Cabo Verde - Investment law guarantees and protection

Investment law guarantees protection against expropriation, 30-day transfer rights and tax rates as low as 2.5% for technology companies

Cabo Verde has constructed one of Africa's most investor-friendly legal frameworks, combining constitutional protections against expropriation with guaranteed profit repatriation and corporate tax rates that can fall as low as 2.5 per cent. The regime targets foreign capital through bilateral investment treaties with nine countries and special economic zones offering rates well below regional norms.

The foundation is the Investment Law of 2012, amended in 2013, which operates within a Portuguese civil law system offering transparency and full ownership rights. Foreign investors can own 100 per cent of enterprises in most sectors without requiring local partners. The law treats domestic and foreign capital identically.

Constitutional protections and compensation guarantees

Investors receive explicit protection against requisition, nationalisation or expropriation of private property. Such measures can only occur for public interest reasons, must follow non-discrimination principles, and require adherence to strict legal procedures.

Compensation terms are specific. Any expropriation triggers "prompt, full and fair compensation" based on the current real value of the investment at the date public utility is declared. The law doesn't leave valuation to government discretion or future negotiation.

Disputes can be settled through international arbitration. The framework permits recourse to ICSID (Washington Convention) rules or International Chamber of Commerce arbitration in Paris if parties cannot agree on alternative mechanisms. Cabo Verde joined ICSID in 2011, providing investors access to the standard international investment dispute system.

For emigrant investors specifically—targeting the 500,000-strong Cape Verdean diaspora—the law adds extra guarantees. Enterprises cannot be confiscated, nationalised or expropriated without just cause and prior fair compensation. That compensation must be paid fully, without delay, and transferred freely to the investor's country of legal domicile.

The 30-day profit repatriation rule

Foreign investors can convert and transfer abroad all income derived from investments, provided they meet compliance requirements. The right hinges on registration with the Banco de Cabo Verde, the central bank. Registration occurs electronically through Cabo Verde TradeInvest, the investment promotion agency. Failure to register forfeits transfer rights.

Transferable funds include net operating profits, dividends, interest on capital, royalties, commissions for related services, compensation for expropriation or loss, initial and additional capital, and loan repayments with associated interest. Foreign workers and Cape Verdeans who lived abroad more than five years can also transfer income after meeting tax obligations.

The central bank must authorise transfers within 30 days of request or receipt of additional information. After that deadline, the bank becomes liable to pay interest at the 30-day LIBOR rate on deposited amounts. This creates financial penalties for administrative delays.

Foreign investors can open accounts in convertible currency with authorised financial institutions in Cabo Verde to conduct international transactions. The only exception occurs if transfers would cause serious balance of payments disturbances—in which case the central bank governor may mandate equal quarterly remittances over a maximum two-year period.

Tax rates from 20% to 2.5%

The standard corporate income tax rate fell from 25 per cent to 22 per cent in 2019, then to 21 per cent in January 2024, and 20 per cent for the 2025 fiscal year. That's the baseline before incentives.

Special regimes drive rates far lower. The International Business Centre offers reduced rates ranging from 2.5 per cent to 5 per cent depending on jobs created. Companies creating 50 jobs pay 2.5 per cent. Companies creating five jobs pay 5 per cent. Between 2011 and 2018, CIN companies received 90 per cent CIT reduction; from 2019 to 2025, the reduction is 85 per cent.

The Special Economic Zone for Technology—hosting TechPark CV in Praia and Mindelo—offers the most aggressive rates. Technology companies pay 2.5 per cent corporate tax during the first five years. They also receive exemptions from VAT, property tax, stamp duty and customs duties. This produces an ultra-low effective tax rate designed to attract R&D and innovation activities.

The São Vicente Maritime Special Economic Zone combines ZEEMSV and CIN-CV regimes for investments exceeding $2.7m (CVE275m). Tourism and hotel projects receive lower rates or temporary exemptions proportional to investment size and jobs created.

Contractual benefits for large projects

Projects of exceptional size or national interest can negotiate Establishment Conventions directly with the Council of Ministers. Eligibility thresholds were reduced in 2016 to democratise access: minimum investment of CVE3bn (approximately $30m), down from CVE10bn previously. Projects must create at least 100 direct jobs within three years, or 20 qualified positions in some sources.

These conventions exempt companies from customs duty, corporate income tax, property tax and stamp duty. Benefits cannot extend beyond 15 years, with the first five years potentially offering blanket exemptions. Crucially, the right to enjoy fiscal incentives cannot be revoked or diminished until the established period expires, provided conditions are maintained and obligations met.

A revised threshold applies to medium-sized foreign direct investment: CVE550m in Praia, Sal and Boa Vista, or CVE275m in other municipalities, plus creation of at least 10 jobs. This opens high-level incentives to projects smaller than the CVE3bn requirement.

Additional investment incentives

Eligible industrial investments receive tax credits up to 50 per cent of the amount invested. Companies can deduct CVE26,000-35,000 from tax due for each new job created, varying by municipality and whether the position employs a disabled person. Higher deductions apply in less-developed municipalities.

Capital gains on share sales are generally tax-exempt if shares were held for at least 12 consecutive months. Non-residents holding shares less than one year face a 20 per cent tax rate on gains.

Imports of goods connected to investment projects benefit from a 5 per cent customs duty rate. This applies to specific equipment and materials tied to the main project.

The Emigrant Investor Statute offers additional benefits targeting diaspora capital. Emigrants receive exemption from corporate tax on distributed dividends and profits from authorised external investment. Post-exemption, a 10 per cent single tax rate applies to profits and dividends. Emigrants also receive customs duty exemptions on materials for construction or renovation of first residences, plus furniture and appliances.

Bilateral investment treaties and international arbitration

Cabo Verde has signed bilateral investment treaties with nine countries: Angola, Austria, China, Cuba, Germany, Italy, Netherlands, Portugal and Switzerland, plus Mauritius. These agreements typically provide fair and equitable treatment, protection against expropriation, and guaranteed transfer rights.

The country is party to the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards, ensuring that international arbitration awards can be enforced domestically. This matters because contract disputes in emerging markets often turn on whether winners can actually collect.

One-stop shop and 75-day processing

Cabo Verde TradeInvest serves as the single point of contact for investors, operating the Balcão Único do Investidor—the One Stop Shop. The system aims to dematerialise and reduce bureaucracy by centralising services. Target response time for public administration is 75 days.

The agency provides after-care services supporting investors after they obtain Investment Registration Certificates during the project implementation phase. Information provided for investment projects receives strict confidentiality treatment by all relevant authorities.

The legal architecture's purpose

The framework attempts what one assessment calls a "legal golden cage" around foreign capital. The Investment Law and bilateral investment treaties guarantee asset security and capital flow freedom. Specialised regimes like the International Business Centre and Establishment Conventions offer substantial tax discounts.

The system recognises that small island economies competing for mobile capital must offer exceptional terms. Cabo Verde cannot compete on market size, natural resources or labour costs. It competes on legal predictability, fiscal incentives and frictionless capital movement.

The 2.5 per cent corporate tax rate for technology companies represents one of the lowest statutory rates globally. Singapore charges 17 per cent. Ireland charges 12.5 per cent. Even notorious tax havens typically offer single-digit rates rather than sub-3 per cent levels.

Implementation questions

Legal frameworks on paper often differ from implementation in practice. The 30-day transfer authorisation deadline has teeth through LIBOR-rate interest penalties, but enforcement depends on central bank capacity and political will. The One Stop Shop's 75-day processing target matters only if consistently met.

Bilateral investment treaties provide recourse but litigation is expensive and slow. ICSID cases typically take three to five years and cost millions. The treaties deter egregious violations but don't prevent routine administrative friction or policy reversals.

The tax incentives create fiscal risks. A government collecting 20 per cent from some companies and 2.5 per cent from others must ensure the arithmetic works. If preferential regimes expand too far, they erode the tax base. Cabo Verde's public debt stood at 110 per cent of GDP in 2024, limiting fiscal space for revenue experiments.

State-owned enterprise reform remains incomplete. The electricity utility Electra requires restructuring. Port operations need modernisation. These bottlenecks can offset legal incentives if infrastructure doesn't deliver.

The competitive position

Cabo Verde's legal framework is more investor-friendly than most African jurisdictions. Full profit repatriation with 30-day processing and LIBOR penalties for delays exceeds regional norms. Protection against expropriation with international arbitration access provides credible commitment. Tax rates of 2.5-5 per cent rival any jurisdiction globally.

The question is whether legal architecture alone attracts investment. Companies need markets, workers, infrastructure and inputs. Cabo Verde offers a population of 600,000, limited natural resources, high energy costs and dependence on imports. The legal framework compensates for structural disadvantages rather than reinforcing natural strengths.

For businesses targeting Portuguese-speaking markets, West African digital services, or Atlantic logistics, the combination of European legal standards, political stability and ultra-low taxes creates genuine appeal. For businesses requiring large markets, cheap labour or local resources, the incentives may not overcome fundamentals.

The framework serves niche strategies rather than mass-market plays. It attracts companies where legal certainty, capital mobility and tax efficiency matter more than market size. Whether that niche is large enough to transform Cabo Verde's economy remains uncertain. The legal foundations are solid. The question is what gets built on them.