Cape Verde in 2026: Booming Tourism and Social Reforms on the Horizon

The archipelago of Cape Verde continues to consolidate its position as one of West Africa's most dynamic destinations, with positive economic indicators that contrast with the structural challenges that require immediate attention.

The Engine of Tourism: Data that Drives Business

According to statements made by Thierry Ligonnière, Chairman of the Board of Directors of Cabo Verde Airports, released by the Island Express, A recent study reveals impressive data on the economic impact of tourism: for every million dollars spent by tourists, 120 direct jobs are created. According to the same study, each group of 13 tourists arriving in the country generates one new job.

Air traffic figures corroborate this trend: the volume of passengers has already exceeded by 24% the records of the pre-pandemic period, indicating a robust and sustainable recovery in the sector.

Source: Expresso das Ilhas, statements by Thierry Ligonnière, CEO of Cabo Verde Airports

Chain Business Opportunities

This growth in tourism creates a multiplier effect that transcends the hotel sector. For every influx of visitors, opportunities arise in:

• Local accommodation and boutique hotels
• Restaurants and gastronomic experiences
• Tourist transport and logistics
• Digital services for tourism
• Blue economy and nautical activities

The Demographic Challenge: Social Security Reform

Alongside the optimism for tourism, the Island Express reports on warnings from the International Monetary Fund (IMF) about the sustainability of Cape Verde's pension system. The ageing of the population combined with a falling birth rate could force the country to raising the retirement age, This will have an impact on the dynamics of the labour market and the social costs of companies.

Source: Expresso das Ilhas, based on IMF warnings

Implications for Entrepreneurs

For those running businesses in Cape Verde, this scenario presents two strategic vectors:

1. Opportunity VectorTourism will continue to be the central engine of the economy, with emerging projects in industrial fishing (such as the 80 million escudos investment in São Vicente under the IMPULSIONA programme), renewable energies and services for digital nomads.
2. Planning Vector: The anticipation of reforms in the social security system requires a review of human resources management strategies, with an emphasis on continuous training and managing the productivity of potentially older teams.

S&D in the Business Ecosystem

In this context, professional business structuring is no longer a differential, but a necessity. Projects with the potential for public or private funding, such as those covered by the IMPULSIONA programme, These require robust business plans, rigorous feasibility studies and proper fiscal organisation.

S&D is positioning itself as a strategic partner in this transformation, accompanying entrepreneurs in the transition from ideas to sustainable companies.

Expanding Tourism: Economic Reality

Consolidated Growth with Nuances

Cape Verde's tourism sector has grown consistently in recent years. Forecasts for 2026 point to:

• Increased investment in infrastructure: new resorts, hotel equipment and port and airport improvements continue to attract foreign and domestic capital.
• Diversification of destinations: it's not just Sal and Boa Vista. Islands such as Santo Antão, Brava and Maio are gaining relevance in nature and wellness tourism.
• Growth of segments: business tourism, events, cultural tourism and ecotourism are emerging as more profitable niches.

Impact on GDP and Tax Revenue

Tourism today represents a significant portion of Cape Verde's GDP. By 2026, it is expected to contribute to:

• Foreign currency inflows
• Direct and indirect job creation
• Increasing taxation (VAT, IRC, IRPS)

Here's the critical point: the greater the growth of the sector, the greater the supervision by the authorities. The DNRE has increased its auditing capacity in high-income sectors. Tourism companies are and will continue to be a priority target for tax checks.

If your company operates in this sector, tax compliance is non-negotiable.

Social Reforms on the Horizon: The Legal Framework

The Context of Pressure for Reform

Cape Verde, like many African countries, is facing internal and external pressure to modernise its social protection and labour rights framework. The reforms expected in 2026 include:

Reinforced Labour Legislation

• Possible revision of the Labour Code
• Greater emphasis on workers' rights (weekly rest, holidays, safety)
• Stricter rules on dismissal and severance pay

Expanded Social Security

• Expansion of pension and subsidy coverage
• Reforms to employer/employee contributions
• Possible revision of INPS (National Social Security Institute) fees

Gender Rights and Inclusion

• Progress towards equal pay
• Reinforced protection against harassment and discrimination
• Shared parenting and licences

Contracting and Formalisation

• Pressure to reduce the informal economy
• Increased obligations to register contracts
• Electronic registers (potentially in 2026)

Why Does It Matter to Your Business?

If your company has employees and in tourism, it's rare not to have these reforms affect you directly:

• Operating costs: increases in social contributions, benefits, indemnities
• Administrative compliancemore obligations, more documentation, more risk of sanctions
• Disputes: employees better informed of their rights = more complaints
• ReputationIn social networks, a labour dispute can quickly damage the brand.

Tax Implications for Tourism Companies

IRC - Corporate Income Tax

Rate: 25% on profits (plus any social defence contribution)

Applicable to: hotels, travel agencies, restaurants, tourist accommodation, tour operators.

Deductions Allowed (and Common Pitfalls)

Companies can deduct legitimate expenses. But the DNRE often rejects them:

• Expenses without documentation (receipts, invoices, vouchers)
• Meals and “hospitality” without commercial justification
• Expenses for “consultants” that are not formalised in a contract
• Depreciation of assets without inventory control

Critical Council: Keep impeccable documentation. In tourism, tax auditors are especially sceptical about questionable deductions.

VAT on Tourist Services

Rate: 15% in Cape Verde

Important point: accommodation, catering and leisure services are subject to VAT. Many tourism companies make the mistake of:

• Not invoicing VAT when they should
• Do not recover VAT on capital expenditure
• Mixing services with different rates without clarity

The DNRE systematically checks the consistency between VAT paid, VAT received and declared turnover. If there are disparities, it means an audit.

Deductions and Incentives for Tourism Investment

Cape Verde offers some incentives for investment in tourism:

• Accelerated deductions for the purchase of investment goods
• Possibility of deducting preventive maintenance costs
• Some regional incentives depending on the island

Many companies are unaware of these incentives or don't document them properly. A specialised tax audit can identify savings opportunities that are not being taken advantage of.

Tax Compliance in the Context of Reforms

With social reforms that can change personnel costs, it's critical:

• Keeping accurate payroll and contribution records
• Anticipate increases in personnel costs and adjust prices/margins
• Make a clear distinction between personnel costs, social allowances and bonuses
• Document any accounting changes resulting from legal reforms

Legal Obligations and Compliance

Reinforced Accounting Obligations

The DNRE expects all the companies to keep it:

• Complete accounting records (journals, ledgers, balance sheets)
• Supporting documentation (invoices, receipts, contracts)
• VAT returns monthly (or quarterly, depending on the regime)
• Annual corporate income tax return with specific deadlines

By 2026, more digitisation is expected. This means:

• Potential requirement for e-invoicing or electronic invoicing
• Digital audit trails
• Greater traceability of transactions

Companies that are not prepared for this will face operational difficulties and compliance risks.

Labour Compliance in the Context of Reforms

In addition to tax, there are labour obligations that will intensify:

• Formalised employment contracts (avoid working without a contract)
• Attendance records, timetables and payslips
• Compliance with health and safety standards at work
• Documentation of performance appraisals

Companies operating informally will face significant fines.

Risks of Non-Compliance

If your company is not compliant, the risks include:

• Fines (which can be 50% to 200% of unpaid taxes)
• Interest on arrears
• Criminal proceedings in serious cases
• Reputational damage and loss of licences

What to do now: Strategic planning

1. Preventive Tax Audit

Don't wait for a DNRE audit. Carry out an internal audit (or hire a specialised consultant) to:

• Check that all expenses are correctly documented
• Identify unused deductions
• Correct accounting errors before the DNRE finds them

2. Correct structuring of labour contracts

Review all employment contracts for:

• Comply with minimum legal requirements
• Anticipating the impact of future reforms
• Explicitly document rights and obligations
• Prepare for a possible increase in social contributions

3. Planning personnel costs

With social reforms on the horizon:

• Make projections of how personnel costs could increase
• Consider impact on gross margin
• Plan price and product mix reviews
• Consider productivity and talent retention

4. Specialised consultancy

S&D Consultancy offers:

• Preventive tax audits
• Tax planning for tourism companies
• Labour consultancy and compliance
• Structuring contracts and personnel policy
• Support in interpreting legal reforms when they arise

Conclusion: The time is now

2026 will be a year of opportunity for tourism in Cape Verde, but also of increased regulatory scrutiny. Companies that prepare themselves, with impeccable documentation, tax compliance and a solid labour structure, will be better placed to grow smoothly.

Those who wait for problems before taking action will be in for unpleasant surprises.

Is your company ready? The time to act is now, not in 2026 when the DNRE comes knocking.

Contact us

If you have any doubts about the tax and legal implications of the reforms, or if you want to carry out a preventive audit, S&D Consultancy is here to help.

📧 Contact us for a free consultation.

We specialise in tax and labour compliance in Cape Verde. We know the local reality, the real challenges facing Cape Verdean companies and the opportunities that many miss due to lack of planning.

Don't put it off. Your tax future will thank you.