Cape Verde's 2025 State Budget: What companies should know

Cape Verde's 2025 State Budget represents a significant milestone in the country's economic and social trajectory. With a clear focus on inclusion, growth and sustainability, this budget aims not only to respond to global economic challenges, but also to position Cape Verde as an example of sustainable and equitable development in the African region.

This report by S&D Consultancyoffers a detailed analysis of the main measures and implications of the 2025 State Budget, with a special focus on information relevant to companies.

Economic and social context

The State Budget is a crucial document that defines a country's economic and political priorities for a given fiscal year. The 2025 State Budget is particularly significant, given the global economic context and local development needs. We aim to provide a comprehensive analysis of Cape Verde's 2025 State Budget, highlighting the most relevant aspects for companies operating in the country.

Cape Verde's economic context

The State Budget for 2025 was presented with a figure of 98 billion Cape Verdean escudos, equivalent to approximately 889 million euros, marking an increase of around 14% on the previous year's budget (Forbes Lusophone Africa). This increase reflects the government's commitment to promoting investment, employment and social inclusion, while strengthening economic resilience against external shocks, including the impacts of climate change.

Tax measures and incentives for companies

Reduction of the corporate income tax rate

One of the most significant measures in State budget for 2025 is the reduction in the Corporate Income Tax (CIT) rate. The government proposes lowering the corporate income tax rate from 21% to 20% in 2025. For Small and Medium-sized Enterprises (SMEs), the rate applicable to the first 50 thousand euros of taxable income will be reduced from 17% to 16%. This measure aims to ease the tax burden on companies, encouraging investment and business expansion.

Tax incentives for wage increases

The 2025 State Budget introduces changes to the Tripartite Agreement on Wage Valorisation and Economic Growth 2025-2028. Companies that increase the average annual base salary per employee by at least 4.7% compared to the previous year will be able to benefit from a 200% increase in the cost of salary increases, up from the 150% previously applicable. This incentive aims to promote the valorisation of human capital and increase the competitiveness of Cape Verdean companies.

Incentives for innovation and business development

The Cape Verdean government is proposing to maintain tax incentives for business research and development. These incentives are crucial for fostering innovation and competitiveness in the global market. Companies that invest in research and development projects will be able to benefit from significant tax deductions, thus encouraging the creation of new products and services that can compete internationally.

Import exemptions and customs benefits

The State Budget for 2025 provides for import exemptions for local authorities and incentives to import public passenger transport vehicles, taxis and heavy goods vehicles for tourism. These measures aim to reduce the operating costs of companies that depend on imports and improve the transport infrastructure, which is essential for economic growth and social inclusion.

Carbon tax and sustainability

A new fiscal measure introduced in the budget is the creation of a carbon tax, which aims to fund actions to mitigate and adapt to the effects of climate change. This tax will be applied from 2025 and represents the government's commitment to environmental sustainability. Companies that adopt sustainable practices will be able to benefit from tax incentives, thus promoting the transition to a green economy.

Monetary policy measures and their impact on companies

The Bank of Cape Verde (BCV) has implemented interest rate increases with the aim of controlling inflation and stabilising the economy. In November 2024, the interest rate was increased by 25 basis points, followed by a further increase of 50 basis points in January 2025. These measures are aimed at tackling factors of uncertainty, such as inflation and the reduction in foreign reserves, but they also pose a challenge for companies, which could face higher financing costs (The Nation).

Economic development and social inclusion

The 2025 budget prioritises investment, employment and social inclusion, with an increase of 14% compared to the 2024 budget, totalling 98 billion escudos (Forbes Lusophone Africa). This increase in investment is aimed at strengthening resilience to economic and climate shocks, promoting shared prosperity. Companies are encouraged to participate in projects that promote social inclusion and sustainable development.

Connectivity and infrastructure

The Cape Verdean government is investing in improving air connectivity, promoting low-cost airlines and increasing domestic and international flights. This strategy aims to improve Cape Verde's internal and external connectivity, facilitating trade and tourism, vital sectors for the country's economy (Island Express).

Implications for companies

Investment opportunities

The 2025 State Budget presents several opportunities for companies, especially in the infrastructure, tourism and renewable energy sectors. Companies operating in these sectors can benefit from tax incentives and public funding for projects that contribute to the government's development objectives.

Tax changes

The budget introduces some tax changes that could impact businesses. These include:

3. Tax Incentives and Benefits: The budget proposes maintaining tax incentives for business research and development, young start-ups, reinvestment of profits and financing of innovation projects. These incentives are crucial to fostering private sector growth and innovation in the country (PwC Portugal).

Priority sectors

• Tax cuts for new investmentsTo stimulate foreign and local investment, the government has proposed a temporary tax cut for new investments in priority sectors.

The 2025 State Budget identifies priority sectors for investment and development, which are fundamental for economic diversification and job creation:

• Incentives for renewable energiesCompanies that invest in renewable energy projects can benefit from tax incentives, including income tax deductions.
• Tax hikes on luxury goods: In order to increase public revenue, the government has proposed an increase in taxes on luxury goods, which could affect companies that import and sell these goods.

Challenges and risks

Despite the opportunities, companies should be aware of the challenges and risks associated with Cape Verde's economic environment:

• Global economic volatility: The global economy continues to be volatile, and fluctuations in international markets can have a negative impact on exports and tourism in Cape Verde.
• Energy transition and digitalisation: The Cape Verdean government is betting heavily on the transition to renewable energies and the digitalisation of services. This commitment aims to make the country more resilient and competitive, offering significant opportunities for companies in the technology and energy sectors (Island Express).

• Dependence on importsDependence on imports for essential goods can result in high costs for companies, especially if there are exchange rate fluctuations or interruptions in supply chains.
• Limited infrastructureAlthough the budget provides for investment in infrastructure, current limitations can pose logistical challenges for companies, especially those that depend on efficient transport and logistics.

Conclusion

Cape Verde's 2025 State Budget presents an ambitious plan for the country's economic and social development.

Companies operating in Cape Verde should be aware of the opportunities and challenges presented by this budget. With strategic investments and a clear understanding of fiscal and economic policies, companies can position themselves to take advantage of the economic growth predicted for the coming years.

Tourism and urban regenerationTourism continues to be a crucial driver of the Cape Verdean economy. The budget provides for investments in urban and environmental upgrading, the valorisation of seafronts and cultural heritage, which can benefit companies linked to tourism and urban development (Government of Cape Verde).

Air connectivityImproving air connectivity by promoting low-cost airlines and increasing domestic and international flights is a priority. This measure aims to improve internal and external connectivity, facilitating trade and tourism (Island Express).

Sustainable development and inclusion

The 2025 State Budget reaffirms Cape Verde's commitment to sustainable development and social justice. The government aims to achieve balanced economic growth between the islands, transforming each one into its own economy aligned with its specific vocations. This strategy includes measures to improve infrastructure, promote social inclusion and reduce extreme poverty (Island Express).

Check out the State Budget 2025

References

APO Group (2024, August 12). Priorities of the Cape Verde State Budget for 2025: Cohesion, Sustainability and Inclusion. Africa Newsroom. https://www.africa-newsroom.com/press/prioridades-do-orcamento-do-estado-de-cabo-verde-para-2025-coesao-sustentabilidade-e-inclusao?lang=pt

PricewaterhouseCoopers (2024, December 31). Cape Verde - State Budget for 2025. PwC Portugal. https://www.pwc.pt/pt/pwcinforfisco/flash/cabo-verde/cabo-verde-orcamento-estado-2025.html