Cabo Verde, a tiny country, 500 kms off the coast of Senegal, has been earning a well-deserved reputation as an increasingly attractive destination for tourism investment.
Apart from a low ranking by the World Economic Forum’s Travel & Tourism Competitiveness Index in regards to the “effect of taxation on incentives to invest” (114/141), the country has ranked in the top half or better of 141 countries on several indicators important to tourism investment:
The Government realizes the importance of tourism to the country and thus endeavors to create a positive regulatory and investment climate. In 2015, the US State Department’s Investment Climate Brief for Cabo Verde recognized the Government’s “great effort…to promote a market oriented economic model and [stated that] in 2014, Cabo Verde achieved its highest economic freedom score (66.1), making its 3rd out of 46 countries in the Sub-Saharan Africa region. The World Bank, International Monetary Fund (IMF), United States, and many other donors have endorsed and supported the GOCV’s economic liberalization policies. All investors, regardless of their nationality, have the same rights and are subject to the same duties and obligations under the laws of Cabo Verde.”
National and foreign investors are treated equally under the Cabo Verde Investment Law (Decree-Law Number 34/2013) and the Law of Industrial Development. The latter sets incentives for investment while a code for Fiscal Benefits (Law No. 26/VIII/2013, of 21 January) establishes tax benefits. The Cabo Verdean agency for the promotion of investment, Cabo Verde Investimentos (CI), has become a one-stop shop for external investors. And, for investors interested in the opportunity rich islands of Boa Vista and Maio, the “Boa Vista and Maio Islands Tourism Development Corporation, SA” (SDTIBM) offers excellent one-stop shop services.
The SDTIBM is helping to speed up the investment process for Boa Vista and Maio while the CI Agency is working on their own electronic “One-Stop Shop” approach and platform, which provides increased aims to limit the process to a maximum of 75 days.
The SDTIBM has also established Special Tourism Areas (ZTE) on the Islands of Boa Vista and Maio, each of which has three Integrated Tourism Development Areas (ZDTI). For prospective investors, the investment incentives and tax benefits also offered in these areas are worth considering, especially given the fast growing demand outlined in the first article of this series.
The Investment Benefits and Incentives add up to an attractive tourism investment climate, which as will be described in the next article are attracting a range of major tourism investments. The benefits and incentives, as described by PriceWaterhouse include:
City IUR Investments Tax Credits - Tax benefits for tourism investors applied to 50% of the eligible investments made under the investment law. The tax credit cannot exceed 50% per tax year of the tax due and the excess tax credit can be carried forward for 10 years. Eligible investments are those investments that exceed US$5 MN.
Stamp Duty Exemption - Those financing operations contracted for tourism investments projects implemented under the investment law are exempt from Stamp Duty.
Custom duties exemption - Materials used in project construction are exempt from customs duties: furniture, equipment and utensils used for installation, expansion or remodeling phase. The amount of the imports must exceed 25% of the initial investment.
Also exempt are materials and transport directly included in the construction, expansion or remodeling of tourism projects which are not destined for sale. A list is available from CI.
Transportation vehicles for the exclusive transportation of tourists and luggage, pleasure yachts, and other equipment destined to sports and cultural animation are also exempt, but the vehicles and equipment imported cannot be more than five years old.
IUP Exemption - Property purchased to be used in the project may benefit from IUP exemption if duly authorized by the Municipality.
Job creation benefits – For each job created in the previous tax year, payers may deduct from the tax due, under certain conditions, the following amounts:
- 236 EUR for each job created in the municipalities of Boa Vista, Praia and Sal.
- 272 EUR 236 for each job created in other municipalities.
- 317 EUR for each job created for disabled people.
Training internships and scholarships – costs are deductible.
Contractual tax benefits (investment contacts) – For substantial investments that exceed 90 MN EUR, generate at least 100 direct jobs within three years and are considered relevant for national economic development in line with Government’s program, investors can negotiate, under certain conditions, with the Cabo Verde Government, tax benefits for the project.
Gambling Law -- The Gambling Law establishes the following:
- Five permanent gambling zones (S. Vicente, Sal, Boavista, Maio and Santiago);
- Market access by competitive bidding;
- Concession fees between €0.18 and 2.4 million upfront;
- Very competitive taxation with a 10% gambling tax on gross monthly revenues (exclusive of other income taxes);
Although there is some room for improvement, the regulatory environment and incentives are attracting tourism investors and major new projects. See the next article in the series.
For further information about tourism investment opportunities on the islands of Boa Vista and Maio, contact the Boa Vista and Maio Islands Tourism Development Corporation, SA” (SDTIBM), P. O. Box 118, Cidade de Sal Rei, Ilha da Boa Vista, Republic of Cape Verde; Tel. +238 251-9200 | Fax +238 251-1615 E-mail: [email protected] | www.sdtibm.cv