Property Investment in Cape Verde: A Guide for Foreigners

Cape Verde, an archipelago off the west coast of Africa, has become an attractive destination for foreign investors interested in the property market. With a legal system based on Portuguese civil law, the country offers a regulated and secure environment for property purchases, guaranteeing equal rights for both local citizens and foreigners. This detailed guide explores the key information you need to know before investing in property in Cape Verde, including property rights, applicable taxes and specific restrictions.

Foreigners may purchase residential or commercial property, or land for development, without any restrictions, as highlighted by Cape Verde Property24. Furthermore, the Cape Verdean government actively encourages foreign investment, fostering a steadily growing property market, driven by tourism and the country’s political stability. This favourable environment is complemented by the absence of inheritance tax, making Cape Verde an attractive choice for those seeking to preserve their wealth for future generations.

However, it is important to understand the specific aspects of the purchase process, such as the requirement to register with the Land Registry and to obtain a Tax Identification Number (NIF), as explained by IC Real Estate Investments. Furthermore, investors should be aware of the associated taxes, such as the Single Property Tax (IUP), which is levied annually on the value of the property, and tax on rental income, should the property be let out.

This guide is designed to provide a comprehensive and practical overview of property investment in Cape Verde, helping foreign investors to navigate this promising market with confidence.

Property Rights and Restrictions for Foreigners in Cape Verde

Property Rights for Foreigners

In Cape Verde, foreign nationals have the same property rights as local citizens, with no significant restrictions on the purchase of residential or commercial property or land for development. This favourable environment is underpinned by a legal system based on Portuguese civil law, which ensures transparency and regulation. All property transactions must be registered with the Land Registry, a mandatory procedure that ensures legal title and protects buyers from potential disputes.

However, there are some specific restrictions relating to the type of land and its location. For example, agricultural land can only be leased, whilst coastal land cannot be purchased and must remain accessible to the public.

Restrictions on the Purchase of Coastal Land

Plots of land situated less than 80 metres from the coast are not available for sale. These areas are protected by law and must remain open to the public, promoting universal access to beaches and the coastline. Nevertheless, these plots may be granted to private investors under temporary concessions, usually for periods of 10 to 20 years, depending on the project and its economic impact. (Settee)

Tax Incentives and Associated Costs

Cape Verde offers attractive tax incentives for foreign investors, including exemption from Single Property Tax (IUP) for up to 10 years for properties purchased under certain conditions. In addition, pensioners with income from abroad may be exempt from tax on that income.

Other costs include:

• Property Tax: 1.5% of the property’s value annually.
• Rental Tax: 10%, with deductions of up to 30%.
• Capital Gains: 1% on property gains.

Requirements for Property Investments

For foreign nationals interested in buying property in Cape Verde, the purchase process is relatively straightforward, but it must be carried out with careful attention to the legal details. The necessary documents include:

• Up-to-date land registry certificate.
• Document confirming the purchase or intention to purchase the property.
• A statement from a financial institution in Cape Verde confirming the transfer of funds for the purchase of the property.

Furthermore, foreign nationals who invest in holiday properties worth more than 80,000 euros (in regions with a per capita GDP below the national average) or 120,000 euros (in regions above the average) may be eligible for a Permanent Residence Card. This card entitles the holder to additional benefits, such as a 10-year exemption from wealth tax.

Permitted Property Types and Areas of Interest

Foreigners can purchase a wide variety of properties, including:

• Residential property: Houses and flats for personal use or letting.
• Commercial property: Hotels, resorts and bars, provided they contribute to economic development and job creation.
• Plots of land for development: Areas designated for the development of tourist or residential projects.

However, it is important to note that purchasing property for use on platforms such as Airbnb does not count as a qualifying investment for citizenship or residency benefits. (Settee)

Legal Considerations and Investment Security

The Cape Verdean legal system, based on Portuguese civil law, offers a secure environment for foreign investors. All transactions must be formalised and registered at the land registry office, thereby ensuring legal protection for the buyer. This process significantly reduces the risk of disputes or fraud. (Cape Verde Property24)

Furthermore, the Cape Verdean government actively encourages foreign investment by fostering a stable political environment and a favourable tax regime. These conditions make Cape Verde an attractive location for international investors. (Cabowork)

Legal and Tax Aspects of Buying Property in Cape Verde

Acquisition Costs and Associated Fees

When purchasing a property in Cape Verde, the buyer should be aware of the mandatory fees and administrative costs associated with the process. These include:

• Property Transfer Tax: A tax of 1.5% on the higher of the sale price or the registered value of the property. This tax must be paid at the time of the transfer of ownership.
• Notary and Registration Fees: The notary’s fee is 19,780 CVE, whilst the property registration fee is 24,150 CVE, totalling approximately 400 euros. These figures may vary slightly depending on the location and type of property. (IC Real Estate Investments)
• Other Costs: These may include costs for document translations, bank charges and lawyers’ fees, depending on the complexity of the transaction.

These costs are mandatory and must be taken into account in the total investment budget.

Annual Taxes and Ongoing Ownership Costs

Following the purchase of a property, owners are liable for annual costs relating to the maintenance and taxation of the property:

• Single Property Tax (IUP): This local tax is calculated on the basis of the property’s registered value. For example, for a property valued at 100,000 euros, the annual IUP is approximately 400 euros, payable in two half-yearly instalments.
• Service Charges: If the property is situated in a resort or housing estate, maintenance fees can range from 600 to 2,000 euros per year, depending on the facilities available. (IC Real Estate Investments)
• Utilities: Water, electricity and gas costs are based on consumption and vary depending on the location and size of the property.

These ongoing costs must be taken into account to ensure the financial viability of the investment.

Contracts and Formalisation of the Purchase

The process of buying property in Cape Verde requires the drawing up of specific contracts to ensure the legal certainty of the transaction:

• Preliminary Contract for the Sale and Purchase: This document is essential for formalising the agreement between the buyer and the seller. It sets out the terms of the transaction, including the price, deadlines and payment terms. (IC Real Estate Investments)
• Final Payment: Payment for the property is usually made by means of a certified cheque from a Cape Verdean bank or an advance bank transfer. This procedure ensures the traceability of the funds and compliance with local laws.

Furthermore, all transactions must be recorded in the Land Registry, which confirms legal ownership of the property and protects buyers against future disputes.

Loan Requirements for Foreign Nationals

Foreign nationals wishing to purchase property in Cape Verde may opt for local bank financing, subject to the following conditions:

• Interest Rates: Average interest rates for foreign investors stand at approximately 8%, which is relatively high compared with other international markets. (IC Real Estate Investments)
• Loan Limit: Cape Verdean banks generally finance up to 70% of the property’s value, requiring the buyer to provide at least 30% of the value as an initial deposit.

Although funding is available, it is important to carefully assess the additional costs associated with interest rates and repayment terms.

Restrictions and Specific Rules for Certain Types of Properties

Although foreign nationals may purchase property in Cape Verde without any significant restrictions, there are some specific limitations:

• Coastal Land: Plots of land situated less than 80 metres from the coast may not be purchased, as they must remain open to the public. However, these plots may be granted to private developers under a concession arrangement, usually for periods of 10 to 20 years.
• Agricultural Land: Under Cape Verdean law, these may only be leased and not purchased. (Settee)

These restrictions are designed to protect natural resources and ensure public access to coastal areas.

Tax Incentives for Foreign Investors

The Cape Verdean government offers tax incentives to attract foreign investors, particularly in strategic sectors such as tourism and infrastructure:

• Exemption from Property Tax: Investors who purchase holiday properties above certain values may be eligible for a property tax exemption for up to 10 years. (Settee)
• Permanent Residence Card: Foreign nationals who invest in holiday properties worth over 80,000 euros (in regions with a per capita GDP below the national average) or 120,000 euros (in regions above the average) may qualify for this benefit, which includes additional tax advantages. (Settee)

These incentives make Cape Verde an attractive option for investors seeking opportunities in the property market.

This article supplements the existing content by providing details on acquisition costs, annual taxes, contracts, financing and tax incentives, without repeating information already covered.