Cabo Verde is known for its good democratic functioning, political stability and for having advanced systems of political, institutional and economic governance, determining factors for attracting foreign investment. It is a dynamic and competitive country with agile and efficient institutions. It has a relatively well-educated, creative, innovative, productive and globally minded population. Its strategic geographic location between three continents, its extensive exclusive economic zone, its stability and free and preferential access to various markets are recognised as the main comparative advantages of Cabo Verde, and the potential that emerges from them constitute opportunities that are strategically and economically well exploited.

Technology

Cabo Verde is making a huge effort in the field of the digital economy and to develop its information technology markets. Recently, the government of Cabo Verde announced that the first Collective Intelligence Centre in Africa will be created in the country. This will occur during 2021 and it is expecting to create around 3,000 jobs for computer programmers over the next few years. It is also projected that the Collective Intelligence Centre will be an exponential accelerator of opportunities for youth and for both the Cabo Verdean and the wider African digital economy. It is anticipated that the digital economy will be the main driver for the development of Cabo Verde during the next decades and a set of reforms will be implemented in order to achieve this goal.

This initiative is part of the global strategy of transforming Cabo Verde into a technological centre in the Atlantic, in addition to other projects already underway such as the data centre, the technology park and the recent installation of the EllaLink submarine cable with capacity for 5G technology. EllaLink has a capacity of 30TB and it will allow greater capacity than all existing cables and ensure Cabo Verde’s communication with and connection to the world. The so-called Digital Agenda aims to contribute to the transformation of the country into a digital centre to accelerate the digital economy, through an improved digital infrastructure, reinforced demand for services and digital skills to improve competitiveness. The execution of this agenda is being co-financed by World Bank funds and is structured around four main pillars: (i) fundamentals and reform of the digital ecosystem (ICT policy, regulations and digital governance), (ii) trustworthy digital prerequisites (cybersecurity and data governance), (iii) training of government officials, and (iv) innovation.

To further this agenda, the creation of the Special Economic Zone for Technology (ZEET) at Cabo Verde Technology Park, in Praia and Mindelo was announced. The companies installed in the ZEET will benefit from a set of tax incentives.

Social Bonds

Another important trend for the next few years will be the issuing of social bonds. The Cabo Verde Stock Exchange (BVCV) announced that they will issue the first Social Bond in Cabo Verde to support greater social inclusion, job creation and promoting greater sustainability and development in the country. This should certainly lead to more activity in the sector and encourage the development of other similar projects.

Privatisations

One of the key events in the Cabo Verde markets in 20021 will be the privatisation of some public entities and the concession of some public services/infrastructure. Cabo Verde has announced important privatisation programmes of companies acting in strategic sectors of the country’s economy. The crises of the COVID-19 pandemic have delayed these privatisation processes, but it is expected that that they will be resumed in the second half of 2021 and investment opportunities in some of the country’s key economic sectors will be appearing shortly.

The companies to be privatised in Cabo Verde are active in a broad spectrum of areas. They include companies involved in the airport and air safety sector, ports and shipyards, electricity generation/distribution and water supply, fuel distribution, post and mail, telecommunications, pharmaceutical production and distribution, fisheries, and the stock market. These are companies that have significant potential for international growth, mainly in the Africa markets, and that act in fast-growing sectors.

The 2030 Transformation Agenda

There are a number of excellent growth opportunities in the future for Cabo Verde, taking into account the 2030 Transformation Agenda and the post-pandemic recovery plan. The challenges are immense and some require an urgent response, such as in the employment, tourism and access to finance sectors. According to information made available, the 2030 Transformation Agenda will consist of seven essential pillars:

• COVID-19 post-pandemic economy promotion plan;
• sustainable tourism development strategy;
• human capital development strategy;
• climate resilience and action strategy;
• decentralisation, regional development and convergence;
• financing of the economy; and
• post-pandemic private sector development.

This firm strongly believes that the implementation the of 2030 Transformation Agenda will provide a wide range of opportunities for both national and international investors who decide to invest in the country.

Tax Measures

In order to facilitate and attract investments to Cabo Verde several new tax measures were established in the 2021 State Budget Law. Some of the most important are set out below.

VAT

This has been reduced to 10% (formerly, 15%) where applicable to hotels and similar facilities, as well as to restaurants.

This also applies to tour operators – who are resident micro, small and medium-sized companies – on all combined services rendered in Cabo Verde in 2021.

Programa Start-up Jovem (Young Start-Ups Programme)

The following exemptions and reduced tax rates apply to start-ups which qualify for the programme.

• 2.5% corporate income tax (CIT) 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 is applicable to the remainder of eligible enterprises, in the first five years of activity, from 1 January 2021 onward.

• There is an 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.
• There is an 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; this incentive shall apply provided that the relevant entities are certified and registered at the Industrial Registry, during the installation, expansion or remodelling phase.
• There is an exemption from stamp duty on financing agreements for the development of the respective activities.
• There is a reduction of 50% on 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

Resident or non-resident entities with permanent establishment in Cabo Verde that make cash capital contributions to companies eligible under the  Young Start-ups Programme or to companies based in a municipal territory with 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 CIT purposes in respect of the costs incurred with 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 young people, aged not more than 37 years, 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 which have not resulted in job reduction or elimination.

Hiring of unemployed people

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

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

Electric mobility

The import of electric vehicles, including two-wheeled vehicles is exempt from VAT and excise duties.

The import of new rechargeable batteries for electric vehicles, including their connectors, shields, connecting cables and metres, intended exclusively for charging is also exempt from VAT and customs duties.

Import of food, medicines and irrigation materials

Under the drought mitigation programme, the import of pasture, food and other products for the 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

These are exempt from import duties and VAT where this relates to machinery, equipment, 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.

The import of photovoltaic panels and accompanying inverters for the production of electricity based on solar energy, batteries exclusively for use in the storage of solar energy produced for use in the water production process for agriculture, carried out by duly licensed companies, are exempt from import duties and VAT.