The Cape Verde Investment Tax Credit: Analysis of the Incentive Scheme and Eligibility Requirements for the Strategic Investor

This article aims to analyse the Investment Tax Credit in Cape Verde, one of the most important economic policy instruments for attracting Foreign Direct Investment (FDI) and capitalising on national reinvestment.

The regime finds its primary foundation in the Code of Fiscal Benefits (CBF), approved by Law 26/VIII/2013, and its subsequent amendments. The Tax Credit typically materialises as a deduction from the collection of the Single Income Tax (IUR) , The scheme offers a direct reduction in the tax liability of legal or natural persons. Access to the scheme is highly selective, depending on the classification of the investment as “relevant” and its formalisation through a Establishment Agreement , The benefit is based on a rigorous criteria of amount and job creation. The benefit is structurally designed to reward productive investment, sustainability and economic resilience.  

I. The legal framework and the nature of the incentive

1.1 The legal basis and primary normative sources

The tax incentives system in Cape Verde, of which the Tax Credit is a crucial component, is governed by the Code of Fiscal Benefits (CBF), established by Law no. 26/VIII/2013, of 21 January. This diploma, combined with the Investment Law (Law no. 13/VIII/2012, as amended) , defines the general and special framework for granting rights, guarantees and, fundamentally, tax incentives to investment projects.  

The Tax Credit, in the Cape Verdean context, is not restricted to a single modality, but is explicitly provided for as a deduction from the collection of the Single Income Tax (IUR). This incentive, which is non-contractual (general regime) and contractual (special regime), aims to encourage productive investment, increase the competitive capacity of companies and direct capital towards national development priorities, such as the energy transition and the Blue Economy.  

1.2 The distinction and modalities of the incentive

Cape Verde's tax policy distinguishes between the following types of incentives, with the Tax Credit being one of the most direct and measurable, as detailed in the following section Resolution no. 90/2024 of 21 October :  

1. Investment Credit: A mechanism that allows the investor to deduct a percentage of the eligible investment costs directly from the tax due (IUR/IRPC collection).  
2. Deduction from the Collection: This method allows the final amount of tax payable to be reduced. The Tax Credit, in practical terms, operates like an IUR Deduction.  
3. Fee Reduction: Decrease in the nominal rate of the Single Income Tax (IUR) up to a limit of 5%.  
4. Exemption: Total tax exemption, applicable to taxes such as IUR, Stamp Duty, Single Property Tax (IUP) and Import Duties, generally for a fixed period.  

Under the general scheme, investors can benefit from a 50% tax credit for the relevant investment , This is a fundamental provision for calculating the benefit.  

II. Eligibility requirements and award mechanism

Access to the Tax Credit is intrinsically linked to the classification and registration of the investment, especially with regard to larger projects.

2.1 Investment criteria for contractual benefits

The most far-reaching tax benefits, which may include the Investment Credit, are granted under contractual tax benefits, also known as Establishment agreements. Eligibility for this contractual modality is defined by criteria of amount and impact, varying according to the location of the project :  

Note: Although the legislation provides for these high limits, a previous special regime (2017 State Budget) exceptionally reduced the minimum amount for concluding Establishment Agreements to 550,000,000 CVE and the number of jobs for 10. The investor should check up-to-date legislation or eligibility for sectoral programmes that may benefit from these reductions.

2.2. The formalisation process and the One-Stop Shop

All investments with a value equal to or greater than 5 million Cape Verdean escudos (5,000,000 CVE) must follow the procedure laid down for the Investor One-Stop Shop (BUI). A Cape Verde TradeInvest (CVTI) is the organisation responsible for managing the BUI, acting as a focal point for promoting, facilitating and approving projects.  

The process of attributing benefits, including the Tax Credit, is integrated into the BUI, and the deadline for assessing and approving investment processes is 75 days. The expression of interest and the submission of the project must be accompanied by a set of documents required by CVTI.

III. The application and amortisation of the Tax Credit

3.1 Conditions of application and deduction limits

The Tax Credit (or Investment Credit) is a benefit of a deductible nature, applied directly to the IUR/IRPC tax. The CBF details the conditions under which this deduction is allowed, namely within the scope of incentives under the Single Income Tax.  

A general condition for access to tax benefits is the need for acceptance by the competent municipal body. This gives local councils a role in approving the tax component of investments, namely the exemption from the Single Property Tax (IUP) on the purchase of property exclusively for the project.  

Summary of the main tax incentives

3.2 Deduction of losses and Carry-Forward

One of the most important characteristics of the Tax Credit in Cape Verde is its flexibility of use over time (phenomenon of carry-forward). The contractual tax benefit, granted for a period of up to 10 years , can take the form of Collection Deduction or Deduction from the tax base.  

In situations where the collection of Single Income Tax in a given year is insufficient to fully deduct the amount of tax credit to which the investor is entitled, the portion not utilised (not deducted) can be deducted from the collection of one of the following fifteen subsequent financial years. This legal provision ensures that the tax benefit of the Investment Credit is not lost due to insufficient profits in the first few years of operation, guaranteeing that the incentive is fully utilised.  

3.3 Other integrated social benefits

The tax incentive scheme focuses not only on capital, but also on social and labour impact. The CBF provides for tax benefits of a social nature , such as collection deduction for each job created in certain municipalities, with the amount varying (e.g. 30,000 escudos per job created in other municipalities). Eligibility for the Tax Credit is therefore reinforced by demonstrating a multiplier effect on employment and social development.  

IV. Conclusions and strategic implications

The Investment Tax Credit in Cape Verde represents a powerful tax relief at the start of activity, operating as a form of state participation in the risk of productive capital.

Success in obtaining this benefit requires an investment planning strategy that links up with the administrative system:

1. Institutional alignment: The investor must formalise the project through CV TradeInvest's One Stop Shop, which is the only channel for accessing the incentives.  
2. Proof of Relevance: Projects that exceed the minimum investment and employment thresholds (criteria for 5 billion escudos and 50 jobs in non-priority regions ) should request and negotiate a Establishment Agreement. This agreement is the legal means of formalising the Investment Credit or the Collection Deduction for a period of up to 10 years.  
3. Amortisation planning: The ability to deduct unused credit for up to 15 years mitigates the risk of not obtaining the benefit in the early years and allows for long-term tax planning to optimise the return on invested capital.  

The Investment Tax Credit, as a form of deduction from the IUR tax, is the centrepiece of Cape Verde's incentive policy for long-term capital, but it requires a rigorous process of analysis. compliance and contract negotiations.

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