Guide to Investment on the Cape Verde Islands

The Purchase Procedure

Preliminary Procedures

Once the property has been chosen and before entering into any purchase, the

Buyer should visit the Land Registry (Conservatoria del Registro Predial), to apply

for a certificate “registo predial” to verify the description of the property and all

records relating to it in effect and from which you can reliably verify if there are any

burdens, liens or encumbrances on the property, especially mortgages, easements,

etc.

Another important task is to obtain confirmation from the Town Council that a

license to inhabit the property (“licença de habitação”) has been issued (when

dealing with an urban property) or a map situating the property if it is a plot to

build on, as well as obtaining the tax value of rural property.

FIRST.- Reserving the property

In a preliminary phase to the purchase operation, the Seller usually requires the

Buyer to reserve the property and the reservation is carried out by the payment of

a “reservation deposit” that varies between 2,000 and 8,000 Euros, which are

usually deductible from the purchase price once the down-payment has been

confirmed.

SECOND.- Purchase Commitment Contract

Real-Estate property transactions on the Cape Verde Islands are usually reduced to

a Purchase Commitment Contract which details such elements as the identity of the

parties, the description of the property, the price, the method of payment, date

foreseen for signature of the public purchase Deed and other conditions agreed

upon. With regards to a private purchase contract, the Purchase Commitment

Contract does not carry any type of administrative or other taxation. Upon

signature of the Purchase Commitment Contract, the Buyer is requested to pay a

down-payment that normally is between 10% and 20% of the price of the property.

The Purchase Commitment Contract is binding and a breach of it will mean that the

Buyer shall lose the deposit or the Seller have to reimburse double the amount

collected, if it is she/he who breaches the agreement.

THIRD – Private Sales Contract

All Real-Estate transactions are subject to Public Purchase Deed and must be duly

recorded in the Land Registry (Conservatoria de los Registros Prediales), by means

of a Notary Public, legally guaranteeing the property. The Public Purchase Deed is

granted by the Notary Public in her/his presence on the Cape Verde Islands. The

ownership rights to the property are transferred in this document, which must

reflect the clauses previously agreed upon in the Purchase Commitment Contract.

The Public Purchase Deed implies payment of the Notarial fees set out in Legal

Decree number 43/90, of June 29, and are around 1.5% of the purchase price of

the property. It takes about one month for the granting of the Public Purchase

Deed to be final once all requirements for it are complete.

FOURTH – Payment of Taxes and other Expenses

Taxes applied to the Purchaser:

Wealth Tax (IUP) is a local tax, with a one-time 3% of the value of the property. In

the case of a donation, the IUP will be applied to the value assigned the property by

the Tax Authorities. Once the application of the principle of territoriality in regards

to taxation is applied on the Cape Verde Islands, the tax is owed by the Buyer

whether or not she/he is a resident of the Cape Verde Islands. The Buyer has up to

30 days after signature of the Public Deed, to pay the IUP, at the Municipal Council

where the property is located.

Taxes applied to the Seller

The Seller might, depending on the value of the property, have to pay capital gains

taxes. This shall happen when, at the time the property is transferred, even if it is

free of charge, the difference between the sales value of the property exceeds the

value of the purchase by 30% (capital gains tax). Taxes will be calculated above

that difference at a sole tax rate of 3% whether or not the Seller is a resident of

Cape Verde, within 30 (thirty) days of signature of the Public Purchase Deed.

Should the plot not yet be built upon, the IUP will only be paid if the purchase value

of the land exceeds two times the purchase value. The taxable act liable for IUP is

always verified when ownership rights on a property are transferred.

Costs Associated with the Property

Once an Owner has acquired Real-Estate property on the Cape Verde Islands,

(whether or not a resident) she/he will be subject to the Single Tax on Property

which will be settled on the Owner of the property (by December 31 of each year),

at a tax rate of 3% over the “property tax value” of the property. This value

corresponds to 25% of the property value attributed to the property by a

Permanent Evaluation (the value is recorded in the “matriz predial” or Land Tax

Office). This value is accrued by December 31 of each year and must be settled by

April 30 of the following year. Payment can be made in two instalments, on April

30 and September 30 of each year.

Income Derived from Rentals

Owners of properties that generate income must present a yearly income statement

and the IUR (Single Tax on Returns) is applicable to individual persons residing on

the Cape Verde islands who collect revenue there. Rental income is subject to a

20% tax rate over profits yielded and non-residents are able to deduct up to almost

730 Euros (80 thousand Cape Verde Escudos), to which another more than 10%

can be added for expenses derived from maintenance and preservation of the

property.

If the property is rented to an entity that does organised accounting, the company

can withhold 10% of the value of the rent. In the tax declaration the Owner must

then indicate the amounts withheld to be credited to her/him at a later date.

FIFTH – Granting the Public Purchase Deed and Registering Ownership

Rights

The final step in the process to purchase property on the Cape Verde Islands is that

of recording the purchase before a Notary Public (“Conservatoria del Registo

Predial” or Land Registry). The record will only be accepted by the “Conservatoria”

after confirmation of payment of the IUP. Having the purchase of the property

recorded implies the payment of fees and registry rates which reach approximately

1.5% of the purchase price.

Incentives to Foreign Investment

The entry of the Cape Verde Islands into the World Economy and the

development of their private sector, aided by the arrival of large foreign investment

groups key to the development of the country, have brought about the need for the

establishment of legal conditions that not only offer attractive incentives for

investment, but also set up a framework of security to help and ensure that foreign

investors can safely operate in the country.

Along these lines of expansion and modernisation, Law 90/IV/93 (ex Law

89/IV/93) was approved, and establishes the general conditions for carrying out

foreign investment in the Republic of Cape Verde including all rights, guarantees

and incentives that the investor is entitled to and complimented by the Procedures

Decree Decreto Regulamentar 1/94 of January 3.

According to the Law, exterior investment is considered to be all

participation in economic activities carried out with contributions from outside the

country and that can be valued financially. For outside investments considered as

such, the Government of Cape Verde, by means of the Law itself, guarantees no

discrimination against foreigners, granting fair treatment regarding the safety and

protection of foreign-owned goods and rights, as well as the guarantee that they

cannot be expropriated or nationalised, except in event of public use.

The Law also guarantees investors the ability to transfer out of the country

all currency in amounts that the investor is entitled to as a result of duly recorded

foreign investment financial operations.

Lastly, the Law grants the foreign investor tax-exemptions on profits and

dividends obtained derived from authorised outside investments, of two different

types:

a) During a five-year period from the date of the investment.

b) As long as it be reinvested, according to the terms established by Law, in

the same or another economic activity in Cape Verde.

As an additional advantage, the Law also establishes a privileged tax regime

for those investments which, once the exception period has been completed and

the amounts have not been reinvested, a mere 10% rate will be applied to profits

and dividends, which represents 50% of the tax on the Single Gains Tax applied to

non-residents individuals (currently established at 20%).

This general regulation is complemented by different sectoral special types

contained in the specific provisions and of which, because of their importance, we

can mention the following:

- Industrial Statutes established by Legal Decree Decreto Lei 108/89,

of December.

- Free Economic Corporation regulated by Law 99/IV/93, of

December 31.

- Incentives applicable to exports or re-exports regulated by Law

92/IV/93, of December 15.

- Tourism Statute regulated by Law 55/IV/2005, of January 10.

The entire group of regulations governing incentives, plus those which are

approved yearly together with the Republic's General Budget by means of adequate

fiscal planning, permit a reduction in tax burdens by approximately 50% of what is

normal, which is equal to approximately 10% on profits earned.

Enterprises and Commercial Code

The figure of the entrepreneur or enterprise, whether individual or collective,

is regulated by the Commercial Business Code approved by Legislative Decree

3/99, of March 29, complimented by Decreed Law 59/99, of September 27, which

regulates the Company Registry; Portaria 45-A/99, of September 27, which

regulates fees for the Company Registry and Portaria 45-B/99, of September 27,

which approved the models of forms used by the Company Registry.

Companies and Commercial Enterprise Code

There are several business types foreseen by Cape Verde legislation and that

may be used by foreign investors. Each company type has distinct characteristics

that permit investors to choose any one of them that best adapt to the business's

interests.

The regulatory decree contemplates five types of companies: three with

limited responsibility for the partners (Company by quotas, Public Limited

Corporation and Cooperative) and two with unlimited responsibility (Collective

Partnership Company and Limited Partnership Company).

The regulating decree also contemplates three types of contractual

cooperation between corporations: the Consortium; Association by Participation and

Complementary Business Group.

It is furthermore quite usual on Cape Verde to find “single-proprietor

businesses”, where they may only be configured as Public Limited or Limited

Liability companies.

A company may be incorporated by means of a written company contract or

Articles of Association that may be public or private, unless the participation of any

one of the partners must be by means of contributing goods the transmission of

which require public deed, in which case the corporate contract must also be

formalised in the same manner.

In general and independent of what has been established for each type of

company, the Articles of Association must include the following:

a) Names or company names of all founding partners and their

remaining identification data.

b) Type of company.

c) Name of the company.

d) Address of the company.

e) Company capital, which must be expressed in Cape Verde

Escudos, except in those companies in collective names in which all partners

contribute only industry.

f) The share of capital and nature in which each partner participates

and amount outlaid to the account of each share.

g) If the contribution is made in goods other than money, a

description of them and their monetary value must be specified.

h) The closing date of the company's accounting year if this does not

coincide with the calendar year, with the limitation that said date must fall

on the last day of a month on the calendar.

Limited Liability Company

The Limited Liability Company is the basic type of limited responsibility

corporation, characterised by the division of its capital into member's participation

quotas and, like all regulated companies, is incorporated by means of the

formalisation of a company agreement between the founding partners, which must

be at least two persons.

The Articles of Incorporation, apart from including the general obligatory

elements, can set up a contractual regime as decided upon by the founders, as long

as it respects regulations imperative in the Code, by means of its regulation via

Articles of Incorporation, Charter or the By-laws.

In the case of single-proprietorship Public Liability companies, they may only

be incorporated by individual persons and cannot participate in the incorporation of

other companies or acquire shares in other corporations.

Responsibilities:

The partners are jointly responsible for all obligations corresponding to the

value of the in-coming funds agreed upon in the Articles of Incorporation and are

not liable for corporate debts unless this is expressly established in the Articles of

Incorporation.

Limitations:

For this type of corporation, the share capital must be at least 200,000

Cape-Verde Escudos, equivalent to 1,814 Euros and the shares, which can have

different face value, may not be worth less than 10,000 Cape-Verde Escudos and

their face value must be in multiples of 1,000.

Contributions must be made in money and can be deferred up to half of their

value, as long as the sum of the initial contributions are equal to or higher than

contributions in industry.

Corporate Administration:

The administration of the corporation shall be carried out by Managing

Directors.

Supervision and Control:

The supervision and control of the corporation shall be done by a

Supervisory Board, if so set out in the Articles of Incorporation.

Public Limited Liability Company

The Public Limited Liability Company is the most elaborate and complex of

the legal figures contemplated in the Code. It is characterised by the possibility of

simultaneous or successive incorporation and its share capital must be divided into

shares. As with other companies, it is incorporated by means of Articles of

Incorporation agreed upon between the founding partners, which, as a general rule,

must be two.

Exceptionally, the figure of the Single-proprietorship Limited Liability

Company may be incorporated (transformed) when a single company gathers under

its control all the shares in a PLC, but this concentration of shares may only last for

one year, thus it must be regularised or suffer court dissolution of it.

The Articles of Incorporation, besides including the general obligatory

elements, may set up the contractual regime that the founders deem best, limited

by the regulations imperative in the Code, by means of its regulation by partnership

agreement or the By-laws, and in any case, must mention the following additional

details:

a) Number of the shares into which the share capital has been divided and if

they shall have face value or not;

b) Specific conditions, if they exist, to which the transmission of shares shall be

subject;

c) Categories of shares issued, with express indication of the number of shares

in each category and the rights attributed to them;

d) Whether the shares are nominative or issued to the bearer and the rules for

their eventual conversion;

e) The amount of capital paid in and time frame for disbursement of capital

subscribed;

f) The authorisation, if given, to issue new obligations.

Responsibilities:

Partner's responsibilities are limited to the value of the shares subscribed by

each one and they are not liable for corporate debts.

Limitations:

For this company type, the minimum social capital must be 2,500,000 Cape-

Verde Escudos, equivalents to 22,673 Euros and the shares, which must have the

same value, may not be for less than 1,000 Cape-Verde Escudos, unless the shares

are issued without a face value.

Contributions must be made in money or goods and up to 70% of their value

may be deferred for a maximum period of five years. This type of corporation does

not permit contributions in industry.

Corporate Administration:

The company shall be administrated by means of a Board of Administrators

made up of an odd number of members which can appoint an Executive Committee

of a maximum of three members and managing directors empowered to deal with

specific matters or actions.

Supervision and Control:

The supervision of the company shall be handled either by a Supervisory

Committee made up of three members or by a sole Supervisor.

Cooperative Companies

Characteristics:

1. They are companies with a variable number of partners and capital.

2. Freedom to join and depart.

3. The number of partners is unlimited, unless by legal imperative.

4. Each partner is entitled to one vote.

Limitations:

First degree Cooperatives may not be incorporated with less than six

partners and Consumer Cooperatives must have at least twenty partners.

Social capital must be materialised at the time of incorporation, by at least a

third of the total and may not be less than 200,000 Escudos.

Obligatory elements in the Articles of Incorporation:

1. Name of the company;

2. The address of the headquarters, of the establishments and any

representations that may exist;

3. The objectives, purpose and duration;

4. The partners must be identified;

5. Initial share capital, its disbursement and increase of the minimum

outlay subscribed;

6. Incorporation, competencies and operation of its administrative bodies;

7. Economic and financial operating regulations.

Collective Company

Responsibilities:

The partner is individually responsible for the amount of their capital

investment and for corporate obligations, unlimitedly, even those contracted

previous to their joining the company. They respond jointly with the remaining

partners, for the corporation. These responsibilities come to an end when the

partner removes their capital investment.

Obligatory elements in the Articles of Incorporation:

1. The type and characteristics of the participation of each partner, in goods

or services, and the value attributed to the goods.

2. The value attributed to the services which the partners contribute, with

regards to the distribution of profits.

3. The share of capital corresponding to the goods with which each partner

participated.

Limited Partnerships

Responsibilities:

Two types of partner:

1. Silent partners, who are responsible for debts up to the value of their

participation

2. Limited partners, who answer jointly for corporate debts in the same

terms as the partners in the corporation.

Two Types of Silent Partnerships:

1. Simple, in which partners may not compete with the company.

2. By shares, and cannot be set up with less than two silent partners.

General procedure to register a corporation

Application to the Conservatória de Registros for a certification

confirming the availability of the chosen name for the company.

Drafting of the Articles of Incorporation.

Obtaining a bank balance or certification of the deposit of at least

10% of the share capital.

Carrying out the formalisation of the Incorporation Deed before a

Notary Public.

Announcing the incorporation in the Official Bulletin of the Cape Verde

Government.

Registering the company at the General Directorate of Taxation.

Registering the company at the different competent government

departments and institutions, depending on the objectives of the

company.

Obtaining a certificate of registration at the Conservatória.

The immediate incorporation of companies is also permitted (only for limited

liability and public limited corporations), on the same day, at the public office at

what is called the “Casa do Cidadão” (Citizen's House), as well as the online incorporation of companies (Portaria 6/2008, of March 13).

© 2009 Planificaciones Mundiales S.L. The information contained herein is general in nature and is

not intended to convey specific personal or corporate data or circumstances. No matter how hard we try

to share information that is exact and current, we cannot guarantee that no changes will be introduced

in the future or at the time when access is required. For that reason, this information should not be

considered to be professional or expert counsel. For an exact and detailed study of your case, we

recommend that the details pertaining to it be studied exhaustively to obtain the pertinent professional

advice.