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Investor’s Guide

Friday, September 10th, 2010
For those of you interested in investing in the fabulous Cape Verde islands, please read our Investor’s Guide. Here you will find information that will assist you in making informed choices about setting up your company, employment of personnel and many other aspects connected with investment in Cape Verde.

Cape Verde Factbook

Country name : Conventional long form: Republic of Cape Verde
Official language : Portuguese
Mother language : Crioul
Capital city : Praia
Total land area : 4,033 km 2
Population : 434,812 inhabitants (2000 Census)
Domestic Currency : Cape Verdean Escudos (CVE)

Reasons for investing in cape verde

Economic and Political Stability

  • Absence of political, ethnic or religious conflicts;
  • Stable social and economic indicators.
  • Privileged Geographic Location

  • Halfway between North America and South Africa;
  • Halfway between South America and Central Europe;
  • Served by major regular north-south sea and air routes.
  • Preferential Access to Markets

  • Country of origin made products benefit from preferential access conditions to markets such as the EU, ECOWAS, USA (SGP and AGOA) and Canada (Memorandum of Understanding on LDC Initiatives).
  • Labour

  • Supply readily available;
  • Easily trained;
  • High level of productivity.
  • Foreign Direct Investment Incentives

  • Two industrial estates, with required facilities, services and equipment available;
  • International sea ports and airports with good capacity;
  • Efficient and competitive information and communication technology;
  • Water supply network and power grid available; ship repair yard and cold storage, processing of fish
  • Government Warranty

  • Non discriminatory policy, fair and just handling of issues;
  • Protection of goods and upholding of rights;
  • 100% repatriation of all legally earned profits in hard currency the investor is entitled to;
  • Freedom to open and maintain bank account in hard currency;
  • Hiring of expatriate workers.
  • Overall Incentives

    Cape Verde offers a set of important incentives, such as:

    Foreign Direct Investment
    Fiscal Incentives

  • 0% tax on dividends and profits to shareholders for a period of 5 years and/or whenever they are reinvested;
  • 0% tax on amortisations and interest falling on financial transactions that constitute foreign direct investment;
  • Stable Fiscal System (Personal Income Taxes of 10% after 6th year of business, without hindrance from benefiting from more favourable and foreseeable terms under bilateral agreements signed between Cape Verde and the country of the recipient investor).
  • Duty Free Enterprises (Special Tax System)

    Fiscal Incentives

  • 0% tax on duties, tariffs or other levies falling on profits for the first 10 years of business;
  • Following said tax exemption period, as foreseen under previous paragraphs, corporate tax on profits or on dividends to shareholders cannot exceed 15% of profits;
  • Furthermore, the duty free enterprise is entitled to full tax exemption and other indirect fiscal assessment namely stamp duty.
  • Customs Incentives

  • Customs duties exemption and excise duty exemption as applicable to the imports of equipment, construction material, fuel and lubricant to be used in manufacturing;
  • Special tax system regarding import of raw materials and others;
  • Duty free export.
  • Export-orientated Companies under Regular Tax System

    Fiscal Incentives

  • Reduced corporate tax rates for the first 5 years in business.
  • Customs Incentives

  • Tax exemption on raw materials, finished and unfinished goods used in the production of export-orientated goods and services;
  • The import of goods and materials to be incorporated in the production of export-orientated commodities is customs duty free, and exempted from excise duty and fees;
  • Freedom to export manufactured goods.
  • Incentives to Specific Sectors

    Industry

  • Customs duties exemption, excise duty, tariffs and overall customs fees on import of goods, equipment and materials as listed;
  • Corporate tax exemption on revenues generated by each new industrial unit registered for a period of 3 years;
  • Freedom to export manufactured goods;
  • Corporate tax deduction on reinvested profits.
  • Tourism

  • Customs duties exemption on the import of materials for the construction and running of hotel establishments, resorts, marinas, golf courses as well as other tourism-orientated undertakings;
  • Corporate tax exemption: 100% exemption for the first 5 years into business and 50% for the following 10 years;
  • Tax rates deduction on profits reinvested in similar activities;
  • Deduction of tax rate on taxable expenditures incurred with training of domestic workers;
  • Freedom to export manufactured goods.
  • Limit to Incentives

  • Is placed on the foreign direct investor engaged in business whose main goal is to supply the domestic market;
  • Is placed on foreign direct investment targeted at the financial sector as the sector is governed by specific law.
  • Business Opportunities

    Industry

  • Water, energy, confectionery, footwear, fish processing, sea salt, cement industry, porcelain, stoneware, earthenware, biscuit production, packing, furniture, commercial printing operations, preparation of feeds and feed ingredients for animals, beverages and soft drinks.
  • Building Industry

  • Production of agglomerates, cement-based products and the like, paints, mosaic tiles, roof-tiles, electrical fittings, household appliances.
  • Fisheries

  • Commercial fisheries, catch, processing, cool storage and sales of fish and fish products.
  • Agriculture

  • Coffee, wine, floriculture, ornamental plants, fruit tree production.
  • Services

  • Teleport, teledata, international ship’s register, catamarans, tourism and industry ancillary undertakings, commercial free trade zones, telecommunications;
  • West Africa shipping routes targeted at coastal trade, feeders and trunking services.
  • Tourism

  • Luxury hotels, resort, marina, golf courses, transportation, restaurants, recreational fishing, diving, inter islands transportation.
  • Privatisation

  • ENAPOR – Port Authority
  • CABNAVE – Shipbuilding Yard
  • EMPROFAC – Importação e Distribuição de Medicamentos
  • TACV – Domestic Flag Carrier (Airlines)

Bureaucratic Red Tape

Foreign Direct Investor Status

Application

Any foreign direct investment operation calls for a prior authorisation (paragraph 1, article 3, Law number 89/IV/93). The Foreign Direct Investor Status application should be addressed to the member of the Government responsible for Finance via CI. The dossier should contain three (3) copies of duly filled in official forms and the following:

  • Identification of the foreign direct investor;
  • Investor’s curriculum and bank references;
  • Intended site;
  • A descriptive project summary;
  • Annexes 1 and 2 (furnished by CI) duly filled in;
  • Environmental Impact Assessment (when applicable).

Delay
Any pronouncement made by the Minister of Finance and Planning is conveyed to the potential investor no later than 30 days after the date of submission of the dossier to CI-ACI. In the event CI-ACI requests additional information to be furnished by the investor, the time spent collecting and furnishing it does not count and the time limit stipulated is adjusted accordingly.

Foreign Direct Investor Certificate
In the event of a No Objection on the part of the Minister of Finance and Planning a Foreign Direct Investor Certificate is issued by CI. The Certifcate becomes void if the investment is not carried out within the timeframe it specifies.

Registration of Foreign Direct Investment
The foreign direct investment operations mentioned under article 5 of Law number 89/IV/93 are subject to registration with the Bank of Cape Verde. Three (3) duly filled in official forms must be submitted.

Inspecção do Empreendimento
In order to start business the undertaking must be duly registered which prompts inspection by the competent authority within 30 days of submission of an inspection note.

Status of Free Trade Companies

Application – Duly filled in form.

Delay

Same directives as under Foreign Direct Investor.

In the event CI-ACI requests additional information be furnished by the investor, the time spent collecting and furnishing it does not count and the time limit stipulated is adjusted accordingly.

Certificate In the event of a No Objection on the part of the Minister of Finance and Planning a Certificate of Free Trade of Company is issued by CI-ACI, a copy of the Certificate is furnished to the domestic authorities in charge of business and labour issues as well as to the applicant. The Certificate entitles the Foreign Direct Investor to access to incentives set in applicable legislation.

Remark
Only 100% export-orientated companies or those that sell their products to other companies operating in a free trade area of Cape Verde are entitled to apply for said status.

Setting up Business in CV
A would-be foreign direct investor willing to set up business in Cape Verde is given the following legal options for creating a company:

Setting up trading companies

Cape Verde sets the following classification of trading companies:

  1. Co-Partnership;
  2. Shareholder Society;
  3. Anonymous Society (or limited company);
  4. Limited Society or Joint-Stock Company;
  5. Co-Operative Society.

The most common forms are Shareholding Society and Anonymous Society (or limited company).

Business Set Up Process

In order to set up a business undertaking in Cape Verde a would-be investor should:

  1. Obtain a certificate of admissible evidence stating that there is no other company bearing same designation;
  2. Demand an original of registration of the trading society and the bylaws, as written by the business partners, with the Registry Office;
  3. Attach the counterfoil of bank deposit as evidence of deposit of amount equivalent to the jointly held capital funds;
  4. Following registration with the Registry Office publish in the Official Gazette (BO) the Bylaws or the business set up agreement;
  5. Obtain with the Directorate General of Tax Collection and Tax Law Enforcement the Fiscal Identification Number (NIF);
  6. Register with the Directorate General of Commerce in order to start commercial business.

As an alternative, a would-be investor is advised to contact (www.portondinosilha.cv) “Casa do Cidadão” if wishing to set up a Trading Company in just one hour.

Fiscal Guide

Single Income Tax (IUR)

IUR falls on the aggregate annual (calendar year) income, derived from different sources. The following are highlighted:

  1. property-derived income;
  2. commercial and industry-derived incomes;
  3. sales of services;
  4. income from agri-business and fisheries;
  5. income from capital investment (gambling income including winnings from lotteries as well);
  6. labour-derived income (self-employment and hired worker).

Under alternative minimum tax method of taxation, such as set under article 57 of Law number 1/96, January 15, 2002 the following tax rates apply:

Hired worker or retiree
Rates charged upon payment concerning incomes generated from the payment of receipts, provision of services and execution of tasks that fall into the category of liberal professions such as stipulated under Law number 1/96 of January 15, 2002.

Legal entities, be it private or public incorporations, judicial persons or not, are liable to pay single income taxes provided they have a head office or businesses domiciled in Cape Verde.

Non-domiciled companies or their equivalent entities, in possession of regular premises but without a head office, an acting board of administration or businesses domiciled in Cape Verde are entitled to pay income taxes falling on the incomes generated.

Individuals residing in the country, actively engaged in commerce, industry, agriculture or fisheries activities as their main source of income as well as premises of non-residents in business are liable to pay income taxes which fall on their statement of income.

In order to compute taxable income, net revenues and relevant inventory taking (positive or negative balance) for a given period must be known from established accounting records and ultimately validated under the terms of Single Income Tax regulation.

The marginal tax percentage applied to a taxpayer’s income bracket (“regular” tax method of taxation) is set at 25%.

The marginal tax percentage under “estimate” tax method of taxation is set at 15%.

The marginal tax percentage under “situation of liquidation” tax method of taxation falls on the following earnings at specified rates:

  1. Interest earned on current account deposits, such as applicable to all depositors, safe for deposits held by emigrants: 20%;
  2. The remaining earnings from capital investments safe for profits distributed by whatever method, including profits generated from the liquidation of business ventures and from investment societies: 15%;
  3. Income generated by non-residents even if they do not own premises, falling on the face value of the invoice: 20%;
  4. Income from gaming, betting:15%.

    Single Property Tax (IUP)

    The marginal tax rate of 2% applies to acts requiring Registry Office procedures.

    Stamp duty
    A stamp duty is due on sales invoices or other transactions and the provision of services.

    Other Information

    Insurance against Accidents at Work and Occupational Diseases

  • Class 1 – 2%
  • Class 3 – 6%
  • Social Security Expenses (Charged upon payment)

  • Expenses incurred by the company- 15%
  • Expenses incurred by the employee – 8%

Real Estate

The sale price of surface unit area in the Comprehensive Tourism Development Areas (ZDTI) varies. Any investor willing to buy real estate in any ZDTI should contact CI-ACI.

To acquire land located in industrial estates willing investors should contact the Municipalities.

Legislation

Foreign Direct Investment – Law number 89/IV/93, December 13;

Decree by Regulation – Law number 1/94, December 3;
Tourism Usefulness – Law number 42/IV/92, April 6;

Free Trade Company Bylaws – Law number 99/IV/93, December 30;

Incentives Applicable to Export and Re-export – Law number 92/IV/93, December 15 (Supplement to BO number 47/93);

Industry Bylaws – Law by Decree number 108/89, December 30;

Trading Companies Code – Legislative Ordinance number 3/99, March 29.

Annual Income Amount Tax %
Less than or Equal to 200,000CVE 0%
Up to: 385,000CVE 11.67%
Up to: 810,000CVE 15.56%
Up to: 1,620,000CVE 21.39%
Up to: 2,430,000CVE 27.22%
Over: 2,430,000CVE 35%

CI-ACI/August 2009
Institutions Telephone(+238) Fax (+238)
CI-ACI (Head Office) 2604110 / 11 2622657
Information Services (CV Telecom) 102
TACV – Cape Verde Airlines (Domestic Flag Carrier) 2608200 2618323
TAP – TAP Portugal (Portuguese Airline) 2615826 2611266
SAA – South Africa Airways 2411358/65 2411093/38
Chamber of Commerce (Sotavento) 2617234 2617235
Chamber of Commerce (Barlavento) 2328495 2328496

Major Sites
Government of Cape Verde www.governo.cv
CI- Cape Verde Investment Promotion Agency www.virtualcapeverde.net
National Institute of Statistics www.ine.cv
Bank of Cape Verde (Central Bank) www.bcv.cv
Cape Verde Telecom www.nave.cv