limited Companies (Sociedade por Quotas)

A limited company has the following characteristics.

  • Minimum share capital – EUR0.01.
  • Minimum number of shareholders – as a rule, two members. Single-shareholder limited liability company incorporation is permitted.
  • Forms of incorporation – as a general rule, limited companies are incorporated by means of a private document (articles of association). Additional formalities may apply if the shareholders perform contributions in kind.
  • Transfers of quotas – the transfer of shares may be carried out by means of an agreement between the parties, except when the incorporation has been made through public deed. The articles of association may set limits or conditions on the transfer of shares or pre-emptive rights in favour of other shareholders or the company itself.
  • Shareholders’ liability – limited to capital subscribed, but shareholders are jointly and severally liable for all contributions foreseen in by-laws.

Public Limited Company (Sociedade Anónima, SA)

A public limited company is the form traditionally adopted by larger companies. It is primarily characterised by the fact that it has a more complex organisational structure than, for example, the limited company. The public limited company form also provides greater flexibility when it comes to share capital insofar as no special procedure is required for the transfer of shares.

The government of Cape Verde announced that they will soon install a Competition Authority and establish new procedures for the control of M&A transactions.

One of the most important principles of corporate governance in Cabo Verde is the one that establishes that corporate bodies are elected by shareholders of the company. The most common corporate structures used in Cabo Verde are public limited companies (sociedade anónima) or limited companies (sociedade por quotas) and their corporate structure is different, as follows.

Public Limited Companies (Sociedade Anónima)

The governing bodies of a public limited company are as follows.

  • The management board, as a rule, has a minimum of three members. Management can be entrusted to one director if the turnover for two consecutive years is expected to be less than CVE10 million. In addition directors, substitute directors must be elected in numbers not exceeding one-third of the effective directors. This means three effective members and one substitute member or one effective member and one substitute.
  • The shareholder meeting.
  • The supervisory board has three members, or one auditor. A member of the supervisory board or the auditor must be certified.

Limited Companies (Sociedade por Quotas)

The governing bodies of a limited company are as follows:

  • management with one or more directors;
  • the shareholder meeting;
  • an auditor is not mandatory, but companies that do not have a supervisory body must appoint a certified auditor to carry out the statutory audit as long as the turnover is greater than CVE10 million and/or the number of employees is more than ten.

The choice of one of these structures depends on many factors, such as the type of business to be implemented, the simplicity or size of the operations, the amount of capital to be invested, the possibility to transfer ownership freely and disclosure rules about the aforesaid ownership. A public limited company (sociedade anónima, SA) is the form traditionally adopted by larger companies. It is primarily characterised by the fact that it has a more complex organisational structure than, for example, the limited company.

The Cape Verdean Companies Code sets out rules governing the relationship between a company and its minority investors.

The new Code reinforced the rights of the minority investors, with emphasis on the following aspects:

  • greater accountability of the management bodies;
  • greater disclosure of relevant information to minority shareholders, in order to create transparency and protection for related parties;
  • mandatory disclosure of information in annual reports and the performance of an external audit.

The report and disclosure obligations depend on the sector of activity of the company.

Companies that operate in financial, banking, insurance and communications are subject to different levels of ongoing reporting and disclosure obligations.

However, for companies not subject to special legal regimes, the following reporting requirements are applied:

  • management report;
  • annual accounts, which are to be filed annually to the commercial registry and are publicly available;
  • statement of commencement of activity from the tax authorities;
  • statement of commencement of activity for social security;
  • amendment to the articles of incorporation.

There is also obligation to disclose information related to the complete identification of a shareholder of company and ultimate beneficial owner. This applies also in case of making, holding or disposing of FDI, as it is not possible to hold bearer shares in Cabo Verde.

Cape Verde has made available to investors a set of instruments and mechanisms that aim to promote and encourage corporate finance. However, the capital market in Cabo Verde is not very dynamic in this respect.

The investors typically use traditional sources of finance, such internal funds, provided by shareholders and bank financing. Notwithstanding, it is legally possible to use debt securities and external equity instruments.

The Securities Market Code in place in Cabo Verde was approved by the Legislative Decree 1/2012 of 27 January 2012, amended by the Law 101/IX/2020 of 21 August 2012. The Securities Code establishes the main rules of securities regulation and provides legal support for the enactment of other regulatory instruments.

Other relevant legal instruments regulating the Cape Verdean securities markets include:

  • the particular legal instrument regulating each type of securities;
  • the Companies Code (Código das Sociedades Comerciais), approved by Legislative Decree 2/2019 of 23 July 2019;
  • the Basic Law for Financial System, approved by Law 61/VIII/2014 of 23 April 2014;
  • the Law on Activity and Finance Institution, approved by Law 62/VIII/2014 of 23 April 2014;
  • the law related to access to insurance activity, approved by Legislative Decree 3/2010, of 17 April 2010.

The capital markets are under the authority of General Audit of the Securities Market (Auditoria Geral do Mercado de Valores Mobiliários, AGMVM). AGMVM is a public agency, with operational and administrative autonomy and depends on the Governor of Banco de Cabo Verde.

In general terms, the duties of AGMVM are as follows:

  • supervision of the securities and financial instruments markets, of public offers relating to securities, of the clearing and settlement of those relating to them, of centralised securities systems, and of all entities intervening in the securities market;
  • the regulation of securities and financial instruments markets, of public offers related to securities, of the activities carried out by the entities subject to their supervision;
  • promoting the development of the securities and financial instruments market and financial intermediation’s activities.

The following entities are supervised by the AGMVM in relation to activities involving securities:

  • stock exchanges, managing entities of multilateral trading systems, settlement systems, clearing-house or central counterparty and centralised securities systems;
  • financial intermediaries and investment consultants;
  • issuers of securities;
  • qualified investors and holders of qualified holdings;
  • guarantee funds and compensation systems for investors and their management entities;
  • auditors and credit rating companies, registered with the AGMVM;
  • other persons who, principally or incidentally, carry out activities related to the issuance, distribution, trading, registration or deposit of financial instruments or, in general, with the organisation and functioning of the markets in financial instruments.

A foreign investor in a business in Cabo Verde may be subject to applicable securities laws and regulations if it performs activities involving securities.

The investment funds are regulated by the Decree Law 15/2005 of 14 February 2005, as amended. In case of a foreign investors structured as investment funds, a regulatory review from AGMVM is mandatory.

If the investment fund is domiciled in a country that is a member of the Organisation for Economic Co-operation and Development (OECD), the law allows the investor to operate in Cape Verde and, for that purpose, they must send the following documents to AGMVM:

  • updated certificate issued by the competent authority of the state of origin, attesting that the investment fund meets the necessary requirements;
  • management regulations or articles of association, if applicable;
  • complete and simplified prospectus or prospectus;
  • the latest annual and half-yearly reports and accounts, if any;
  • information on the modalities foreseen for the commercialisation of the units.

After sending these documents, the fund can start its activities, as long as there is no opposition from the AGMVM within two months.

If the investment fund is domiciled in a country that is not a member of the OECD, its operation in Cape Verde is dependent on an authorisation to be granted by AGMVM after a case-by-case analysis.

The Decree Law 53/2003 of 24 November 2003 establishes the general framework for merger control, applicable to most merger and acquisition operations. It applies to all economic activities carried out, on a permanent or occasional basis, in the private, public and cooperative sectors.

As a general principle, it is established that agreements and concerted practices between companies and decisions by associations of companies are prohibited, in whatever form they take, whose object or effect is to prevent, distort or restrict competition as a whole or part of the national market.

With concerns to merger transaction, there are subject to prior notification the transaction that meet one of the following conditions:

  • creation or reinforcement of a share of more than 30% in the national market for a good or service, or in a substantial part of it, as a result of the merger;
  • realisation, by the group of companies involved in the merger, of a turnover in Cape Verde, exceeding a CVE1 million in the last year, net of taxes directly related to the turnover.

If the concentration consists of the acquisition of parts of a company or parts of the group of companies, the turnover to be taken into account in relation to the transferor or transferors will only cover the company or companies, or respective parts, that are the object of the transaction.

Prior notification must be made before the legal transactions necessary for the concentration are completed and before the announcement of any takeover bid.

It is deemed that there is a merger of companies:

  • in the case of a merger of two or more previously independent companies;
  • in the case of one or more persons who already control at least one company, or in the case of one or more companies, acquire, directly or indirectly, control over all or parts of one or more other companies;
  • if two or more companies form a joint company, provided that it corresponds to an autonomous economic entity of long-term nature and does not have as its object or effect the co-ordination of competitive behaviour between the founding companies or between them and the joint company.

Control arises from any act, regardless of the form it takes, which implies the possibility of exercising, individually or jointly, and taking into account the factual or legal circumstances, a decisive influence on the activity of a company, namely:

  • acquisition of all or part of the share capital;
  • acquisition of property, use or fruition rights over all or part of a company's assets;
  • acquisition of rights or conclusion of contracts that give a predominant action in the composition or in the deliberations of the bodies of a company.

It is not considered to be concentration of companies in the case of the following:

  • acquisition of stakes in the context of the special company recovery process;
  • acquisition of shares as guarantee or credit satisfaction.

Prior notification of mergers is addressed to the Directorate-General for Trade and is submitted:

  • in case of merger or constitution of joint control, by the group of participating companies;
  • in the remaining cases, by the company or by the persons wishing to acquire control of the group or parts of one or more companies.

However, depending on the sector, an entity can regulate some of the operations – namely, in the finance and insurance sectors, which are regulated by the Central Bank of Cabo Verde.

Companies operating in the telecommunication sector are regulated by the Multisectoral Economy Regulation Agency and, in this case, there is merger control.

There are no general procedures established in the law for the review. Notwithstanding, the Directorate-General for Trade will analyse the following documents/information:

  • identification of individual and legal persons participants in the merger;
  • nature and legal form of the concentration;
  • nature of the goods or services produced;
  • list of companies that maintain the interdependence links or special voting rights;
  • market shares as a result of the operation concentration and basis for its determination;
  • turnover in Cape Verde of companies’ participants;
  • report and accounts of participating companies for the past three financial years.

Remedies and commitments differ on a case-by-case analysis process. The law only requires that conditions, remedies or other commitments shall be the ones appropriated and necessary to maintain effective competition in the market.

The relevant authority has the power to block the transaction, ordering, if it has already taken place, measures appropriate to the establishment of effective competition, namely the separation of companies or grouped assets or the cessation of control.

On the other hand, legal transactions related to the concentration are considered null to the extent that they carry out operations condemned by a decision that prohibited the concentration, imposed conditions for its execution or ordered appropriate measures to re-establish effective competition.

The investor has always the right to appeal to the Supreme Court against the decision of the relevant authority.

Cabo Verde provides to the investor an entity called Cabo Verde Trade Invest (CVTI). This an investment and export promotion agency, a public entity which focuses on promoting, disseminating, co-ordinating, facilitating and monitoring investment opportunities in the country and exports of goods and services produced in Cape Verde. CVTI acts as the only contact with the investor. CVTI provides the investor with all necessary support in the development and implementation of investment projects. CVTI's support consists of reducing bureaucracy and response time, thereby reducing investors' time and costs.

CVTI analyse and review all types of economic investments taking place in Cape Verde's territory or abroad, made by national or foreign investors and wishing to benefit from guarantees and incentives established in the law.

For the purposes of processing investment projects, two different regimes are established: (i) the general regime, and (ii) the contractual regime (convenção de estabelecimento).

The general regime does not imply investment negotiation and signing of an investment agreement.

The contractual regime implies the existence of a special administrative procedure regime applicable to investment projects, consisting of:

  • reduction of procedural deadlines;
  • global decision period;
  • single document containing the opinions, approvals, authorisations, decisions or licences;
  • exceptional negotiated incentives.

All investments made and approved by CVTI have access to the tax benefits provided for in the Tax Benefits Code. However, the investments made under the contractual regime may benefit from exceptional incentives regarding import duties, income tax, property tax, stamp duty, as well as other tax benefits.

Investment projects can be submitted in the Portuguese, Spanish, French or English languages.

In general, the investment process shall contain the following information/documents:

  • name or corporate name and domicile or headquarters of the investor;
  • description of the economic activity to be developed;
  • characteristics of the project's location;
  • estimated period for installation and operation;
  • brief description of technologies and the list of the main productive equipment, when applicable;
  • turnover forecast for the first five years;
  • forecasting the volume and value of exports for the first five years, when applicable;
  • indication of the main export markets, when applicable;
  • total investment value (non-current assets, current assets, others);
  • financing model (own resources, loans, other instruments or sources of financing);
  • contributions from abroad:
  • cash amount;
  • goods, services and rights imported without foreign exchange expenditure;
  • profits and dividends from a foreign investment reinvested;
  • indication of the number and type of jobs to be created;
  • details of facilities for the treatment of water, solid waste and waste, if applicable;
  • use of relevant innovative technologies.

Since everything is in accordance with the documents and information presented by the investor, CVTI recognises the investment within five business days.

Within a period not exceeding two days after the issuing of the recognition decision, CVTI designates the sole interlocutor, and send all the documentation submitted by the investor and accompanied by a memorandum to the various participating entities, which includes:

  • the status of the process and its possible antecedents;
  • the identification of possible constraints and obstacles to the project and the respective procedural implications; and
  • the schedule of procedures to be developed, detailing the circuit of the process, the procedural obligations of the proponent and a schedule of commitment by the Administration in matters of formalities and acts, reducing, whenever possible, the maximum deadlines set by law.

The schedule for each recognised project, is mandatory, in terms of tasks and deadlines, to all public entities, competent to practice acts or formalities in the procedures applicable to the project, and such entities shall issue opinions, approvals, authorisations, decisions or licences within the agreed terms.

All opinions, approvals, authorisations, decisions or licences under the responsibility of the public entities, including the Environmental Impact Statement required for the project, must be issued within the maximum global period of 75 days.

With the approval of the investment, CVTI issues the Single Document that integrates all the opinions, approvals, authorisations, decisions or licences necessary for the completion of the project.

Once all the obligations to which they are subject have been fulfilled, foreign investors have the right to convert into any other freely convertible currency and to transfer abroad all income from their investment. Investors are also entitled to transfer abroad the initial and additional capital that have been used to maintain or increase investment, as well as the repayment of any loan, including associated interest, related to the investment.

The FDI may have accounts in convertible currency, in financial institutions established in Cape Verde, through which they can carry out all operations abroad.

Investments made under the Investment Law benefit from certain tax benefits, as in the following four examples.

Investment Tax Credit

The investments made under the Investment Law benefit from a tax credit, in the form of a tax deduction to the CIT and PIT due, applicable to taxpayers subject to the organised accounting regime, in a value corresponding to:

  • 30% of relevant investments made in health, environment, creative industry, tourism or tourism promotion and tourism real estate promotion, industrial activity, air and maritime transportation services and port and airport services, production of renewable energy, production and assembly of renewable energy equipment, scientific research and investigation, as well as the development of information and communication technologies;
  • 20% of relevant investments made in other areas.

Tax credit is to be deducted from the total amount of tax liability, up to the limit of 50% of the total tax liability of each year.

The application of such benefit is dependent on the presentation, by the taxpayer, of the income tax return of the relevant fiscal year (FY) as well as evidence of the investments made, through the periodical income return and the annual statement for accounting and tax purposes.

Contractual Tax Benefits

There are exceptional incentives – regarding customs duties, CIT, PIT, property tax and stamp duty – to investments that fulfil all of the following conditions:

  • the investor should possess technical and managerial capacities;
  • the invested amount should exceed CVE3 billion; the relevant amount is CVE1.5 billion in the case of investments located in a municipal area, the average GDP per capita of which is lower than the national average (with reference to the last three years); and
  • they create, directly, at least 20 qualified jobs (ten in the case of investments located in a municipal area whose average GDP per capita is lower than the national average, with reference to the last three years); a qualified job requires professional or higher education, specialised technical training, certified by a national or foreign entity, including management positions.

The concession of contractual tax benefits is subject to approval by the Council of Ministers upon agreement.

Differentiated Merit Projects

Differentiated Merit Projects (DMP) status, established by Law 80/IX/2020, of 26 March 2020, is granted to investments that, among others, cumulatively meet the following requirements:

  • represent an investment equal to or higher than CVE1.5 billion;
  • contribute, in net terms, to the improvement of the balance of payments;
  • use technology, production and commercialisation processes that minimise environmental impacts or promote environmental sustainability; and
  • have a recognised productive social effect, particularly in the creation of at least five qualified jobs (those that require specialised technical training, either professional or of higher education, including management positions).

Investment projects with DMP status are granted the following benefits:

  • a reduced customs duty rate of 5% on the importation of materials, goods and equipment mentioned in Article 15 of the Tax Benefit Code;
  • customs duty exemption on the importation of raw materials, consumables, finished and semi-finished materials and other products to be incorporated in products manufactured by the company; in the case of industrial investment, projects of companies registered in the “Cadastro Industrial”, the exemption is also applicable to packaging and wrapping materials used in products manufactured by the company;
  • CIT tax credit of 30% of the eligible investments effectively made (capped at 50% of the CIT assessed);
  • stamp tax exemption on the borrowing of funds for the investment;
  • property tax (IUP) exemption on the acquisition of real estate exclusively aimed at the installation of the investment project; and
  • other non-tax incentives established in specific legal diplomas.

Alongside the above benefits, for DMP investment projects implemented in municipal areas with a GDP per capita lower than the national average, there are the following added benefits:

  • CIT credit of 40% of the eligible investments effectively made (capped at 50% of the CIT assessed); and
  • IUP exemption on the acquisition of real estate used in the development of the company’s main activity, including any developing needs arising throughout the first five years following the acquisition.

CVTI will analyse if the investment would contribute to the pursuit, namely, the following objectives:

  • promotion of economic, social and cultural development of populations;
  • reduction of regional socio-economic asymmetries;
  • ensuring environmental balance;
  • strengthening the business and national productive capacity;
  • creation of direct and indirect jobs;
  • improving the quality of Cape Verdean manpower;
  • promotion of innovation and transfer technology;
  • increase and diversification of exports;
  • improvement of balance of payment accounts;
  • efficient supply of the internal market;
  • improvement of economic infrastructure;
  • competitive insertion and integration in the market regional.

In case of investments subject to an investment agreement (Convenção de Estabelecimento), CVTI also reviews the partnerships and joint ventures, the curriculum vitae or document that demonstrates business capabilities of the partners or shareholders that hold more than 10% of the initial share capital of the investment.

The matter is not applicable in this jurisdiction.

CVTI has the ability to block the investment. However, the law recognises the right of an investor to challenge any decision of the administrative authorities in court. The scope of the legal challenge depends on the nature of the decision by CVTI.

The court does not have mandatory deadlines to issue a decision. It can take six months or more.

If an investment is made without the prior approval of CVTI, the FDI will not be able to benefit from the advantages established in law for the investment made according to the Investment Law.

The matter is not applicable in this jurisdiction.

The tax applicable to companies or business is corporate income tax (CIT), called Imposto sobre o Rendimento das Pessoas Colectivas. The CIT lived on profits obtained within the Cabo Verdean territory and those obtained outside by resident companies (worldwide principle). Non-resident companies with a permanent establishment (PE) in Cabo Verde are also subject to CIT on Cabo Verdean-source income attributable to the PE.

Taxable profit is computed according to the local accounting rules and adjusted for tax purposes. For the purposes of determining taxable income, CIT payers can be taxed under two methods/regimes.

Special Regime for Micro and Small-Sized Companies

The following categorisations apply:

  • micro-sized company – an entity that employs up to five persons, with an annual turnover (gross amount of sales and services) that does not exceed CVE5 million;
  • small-sized company – an entity that employs between six and ten persons, with an annual turnover (gross amount of sales and services) of between CVE5 million and CVE10 million; and
  • micro and small importers – importers whose customs value of imported goods does not exceed the value of turnover on an annual basis for the purpose of qualifying under the simplified scheme for micro and small-sized companies.

Micro and small-sized companies are subject to a single special tax (SST) of 4% levied on the gross amount of sales obtained in each taxable year, to be paid quarterly. The SST replaces the CIT, fire brigade surtax and value added tax (VAT), as well as the contribution to social security attributable to the company.

Standard Organised Accounting Regime

This is the standard/normal regime under which the computation of profits follows the local accounting rules.

Resident companies are subject to a tax rate of 22%, where taxable income corresponds to the profit less any tax benefits and any losses carried forward, as stated in the tax return. The tax rate of 22% is also applicable for PEs of non-resident companies.

The CIT rate is increased by a fire brigade surcharge, called Taxa de Incêndio, of 2% on the tax due, leading to a final tax rate of 22.44%. This surcharge is levied in the municipalities of Praia (Island of Santiago) and Mindelo (Island of São Vicente).

Non-resident companies without a PE are subject to WHT rates applicable for each income category stipulated in the Tax Code, which range between 1% and 20%.

Permanent establishment

Non-resident companies deemed to have a PE in Cabo Verde are also subject to tax in Cabo Verde. Under Cabo Verdean tax law, a non-resident company is deemed to have a PE if the non-resident company:

  • has any fixed installation or permanent representation located in Cabo Verde through which, among others, activities of a commercial, industrial or agricultural nature, or fishing and rendering of services are carried out (including agricultural, fishing, and cattle-raising explorations, or other quarries or any other places of natural resources extraction); or
  • carries out its activity in Cabo Verde through
    1. employees, or any other personnel hired for that purpose, for a period (continuous or not) of not less than 183 days within a 12-month period,
    2. a person (a dependent agent), who is not an independent agent, acting, in the Cabo Verdean territory on behalf of a company, with powers to intermediate and conclude binding contracts for that company, within the scope of its business activity, or
    3. a building site or a construction installation if it lasts for more than 183 days, as well as activities of co-ordination, supervision and inspection related to the building site or its construction installation.

A permanent establishment is also recognised in the case of:

  • commissionaire arrangements;
  • preparatory or ancillary activities carried out by closely related enterprises through a fixed installation; and
  • independent agents acting exclusively, or almost exclusively, on behalf of one or more closely related enterprises.

A PE of a non-resident is taxed as a resident company.

The Cape Verdean law grants to investor a full relief from taxation on profit distribution at the beneficiary level. However, for entities with a local CIT rate reduction, the tax relief is only 50%.

Interest payments, in general, are subject to WHT at a rate of 20%.

Bond interest is subject to WHT at the rate of 10%, except bonds and similar financial products (excluding public debts) duly listed on the stock exchange, which are subject to CIT at the reduced rate of 5%.

Interest on shareholder loans or income from subscription of obligations paid to holding companies is exempt from WHT.

Royalty payments are subject to WHT at the rate of 20%.

Payments of services between resident companies are generally not subject to WHT.

Payments of services to non-resident entities are subject to WHT at the rate of 15%, unless waived under the applicable tax treaty.

The matter is not applicable in this jurisdiction.

The Cape Verdean legislation treats capital gains as ordinary business income. They are not subject to a separate capital gains tax.

Capital gains can be considered only in 50% of the respective amount if the sales proceeds are reinvested in the acquisition, production, or construction of tangible fixed assets, intangible assets, or non-consumable biological assets. For this purpose, the reinvestment must take place in the previous tax year, in the tax year in which the transfer occurs, or in the two tax years following the transfer.

In case of partial reinvestment, a partial relief (proportional to the investment made) will apply. In case the reinvestment is not fully accomplished during the reinvestment period, the difference (or the proportional difference) will be considered as taxable income of the second year following the disposal, increased by 15%.

Capital gains on the sale of share capital or other equity instruments, owned for a period of not less than 12 months, obtained by a resident or non-resident with a PE in Cabo Verde are exempt from CIT. This benefit does not apply to capital gains on the sale of share capital acquired from entities that are subject to a more favourable tax regime. The exemption also does not apply on capital gains arising on the transfer of shareholdings in a company in which more than 50% of the assets owned are composed, directly or indirectly, of real estate located in Cabo Verde (it includes the gains derived from the respective transfer for a consideration).

Capital gains on the sale of share capital or other securities obtained by non-resident entities without a PE in Cabo Verde are also exempt from CIT. This exemption does not apply on capital gains arising on the transfer of shareholdings in a company in which more than 50% of the assets owned are composed, directly or indirectly, of real estate located in Cabo Verde (it includes the gains derived from the respective transfer for a consideration).

Cabo Verdean law provides for anti-evasion rules. Decree No 75/2015 regulates the application of the transfer pricing regime and its requirements, as set forth in the Corporate Income Tax Code. It establishes that for the transactions between a taxpayer subject to corporate income tax and any other entity, whether or not subject to these taxes, with which the taxpayer has special relations, the terms and conditions should be stipulated, accepted and observed such that they are substantially the same or identical as those that would be normally stipulated, accepted and observed between independent entities in comparable transactions.

The law states that the taxpayer must keep on-hand information and documentation regarding its transfer pricing policy, obliging the following taxpayers to prepare a transfer pricing documentation file:

  • entities classified as “large taxpayers”;
  • entities considered taxed under a privileged tax regime, as defined in the General Tax Code;
  • permanent establishments of non-resident entities; and,
  • other entities designated as such by the Tax Authorities.

The employment relationship is regulated by the Labour Code (Decreto-Legislativo No 5/2007 of 16 October 2007). Further to the Labour Code, several other laws regulate important issues, such as work-related accidents and sickness.

Nevertheless, the parties may agree in employment agreements some special situation conditions for the employment relationship provided they do not violate the Labour Code.

It is also possible to have collective bargaining agreements with more favourable conditions for employees.

Civil servants or public employment relationships are subject to special regulation.

As a rule, no written document is required and the employment relationship can be proved by any means. Some types of contract must be in writing – that is, fixed-term or part-time – and certain top management contracts. However, if the contract is not in writing, it does not render it invalid. It can, however, lead to the contract’s requalification into a full-time permanent one.

The minimum and maximum working times are regulated by the Labour Code. The normal working period may not exceed eight hours per day and 44 hours per week, and a minimum of 12 consecutive hours of rest must be respected.

The Labour Code provides that by a unilateral decision of the employer, a single schedule of seven hours of daily work may be established during the months July to September, between 6am and 3pm on the same day. During daylight saving time, the employee shall be allowed an interval of not less than 15 minutes.

The employer may also choose to maintain normal working hours by extending rest time between the morning and afternoon periods, but in such case the afternoon period may not exceed 7.30pm each day.

As a rule, the daily working period shall be interrupted by an interval with a maximum duration of one hour so that the employee does not work more than five consecutive hours.

Overtime hours are also regulated by the Labour Code and are considered to be work outside the normal period of work to which the employee is bound and can only be done (i) in the case of increases in work that do not justify the recruitment of other employees or (ii) in the case of force majeure, or where there are serious reasons that make it necessary to prevent serious harm.

The compensation of employees is performed by means of cash and some in-kind benefit.

Employers usually give employees a basic salary and some subsidies, such as for food, transportation and, when justified, housing subsidies. Some companies also support for communications and fuel.

As a rule, change-of-control or other investment transactions do not have a negative impact in the compensation of employees.

According to the laws in place in Cabo Verde, in the event of an acquisition, change-of-control or other investment transaction, the rights of employees will not be affected. If there is a change in the employer's legal status – namely, by succession, transfer, merger or split – the new employer succeeds in the rights and obligations of the previous one, in relation to employment contracts.

In case of acquisition, change-of-control or other investment transaction, the change in the employer's legal position must be communicated to the employees up to 30 days before the transaction. No intervention of the works council is required.

Intellectual property is a very important aspect of the foreign investment process in Cape Verde. The entire registration process is carried out by the Institute for Quality Management and Intellectual Property (IGQPI).

The law establishes general criteria for review – applicable to all type of intellectual property (IP) – and specifics criteria to each of intellectual property. As a rule, a registration may be refused in following cases:

  • failure to pay fees;
  • failure to provide the necessary elements for a complete instruction of the process;
  • failure to observe formalities or procedures essential for granting the right;
  • the recognition that the applicant intends to unfair competition, or that it is possible regardless of his intention;
  • violation of public order rules.

For example, in case of a patents there are three patentability requirements in the Industrial Property Code (IPC): novelty, inventive step and industrial application.

The main intellectual property regulated by the law are the following.

Patents

A patent is an exclusive right that can be granted to any type of invention in any field of technology, whether it is a product or a process, as well as for new processes for obtaining products, substances or compounds that already exist.

Trade Marks

Trade marks are signs used in trade to identify products and services, and can consist of a sign or set of signs capable of being represented graphically – that is, words (including names of people), designs, letters, numbers, sounds, the shape of the product or its packaging. A trade mark may also consist of advertising slogans for goods or services to which they refer, irrespective of copyright protection afforded to them, provided they are of distinctive character.

Industrial Design

A design shall mean the ornament or aesthetic aspect of an article, including the appearance of the whole, or part, of a product resulting from the features of, in particular, the lines, contours, colours, shape, texture or materials of the product itself and its ornamentation. Designs that are contrary to public order, public health or morality may not be registered.

Copyright

Copyright is defined as the exclusive right of authors of literary, artistic and scientific works to enjoy, use and exploit such works or to authorise their enjoyment, use or exploitation by third parties, either in whole or in part. Copyright shall comprise economic rights and personal rights, the latter being known as moral rights.

Software, databases and trade secrets are also protected under the regime of industrial and intellectual rights.

Cabo Verde provides strong intellectual property protection.

The patent confers the exclusive right to use the invention anywhere in the national territory and also confers on its owner the right to prevent third parties from manufacturing, offering, stocking, trading or using the product that is the subject of the patent without his consent and from importing or holding it for any of these purposes. The length of protection is 20 years.

The registration of the trade mark grants to the right-holder the ownership and the exclusive use of the trade mark for the products and the services that it designates. The length of protection is ten years from the date of the respective concession and can be indefinitely renewed by equal periods.

In case of a copyright the length of protection is for the lifetime of the author plus 50 years following his death, even if it is a posthumous work. The length of protection for copyright in works of photography or applied arts is 25 years after such works are produced.

Generally, intellectual property rights will be enforced and invalidated before the first instance courts. Whoever illegally violates the intellectual property rights of another person, with criminal intent or by mere blame, must pay compensation to the injured party for the damages resulting from the violation. For this purpose, the IP right-holder must prove the causality of the infringement for the damages calculation. The injured parties can also resort to criminal courts for criminal cases.

Currently, in Cabo Verde, the personal data protection legislation in force is the Constitution of the Republic of Cabo Verde and Law 133/V/2001, of 22 January 2001 (as amended).

The Constitution establishes that all citizens shall be guaranteed the right to personal identity, the development of personality and civil capacity, which may only be limited by a judicial decision and in the cases and terms established in the law, and that all citizens shall have the right of access to computerised data that affects them and for the same to be rectified and updated, as well as the right to be informed about the purposes of the data, in the terms of the law. The Constitution also grants the right of habeas data to ensure knowledge of the information contained in files, computer archives and registers that affect subjects, as well as to be informed about the purposes of the data and for the same to be rectified or updated.

Law 133/V/2001 establishes the general legal framework for the protection of individuals with regard to the processing of personal data and it applies to the processing of personal data wholly or partly by automated means as well as to the processing of personal data other than by automated means contained in manual files or part of manual files. The law shall also apply to the processing of personal data carried out:

  • in the context of the activities of an establishment of the controller situated within the national territory;
  • outside the national territory in places where the Cabo Verdean law applies by virtue of international public law; and
  • by a controller who is not established on the national territory, who, for purposes of processing personal data, makes use of automated or other types of equipment situated on the national territory, except where such equipment is used only for purposes of transit.

Law 133/V/2001 applies in an international context where there are any international treaties in place.

All significant issues have been dealt with in the preceding answers.

Raposo Bernardo & Associados

Av. Fontes Pereira de Melo
Edifício Aviz, 35, 18.º
1050-118 Lisboa
Portugal

+351 21 3121330

+351 21 356 29 08

lisboa@raposobernardo.com www.raposobernardo.com
Author Business Card

Trends and Developments


Authors



Raposo Bernardo & Associados (Praia) is an international full-service law firm, with practices in Africa (Angola, Cabo Verde, Guinea Bissau, Mozambique, and São Tomé and Príncipe) and Europe (Portugal, Poland and Spain). In Cabo Verde, with a team of 12 lawyers locally and abroad, the firm offers more than 20 years of local experience by participating in the most innovative and relevant projects, regularly representing the interests of national and international players, investment and commercial banks, investment funds, financial intermediaries, governmental entities, and public sector and private agents in legal matters concerning banking, energy, aviation, pharmaceuticals, tourism and leisure, and construction and infrastructure. The firm’s expertise includes advising on operations such as: corporate finance and major project finance; large M&A transactions; privatisations; PPP projects; large infrastructure projects; drafts of banking, financial markets and insurance legislation; and working closely with major international law firms.

Introduction

The economic environment in Cabo Verde is favourable to foreign investment. Cabo Verde is currently experiencing a downturn as a consequence of the COVID-19 pandemic, but the government is adopting the necessary measures to deal with the situation and to reduce COVID-19’s consequences, both in the labour market and in the sectors of the economy affected by the pandemic, such as in tourism sector, which has a big impact on the national economy.

Cabo Verde actively encourages private investment and is used to receiving foreign investment. The country grants to foreign investors a wide range of benefits and guarantees. For example, companies incorporated with foreign capital are considered as local companies, the property rights of investors are protected and respected, the possibilities of expropriation are limited and always subject to compensations, there is the right to recourse to courts in case of litigation, and IP rights are also protected.

The following are also noteworthy: the cancelation of any licence or permit is not allowed without a previous judicial process; the foreign investor can freely import the goods or materials for its project and can also export the goods it manufactures; foreign investors are granted access to internal or external credit. Investors are also allowed to transfer abroad the dividends received and the amounts resulting from the liquidation of their activity, indemnities and royalties, among others.

Cabo Verde is party to investment protection bilateral agreements with several countries, such as Mauritius, China, Angola, Portugal and Germany, as well as the OPEC Fund.

Privatisation

In 2021, one of the key points for the market in Cabo Verde will be the privatisation of some public entities and concession of public services/infrastructure. The government has announced important privatisation programmes of companies acting in strategic sectors of the country’s economy. The COVID-19 pandemic has delayed the privatisation processes, but it is expected that that they will be resumed in 2021 and investment opportunities in some of the economy key sectors will subsequently appear.

The companies to be privatised in Cabo Verde are active in a broad spectrum of areas, including: airport and air safety; handling; ports; shipyards; electricity or water supply; fuel distribution; post mail; telecoms; pharmaceutical production and distribution; fisheries; and the stock market. These are companies that have an important internationalisation potential, mainly for the Africa markets, and that act in fast-growing sectors.

There is an increasing emphasis on the digital sphere, and it is expected there will be a heavy investment in the health sector in order to improve the local population's safety as well as creating a trustworthy environment for sectors such as tourism, hospitality and transportation. Utilities will also be under the spotlight, as always.

African Continental Free Trade Area (AfCFTA)

Another important driver for foreign investment is the fact that, since 1 January 2021, Cabo Verde belongs to the world’s largest free trade area, the African Continental Free Trade Area (AfCFTA). The AfCFTA promises a circle of greater market opportunities, triggering more trade and investment, and allowing greater value addition and productivity growth.

Cabo Verde is a safe investment destination and can be used by the foreign investor as entry into the AfCFTA. Its geographic location between America, Africa and Europe means that it serves as an entrance door for several markets, such as the Economic Community of West African States (ECOWAS). Cabo Verde has a skilled workforce, being the third-ranked country in Africa in terms of human development and quality of life, as well as being the fourth-ranked country in Africa in terms of IT. It is also a mature democracy. The AfCFTA will work towards a continental customs union, elimination of tariffs on 90% of intra-African goods, inclusion in the movement of capital and people between countries, facilitation of external investment and reduction of non-tariff barriers.

AfCFTA was signed by 54 out of the 55 African Union member states (Eritrea being the exception). It is a framework agreement including the following protocols: trade in goods, trade in services, intellectual property rights, competition policy, investment and dispute settlement. So far more than 30 countries have ratified the Agreement, which aims to connect 55 countries, creating a market of 1.3 billion people. There are a lot of opportunities, particularly in relation to manufacturing, agriculture, services and e-commerce.

New Tax Measures

The 2021 State Budget Law has now come into force. The following tax measures for 2021 are of particular significance.

VAT

There has been a reduction to 10% on the VAT applicable to hotels and similar facilities, as well to restaurants; formerly, the rate was 15%.

Young start-up incentive programme (Programa Start-up Jovem)

The following incentives apply from 1 January 2021:

  • a 2.5% corporate income tax (Imposto sobre o Rendimento das Pessoas Coletivas, IRPC) rate applicable in the first five years of activity, from 1 January 2021 onward – this rate applies to information, communication and technology (ICT) and research and development (R&D) enterprises, regardless of the location of the head office or place of effective management;
  • a 5% IRPC rate applicable to the remainder of eligible enterprises, in the first five years of activity, from 1 January 2021 onward;
  • exemption from customs duties, excise duty and VAT on the import of one vehicle for the transport of goods, comprising up to three seats in the cabin, including the driver, with a maximum age of five years, intended exclusively for the respective activity;
  • exemption from import duties on the import of raw and subsidiary materials, materials and finished and semi-finished products intended for incorporation into products manufactured within the scope of industrial projects – the incentive shall apply provided that the entities are certified and registered at the Industrial Registry, during the installation, expansion or remodelling phase;
  • exemption from stamp duty on financing agreements for the development of the respective activities;
  • reduction of 50% of the fees due on notarial acts and registrations due on the purchase and sale of real estate for the respective installation;
  • companies whose place of effective management is located outside the municipalities of Praia, São Vicente, Sal and Boa Vista, shall benefit from a tax credit of 50% of the CIT assessed (not applicable to ICT and R&D activities).

Incentives for investment companies

Any resident or non-resident entities with permanent establishment in Cabo Verde that make cash capital contributions to companies eligible under the aforesaid start-up programme or to companies based in municipal territory with an average GDP per capita in the last three years below the national average, as well as to micro and small companies, can deduct part of these contributions up to 2% of tax assessed in the previous tax year (conditions apply).

This benefit is not cumulative, with the tax benefit regarding conventional remuneration of share capital foreseen in the Tax Benefits Code. 

Acquisition of equipment and accounting and invoicing software

An additional deduction of 30% is allowed for IRPC purposes in respect of the costs incurred in the acquisition of equipment, as well as accounting and invoicing software for the purposes of electronic invoicing and the Standard Audit File for Tax Purposes Cabo Verde (SAFT-CV).

Job creation

Natural and legal persons (the latter being taxed under the organised accounting regime) that hire people younger than 38 years of age for a first job shall continue to be exempt from social security contributions. This benefit applies only to contracts with a duration of one year or more, which refer to workers registered with social security and vacancies which have not resulted from job reduction or elimination.

Hiring of unemployed people

The taxpayers covered by the organised accounting regime shall be entitled to a tax credit of CVE20,000, per each unemployed person hired for a minimum 12-month period.

Professional internships

The taxpayers as well as individuals taxed under the organised accounting regime may benefit from a tax credit amounting to CVE20,000, for each trainee hired for a minimum of six months.

Incentives on the import of transport vehicles for tourists

The following is exempt from customs duties, excise duties and VAT: the import of heavy passenger vehicles for collective transport of passengers, duly equipped, not more than six years' old, comprising more than 30 seats including that for the driver, intended for exclusive transport of tourists and baggage, when imported by companies holding a licence and a tourist transport permit. 

Electric mobility

The import of electric vehicles, including two-wheeler vehicles, are exempt from VAT and customs duties. Also exempt from VAT and customs duties are the import of new rechargeable batteries for electric vehicles, including their connectors, shields, connecting cables and meters, intended exclusively for charging. Additionally, the referred vehicles are also exempt from parking fees.

Import of food, medicines and irrigation materials

Under the National Programme of Actions against Land Degradation and Mitigation of Drought Effects, the importation of pasture, food and other products vaccination and deworming of animals, as well as of materials for drip irrigation, is exempt from payment of:

  • import duties;
  • VAT; and
  • fees, contributions, emoluments, costs, including community tax, charged by entities involved in the licensing and customs clearance process for goods.

Seawater desalination plant

The import of machinery, equipment and its accessories and spare parts, as well as all types of material necessary for the water desalination process for use in agriculture, carried out by companies duly licensed and authorised by the sector are exempt from import duties and VAT.

Also, the imports of photovoltaic panels and respective inverters for the production of electricity based on solar energy, batteries for use exclusive in the storage of solar energy produced to be used in the water production process for agriculture, carried out by companies duly licensed by the sector, are exempt from import duties and VAT.

Therefore, in conclusion, it is expected there will be an increase in foreign investment through the opportunities provided by the privatisation programme and the fact that Cabo Verde belongs to the world’s largest free trade area, the African Continental Free Trade Area (AfCFTA), since 1 January 2021, combined with some attractive tax incentives.

Raposo Bernardo & Associados

Av. Fontes Pereira de Melo
Edifício Aviz, 35, 18.º
1050-118 Lisboa
Portugal

+351 21 3121330

+351 21 356 29 08

lisboa@raposobernardo.com www.raposobernardo.com
Author Business Card

Law and Practice

Authors



Raposo Bernardo & Associados is an international full-service law firm, with practices in Africa (Angola, Cabo Verde, Guinea Bissau, Mozambique, and São Tomé and Príncipe) and Europe (Portugal, Poland and Spain). In Cabo Verde, with a team of 12 lawyers locally and abroad, the firm offers more than 20 years of local experience by participating in the most innovative and relevant projects, regularly representing the interests of national and international players, investment and commercial banks, investment funds, financial intermediaries, governmental entities, and public sector and private agents in legal matters concerning banking, energy, aviation, pharmaceuticals, tourism and leisure, and construction and infrastructure. The firm’s expertise includes advising on operations such as corporate finance and major project finance; large M&A transactions; privatisations; PPP projects; large infrastructure projects; drafts of banking, financial markets and insurance legislation; and working closely with major international law firms.

Trends and Development

Authors



Raposo Bernardo & Associados (Praia) is an international full-service law firm, with practices in Africa (Angola, Cabo Verde, Guinea Bissau, Mozambique, and São Tomé and Príncipe) and Europe (Portugal, Poland and Spain). In Cabo Verde, with a team of 12 lawyers locally and abroad, the firm offers more than 20 years of local experience by participating in the most innovative and relevant projects, regularly representing the interests of national and international players, investment and commercial banks, investment funds, financial intermediaries, governmental entities, and public sector and private agents in legal matters concerning banking, energy, aviation, pharmaceuticals, tourism and leisure, and construction and infrastructure. The firm’s expertise includes advising on operations such as: corporate finance and major project finance; large M&A transactions; privatisations; PPP projects; large infrastructure projects; drafts of banking, financial markets and insurance legislation; and working closely with major international law firms.

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