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10.1. Specific Incentives

Cape Verde offers the following incentives to investors:

Incentives for Investments

Qualifying investment projects made under the Investment Law (Lei de Investimento - Law 13/VIII/2012, of 11 July) can benefit from certain tax credits and contractual tax incentives.

Tax Credits/ Incentives

The following tax credits are granted to qualifying investment projects, subject to certain conditions:

  • Corporate tax credit of up to 30% (previously 50%) for investments made in the specified sectors such as health sector, environment, creative industry, tourism, touristic promotion and real estate, industrial activity, air and sea transportation services, port and airport services, production of renewable energy, production and assembly of renewable energy equipment, research and development (R&D), and development of information and communication technologies; and
  • Corporate tax credit of up to 20% (previously 30%) for eligible investments made in other sectors, provided the taxpayer files an annual tax return along with documentation evidencing the investments made;

The above tax credits can be used in the year of investment for up to 50% of the corporate tax liability. Any excess can be carried forward for 10 years.

Further, the following incentives are available to qualifying investment projects, subject to certain conditions:

  • Exemptions from property tax ('IUP'), stamp duty, on the acquisition of immovable property and other assets related to the investment project or its financing; and
  • Customs duties apply at a reduced rate of 5% (previously exempted) on the importation of certain types of goods relevant for an investment project.

Convention of Establishment / Contractual Tax Benefits (Convenção de Estabelecimento)

Qualifying investment projects under the Investment Law are eligible for certain incentives relating to import duty, corporate tax, IUP or stamp duty. The incentives are agreed to in a convention between the investor and the government (subject to approval by the Council of Ministers) and may be in the form of exemption, deduction, accelerated depreciation, or reduction of tax rates.

The types of incentives are based on the amount of investment and location. The exemption is granted for a maximum period of 5 years and may be revoked in certain cases as per the law.

The incentives are subject to fulfilment of the following conditions:

  • Promoter of investment possesses technical and managerial skills for said investments (except projects registered in the Cape Verde Investment Office);
  • The investment value is more than CVE 3 billion (previously 550 million) in general, and more than CVE 1.5 billion for investments made in municipal areas with an average GDP per capita lower than the national average in the last 3 years;
  • The investment is made for the promotion and acceleration of economic development, under the government's program; and
  • The investment leads to the creation of at least 20 qualified jobs in general, or  at least 10 qualified jobs in case of investments in municipal areas with an average GDP per capita lower than the national average in the last three years.

Incentives for Differentiated Merit Investment Projects (Projetos de Mérito Diferenciado or PMDs)

The Differentiated Merit Investment Project regime introduced on 26 March 2020 applies to companies meeting specified criteria, and to such companies PMD status is granted. The criteria include an investment threshold equal to or greater than CVE 1.5 billion, use of environment-friendly technology, and creation of at least 5 qualified jobs (i.e., jobs that require specialized technical training).

Under this regime, companies with PMD status are entitled to the following benefits, subject to certain conditions:

  • Corporate tax credit of 30%. A higher credit of 40% (capped at 50% of corporate tax assessed) applies for municipal areas with GDP per capita lower than the national average;
  • Customs duty at a reduced rate of 5% on import of specified materials, goods,  equipments and other assets and spares relating to investment project;
  • Exemption from customs duties on import of raw materials, consumables, finished and semi-finished materials, and other items used in product manufacturing by the company. The exemption is also available for packaging and wrapping materials used in products manufactured by the company, relating to the main purpose of the investment projects;
  • Exemption from property-tax (‘IUP’) on acquisition of real estate exclusively for installation of investment project. Additionally, the IUP on development activities relating to the real estate is also exempt for the first 5 years after the acquisition of the real estate in case of investments in municipal areas with GDP per capita lower than the national average; and
  • Other non-tax incentives such as funding of up to 80% of human resource costs in the first year.

Taxpayers with the PMD status may also claim the contractual tax benefits mentioned above if the respective requirements are met. However, such benefits cannot be cumulated with the above incentives available under the PMD status.

Incentives for Industrial Activity

The following tax and customs benefits are provided to taxpayers engaged in industrial activities:

  • A corporate tax credit is available for up to 50% of the eligible investments made in  industrial activity. Any unused tax credit may be carried forward for ten years, subject to certain limitations;
  • Eligible investments include the acquisition of new fixed assets, patents, and licenses regarding technologies;
  • Industrial activities may benefit from an exemption from property tax (IUP) on the acquisition of immovable property used exclusively for industrial purposes subject to approval by the municipality;
  • Exemption from customs duties on the importation of construction material, machines, utensils, semi and finished materials, products, and raw materials used in the production of goods; and
  • Exemption from stamp duty on financing transactions pertaining to industrial projects.

Incentives for Internationalization of Cape Verdean Companies

The regime provides for tax and financial incentives for investment projects in order to promote the internationalization of Cape Verdean companies.

The following incentives are granted under a contract of not more than three years to internationalization projects of companies, with head office and place of effective management in Cape Verde, that is undertaken before 31 December 2020:

  • Reduced corporate tax rate up to 50%, applicable until the term of the investment contract;
  • Tax exemption  on income obtained by qualified expatriate employees;
  • A deduction for creation of employment ranging between CVE 26,000 and CVE 35,000 for each new job created;
  • Exemption from property tax (‘IUP’) on the acquisition of immovable property for the establishment or expansion of the activity of the investor;
  • Exemption as per applicable VAT regulations and customs laws; and
  • Exemption from stamp duty on the incorporation of companies or on increase of share capital of existing companies and on financing transactions.

Incentives for International Business Centre ('IBC') (Centro Internacional de Negócios or CIN)

Companies licensed to operate in the Cape Verdean International Business Centre can benefit from a favourable tax regime. The Cape Verdean Agency for Foreign Investment is responsible for granting licenses to companies to operate within the IBC. The IBC includes three separate centers in which three different activities may be undertaken, which are as follows:

  • The International Industrial Centre ('CII');
  • The International Commercial Centre ('CIC'); and
  • The International Services Centre ('CIPS').

Effective 29 April 2020, tax benefits apply to income derived from all activities undertaken by entities operating in the IBCs. Previously, the tax benefits applied only in respect of income from activities carried out with other IBC licensed entities or with non-residents entities (without a permanent establishment in Cape Verde).

Further, effective 29 April 2020, CIPS entities are required to have minimum operational expenses relevant for carrying out the licensed activity.

These tax benefits do not apply to entities engaged in tourism, banking and insurance, real estate, or construction.

The following benefits are provided:

  • Reduced corporate tax rates for entities licensed to operate within CII and CIC (depending on jobs created)
    • 5% for entities with 10 (previously 5) or more dependent workers;
    • 3.5% for entities with 20 or more dependent workers; and
    • 2.5% for entities with 50 or more dependent workers;
  • Reduced corporate tax of 2.5% for entities licensed to operate within the CIPS and having at least 4 dependent workers;
  • Shareholders of the entities licensed to operate within the IBC are exempt from taxation on dividends, and interest received;
  • Exemptions as per applicable VAT regulations and customs laws;
  • Exemption from property tax (IUP) on the acquisition of immovable property to be used exclusively for the activity of the IBC; and
  • Exemption from stamp duty on financing transactions.

Incentives for Special Economic Zones (Zonas Económicas Especiais or ZEEs)

Effective 20 June 2020, qualifying activities and investments in the Special Economic Zone (SEZ) are eligible for tax benefits, customs duty exemptions, and other benefits that are available to the IBCs (as given above) after necessary adjustments. These benefits are subject to the fulfillment of certain conditions.

Incentives for the Savings and Financial Sector

The Tax Benefit Code provides for several tax incentives for the financial sector, which are as follows:

  • Financial Investments - Income derived from certificates of deposit and long-term bank deposits benefit from a corporate tax exemption of up to 75% (depending on the maturity date of the deposits);
  • Long term financial investments - Income derived from certificates of deposit and long-term deposits for a period exceeding 5 years are taxable at 50% of the value if the maturity period is between 5 and 8 years and are taxable at 25% of the value if the maturity period is over 8 years. The benefits also apply to insurance products from insurance companies established in Cape Verde provided:
    • the capital invested is blocked for a minimum period of 5 years; and
    • the remuneration is due at the end of the contractual period;
  • Securities Market (Bonds) - Income derived from bonds or similar products (except public debt securities), listed in the securities market, obtained until 31 December 2025 (previously 31 December 2017) benefit from a reduced corporate tax at a flat rate of 5%;
  • Additionally, dividends from shares listed on the stock exchange, placed at the disposal of its holders until 31 December 2025 (previously 31 December 2017), are exempt from corporate tax;
  • Investment in security funds - The following tax benefits are available for income derived from securities’ funds, when established and operating under the Cape Verdean legislation:
    • an exemption from corporate tax (except capital gains);
    • a reduced corporate tax at a flat rate of 10% on foreign income(except capital gains); and
    • a reduced corporate tax at the rate of 10% on capital gains;
  • Investment in real estate – Real estate income is subject to corporate tax at the rate of 10% (after deduction of the respective expenses).
  • Capital gains on property is subject to corporate tax at the rate of 15% on 50% of the income, resulting in an effective rate of 7.5%;
  • Corporate tax exemption on income received by unit holders in securities funds and real estate investment funds, established under Cape Verdean legislation; and
  • Investments in Venture capital funds - Corporate tax exemption on income from venture capital funds, established under Cape Verdean legislation, as well as income received by the unit holders in venture capital funds.

Incentives for Renewable Energies

There is a regime for promotion, encouragement, access, licensing and exploitation of renewable energy sources, such as water, wind, solar, biomass, biogas or industrial, agricultural or urban waste, oceans and tides, and geothermal, etc. Under the regime, renewable energy producers are eligible for the following incentives:

  • Corporate tax credit is available for up to 30% (previously 50%) of the eligible investments made in renewable energies projects;
  • Customs duties and other customs charges at a reduced rate of 5% (previously exempt) applies on the importation of capital goods, raw materials, and supplies, finished and semi-finished products, and other materials that are incorporated or used in the production of goods or services involved in the production of electrical energy from renewable sources; and
  • Exemptions from property tax (IUP) and stamp duty are granted on the acquisition of immovable property and other assets related to the investment project or its financing.

Incentives for Shipping Transport Industry

The following tax and customs benefits are provided in respect of investment projects related to shipping, air, and sea transportation:

  • Corporate tax credit is available for up to 30% (previously 50%) of the eligible investments;
  • Customs duties at a reduced rate of 5% (previously exempt) applies on the importation of shipping material for the maintenance, production, and repair of shipping and related equipment; and
  • Exemptions from property tax (IUP) and stamp duty are granted on the acquisition of immovable property and other assets related to the investment project or its financing.

Incentives for Projects with Touristic Status (Estatuto de Utilidade Turística)

Cape Verde grants touristic status to various types of tourism projects and grants various tax incentives and benefits, including:

  • Corporate tax credit of up to 30% for eligible investments in tourism, tourism promotion activities, and real estate tourism projects;
  • Property tax (IUP) exemption on acquisition of real estate for the construction and installation of touristic projects subject to the approval of the municipality;
  • Custom duties at a reduced rate of 5% on the importation of materials and equipment used in touristic projects; and
  • Stamp duty exemption on financing of tourism investments.

Incentives for Media, telecommunications, and Internet

An exemption from customs duties is available on import of goods, materials, and other equipment exclusively for the purpose of telecommunications and media.

Special Regime for Credit Institutions with Restricted Authorization (ICAR)

Credit institutions with restricted authorization (Instituições de crédito de autorização restrita) (ICAR) licensed before 31 December 2018 could avail the following tax benefits:

  • Reduced corporate income tax at the rate of 10% applies until 31 December 2021 (not applicable on profits derived from transactions with residents); and
  • Customs duties exemption on the importation of materials and equipment that are exclusively used for the establishment of the entity.

The general corporate tax regime applies for ICARs that are licensed on or after 1 January 2019.  

Effective 24 March 2020, the legal regime for ICAR was revoked. However, a transitional regime is in place until 30 December 2020, allowing an existing ICAR to amend its articles of association and internal organization to operate as a generic authorized financial institution.

Incentives for Savings and Credit Cooperatives and Micro Banks

The following tax benefits are available for savings and credit cooperatives, and micro banks:

  • Corporate tax exemption for 3year period computed as of 1 January 2019, provided the profits are not distributed or are reinvested in social projects undertaken by non-profit organizations; and
  • Customs duty exemption on import of raw materials and equipment for the purpose of installation.

COVID-19 Emergency Measures

In response to the COVID-19 pandemic, Cape Verde announced an additional corporate tax deduction of 30% on certain eligible expenses incurred from 25 April 2020 onwards for the acquisition of personal protective equipment, cleaning equipment, and services, etc.