Cabo Verde Strategic tax incentives and special economic zones
Cabo Verde has built a tiered system of special economic zones and tax incentives offering corporate rates from 2.5 per cent to 5 per cent, five-year exemptions for tourism projects, and negotiated benefits for investments exceeding CVE3bn. The framework targets foreign direct investment through sector-specific zones including technology parks, maritime logistics platforms and integrated tourism developments.
The strategy combines geographic clustering with fiscal privileges to attract mobile capital in digital services, renewable energy and the blue economy. Each zone offers distinct incentives calibrated to sector requirements and development priorities.
Technology zone with 2.5% corporate rate
The Special Economic Zone for Technologies, located at TechPark campuses in Praia and Mindelo, offers the most aggressive rates. Eligible technology companies operating in the ZEET pay just 2.5 per cent corporate income tax.
Companies also receive VAT and customs duty exemptions on raw materials and essential equipment. The regime seeks to attract global capital in ICT and digital services, positioning Cabo Verde as a regional technology hub and creating high-value jobs for young workers.
The 2.5 per cent rate places ZEET among the world's lowest statutory corporate tax jurisdictions. Ireland charges 12.5 per cent. Singapore charges 17 per cent. Even territories commonly termed tax havens typically offer single-digit rather than sub-3 per cent rates.
The technology focus aligns with Cabo Verde's digital infrastructure investments. The EllaLink submarine cable connects Brazil and Portugal through Cabo Verde, providing low-latency connectivity to Europe and South America. The government aims to transform the country into a "cyber island" serving Portuguese-speaking markets and the ECOWAS region.
International Business Centre with job-linked rates
The International Business Centre promotes export-oriented enterprises in industry, commerce and services conducted with non-residents. Companies licensed to operate in the IBC benefit from reduced corporate tax 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 20 jobs pay 3.5 per cent. Companies creating five jobs pay 5 per cent. This structure incentivises employment while maintaining ultra-low rates for all qualifying businesses.
Investments eligible for internationalisation schemes receive up to 50 per cent reduction in the corporate rate during the contract term. Young start-ups and profit reinvestment also qualify for maintained incentives.
The IBC's design targets internationally mobile businesses that can locate operations anywhere. By tying rates to job creation, the framework ensures foreign investment generates local employment rather than merely booking profits in a low-tax jurisdiction.
Tourism zones with five-year exemptions
Integrated Tourism Development Zones are designated areas with special aptitude for tourism development. Projects achieving Tourist Utility Status receive corporate income tax exemption for the first five years of activity.
Tourism projects also benefit from VAT and customs duty exemptions on imported materials and equipment necessary for implementation, particularly those promoting sustainability. This reduces capital costs for hotel construction, resort development and tourism infrastructure.
The ZDTI framework exists on multiple islands including Sal and Maio. The Special Economic Zone of Maio aims to transform the island into a tourism-residential, cultural and business hub for Africa. Entities operating there benefit from integrated free zone regimes, tax-free and duty-free shops, and specific tax and customs benefits.
A Special Air Economic Zone on Sal Island, anchored by the air hub and airport city, targets passenger distribution and air cargo logistics. This positions Sal as an international aviation platform serving transatlantic routes.
Maritime zone for blue economy development
The Special Maritime Economic Zone in São Vicente focuses on transforming Cabo Verde into a maritime and logistics platform. The zone targets blue economy sectors including fisheries, naval industry and renewable energy.
São Vicente hosts Porto Grande, one of two deep-water ports in Cabo Verde. The EU's Global Gateway initiative committed €148m to modernise four strategic ports including Porto Grande and expand the CABNAVE shipyard. The maritime zone creates fiscal incentives for businesses using this infrastructure.
The blue economy represents strategic diversification from tourism. Cabo Verde's Exclusive Economic Zone spans 734,265 sq km against land area of just 4,033 sq km—a sea-to-land ratio exceeding 180:1. The government aims for the blue economy to contribute 25 per cent of GDP and generate 35,000 jobs by 2030.
Establishment conventions for major projects
Large-scale investments deemed of exceptional national interest can negotiate establishment conventions with the government. The threshold is CVE3bn (approximately $30m) in higher-GDP areas or CVE1.5bn in lower-GDP areas, plus creation of at least 20 qualified jobs (or 10 in lower-GDP areas).
These conventions provide exceptional incentives including exemptions, rate reductions or accelerated depreciation on customs duties, corporate income tax, personal income tax, property tax and stamp duty. Benefits can extend up to 15 years.
Crucially, the framework guarantees fiscal stability. Benefits cannot be revoked until the expiration period ends, provided conditions are maintained. The effective minimum corporate rate achieved through negotiation is 5 per cent.
This contractual approach provides certainty for major capital commitments. A company investing $50m in infrastructure cannot see tax treatment changed mid-project through legislative amendment or policy shift. The guarantee matters because large projects typically have 15-20 year payback periods.
Renewable energy incentives
Companies engaged in renewable energy projects benefit from corporate tax credits up to 30 per cent of relevant investment. Imports of new, modern equipment for renewable energy production—solar panels, wind generators, battery storage—receive customs duty exemptions.
Investments in priority sectors including health, renewable energy, tourism promotion, industrial activities and air/sea transport services qualify for tax credits deducted from income tax equivalent to 30 per cent or 50 per cent of investment value.
These provisions support Cabo Verde's renewable energy targets: 50 per cent renewable electricity by 2030 and 100 per cent by 2040. The country currently imports 80 per cent of energy as fossil fuels, creating vulnerability to oil price volatility and balance of payments pressure.
Research and Development
Companies engaged in research and development can deduct eligible R&D expenses from corporate tax liability at double percentage: 40 per cent of expenses plus 50 per cent of incremental expenses compared to previous years.
An investment tax credit grants 30 per cent deduction from corporate tax collection for relevant investments in creative industry, tourism, industrial activity and renewable energy production. This encourages innovation spending beyond routine operations.
The R&D incentives target knowledge-intensive sectors where Cabo Verde cannot compete on labour costs or market size. Technology services, software development, data analytics and digital content creation all qualify for enhanced deductions.
Digital nomad tax exemption
Individuals participating in the Remote Working Programme for up to one year are exempt from local income tax on foreign earnings. This promotes Cabo Verde as a destination for location-independent workers, particularly from Europe given the four-hour flight time and euro-pegged currency.
The exemption matters because digital nomads typically pay income tax in their country of residence. By exempting foreign earnings, Cabo Verde attracts remote workers without creating double taxation concerns. The workers spend money locally on accommodation, food and services without tax liability.
Diaspora investor benefits
Emigrant investors benefit from exemption from taxation on dividends and profits distributed from authorised foreign investments. They also receive reduced customs duties for importing materials for construction or refurbishment of a first residential house.
The Cape Verdean diaspora numbers more than 500,000 people abroad—nearly equal to the domestic population. Remittances total approximately 13.5 per cent of GDP. The government views diaspora members as natural investors with cultural ties, local knowledge and commitment to development.
Job creation deductions
Companies can deduct specific amounts from tax liability for each permanent job created. The deduction ranges from CVE26,000 to CVE35,000 per job depending on location and worker characteristics.
Higher deductions apply in less-developed municipalities to encourage geographic equity. Employing disabled persons triggers the highest deduction. This creates fiscal incentives for inclusive hiring and balanced regional development.
Nearly all tax benefits and incentives are explicitly conditional on job creation, particularly qualified jobs. Industrial zones created 2,500 direct jobs by 2025 according to government estimates. The employment linkage ensures foreign investment generates local opportunities rather than capital-intensive, low-employment operations.
Customs and VAT exemptions
Foreign investors often benefit from exemptions on import duties and VAT for goods and materials essential to operations. This matters for businesses relying on imported raw materials or equipment for export-oriented production.
Specific exemptions cover diverse sectors. Health sector imports of equipment already exempt from duty receive additional VAT exemption. Agricultural inputs including fertilisers, soil improvers and animal feeds receive VAT exemption. Tourism sustainability equipment enjoys VAT and customs exemptions.
The exemptions reduce capital costs for sectors where domestic production capacity doesn't exist. Cabo Verde imports most manufactured goods, machinery and equipment. Customs duty and VAT exemptions can reduce total import costs by 20-25 per cent.
Streamlined processes through one-stop shop
Special economic zones simplify company registration, licensing and regulatory compliance. Cabo Verde TradeInvest oversees these zones and offers one-stop shop services to reduce bureaucracy and ensure project approval within 75 days.
The zones are often equipped with essential utilities including roads, electricity, water and telecommunications. This reduces setup costs and accelerates business timelines. Companies avoid negotiating separately with multiple utilities or government departments.
For international entities, streamlined processes reduce the friction costs that often discourage investment in emerging markets. The difference between 75-day approval and six-month approval can determine whether a project proceeds or relocates to a competitor jurisdiction.
Investment thresholds halved for disadvantaged areas
Many incentives including reduced thresholds for contractual benefits are halved when implemented in municipalities with below-average GDP per capita. This addresses socio-economic imbalances between islands.
The policy recognises that Praia, Sal and Boa Vista dominate economic activity while other islands lag. By offering more generous terms in disadvantaged areas, the government encourages geographic diversification of investment beyond established tourism centres.
The strategic logic
The tiered system of zones and incentives creates differentiated value propositions for different investor types. Technology companies seeking the lowest possible tax rate gravitate to ZEET's 2.5 per cent. Tourism developers prioritise five-year exemptions and sustainability equipment duty waivers. Major industrial investors negotiate establishment conventions with 15-year fiscal stability.
The sector-specific approach reflects Cabo Verde's development constraints and opportunities. The country cannot compete as a manufacturing platform—labour costs exceed mainland Africa and the domestic market is tiny. It can compete as a services hub, leveraging political stability, European legal standards, strategic location and ultra-low taxes.
The employment linkage ensures that low tax rates translate to job creation. Without employment thresholds, businesses could book profits in Cabo Verde while conducting operations elsewhere. The job requirements create genuine economic activity and skills transfer.
Implementation and enforcement challenges
Tax incentives work only if administered consistently and transparently. Determining which companies qualify for which regime requires clear rules and competent enforcement. Discretionary decisions create corruption opportunities and investor uncertainty.
The job creation requirements need verification. Companies might inflate employee counts or create short-term positions to qualify for benefits. Tax authorities must audit employment claims while processing applications promptly enough to maintain the 75-day approval target.
The sector-specific exemptions—renewable energy equipment, tourism sustainability materials, R&D expenses—require classification decisions. What equipment qualifies? What activities count as R&D? Administrative interpretation shapes effective rates regardless of statutory provisions.
Competitive positioning
Cabo Verde's special economic zone framework is more sophisticated than most small island developing states. Mauritius offers 15 per cent corporate tax but doesn't differentiate by sector or employment. Seychelles offers territorial taxation but lacks specialised zones. Caribbean jurisdictions offer zero tax but face blacklisting pressures.
The 2.5 per cent rate for technology companies represents perhaps the world's lowest for a jurisdiction with democratic governance, rule of law and treaty access to major markets. Whether this attracts substantial investment depends on factors beyond tax: infrastructure quality, talent availability, market access and regulatory efficiency.
The zones create clustering potential. If several technology companies locate in ZEET, network effects emerge: shared talent pools, knowledge spillovers, supplier development. The zones work best when they reach critical mass rather than operating with one or two occupants.
The calculated gamble
Cabo Verde's zone and incentive strategy represents a calculated gamble: that ultra-low taxes and fiscal stability will attract enough high-quality investment to compensate for revenue losses. The bet assumes that 2.5 per cent of something is better than 20 per cent of nothing.
For investors, the proposition is straightforward: among the world's lowest tax rates, coupled with profit repatriation guarantees, political stability and European legal standards. The downside risks—small market, infrastructure gaps, climate vulnerability—are real but may be acceptable given fiscal benefits.
Whether the strategy succeeds will become clear over 5-10 years as zones either fill with companies or remain empty. The infrastructure is built, the incentives are legislated, and the institutional framework exists. The question is whether businesses arrive. For now, Cabo Verde has set the table with generous fiscal hospitality. Whether guests appear for the meal depends on whether what's being served—beyond low taxes—meets their strategic appetite.