CAPE VERDE INVESTMENTS – Cape-verdean Promotion Investment Agency

1

Official name : Republic of Cape Verde Official language: Portuguese National language: Crioulo Capital city : Praia Total land area : 4.033 km2 Population: 447. 947 inhabitants (INE -02/03) Official currency: (CVE) Cape Verdean Escudos NATIONAL INDICATORS Real sector Real G DP

2001 Annual V. (%)

1

GDP per Capita 1 Inflation (CPI) Rate of Unemployment

2002

3,5

USD Annual V. (%) Annual V. (%)

5,5

2003

2004

2005

4,7

5,0

6,4

1.570,8 1.649,3 1.761,3

1.814,9

1.930,2

3,7

1,9

1,6

-1,9

0,4

19,1

16,2

16,7

16,7

nd

Average Annual Exchange Rate (2005) USD

88,6 110,265

Euro ( Fixed parity )

Main External Sectors

2002

2003

2004

2005

Exports : Goods and services

In % of GDP

1,7

1,6

1,6

1,7

Imports : Goods and services

In % of GDP

43,4

43,0

41,5

42,6

Source : Central Bank 1- Data: Central Bank

* Tourism Travel credits, Balance of Payment ** Tourism Travel credits / Total services credit

2

NATIONAL ECONOMIC INDICATORS 2002 Revenues from Tourism (In Millions of CVE) Contribution of Tourism tp GDP (%) Contribution to the Services Sector (%)

6.985,5 9,4 37,6

Source: Central Bank

3

2003 8.306,1 10,4 42,1

2004

2005

8.495,6 10,3 40,3

9.565,9 10,5 40,4

 Stable political and socio-economic environment

Parliamentary political system of free elections; Free of ideological confrontation, ethnic or religious strifes; Far-reaching macroeconomics and social indicators.  Privileged strategic location

At the cross - roads of North America and South Africa; At the intersection of South America and Central Europe; Served by regular liner connections.  Outward-looking markets

Cape Verde made products benefit from preferential trade access to European Union, USA, Canada and ECOWAS markets  Labor market

Freely available; Easily trainable and ; Highly productive workforce.  Foreign Investment Facilities

Two infrastructured industrial parks; International airports and ports ; Efficient information communication facilities ; Ship repair facilities, cold storage and fish processing.

GOVERNMENT WARRANTEED RIGHTS Nondiscrimination and equity treatment ; Security and legal protection of property rights and other assets; Repatriation of hard currency funds over legally obtained profits; Hard currency account for free transactions;

INVESTMENT POLICY INCENTIVES  Foreign Investment

Cape Verde‟s incentives package focuses on external investment, free export enterprise, exports, and activities on different sectors. The benefits granted are as follows: General incentives and exemptions foreseen in the different sectors laws. 4

 FISCAL INCENTIVES

Full exemption of fiscal obligations applicable to all generated during the first five years of operation,;

dividends and profits,

Tax-exemptions on amortizations and interests accruing from Foreign investment related financial transactions; Standardization of the Fiscal regime, 10% after the fifth years of activity. Tax-exemptions on dividends which capital has been reinvested ; Guarantees

Legal protection of private property rights, regarding foreign investment ; Unconditional transferability in convertible currency, of net profits and dividends; Privately managed foreign currency accounts;

 Fre Export Enterprises Fiscal Incentives

Total exemption on corporate and complementary taxes on profits for the first decade; Full tax exemption on dividends shared with partners during the first ten-yearperiod ; Lifetime exemption on indirect fiscal taxes. Customs Facilities

Free admission of imported machinery equipment, construction materials, fuel oil, lubricators and other goods, solely for export activity ; Special regime applicable to the imports of raw materials and related materials ; Exemption on all customs duties for exports. (Decree Law 99/ IV/ 93, of December 13)

5

 Exports: Goods and Services Fiscal Incentives

Reduction of taxes and impositions on profits for the first five-year period. Customs Facilities

Duty-free imports of raw materials, finished and semi-finished goods, used exclusively in production of goods and services at the enterprise ; Total exemption on duties, general customs emoluments, consumer tax and others destined for exports; Free export of goods. (Decree Law 92/ IV/ 93, of December 15 )

SECTORS SPECIFIC INCENTIVES  Industry

Exemption from corporate taxes, consumer tax and general customs emoluments over imports of goods, equipment and listed materials ; Exemption of Sole Personal Income (IUR)* over incomes generated in each new industrial establishment, that has been previously registered within a three-year period; Free export of goods; Tax deduction on profits reinvested. ( Law Decree 108/ 89, of 30 December )  Tourism

Exemption from general customs duties over imports of materials used for exclusive construction or installation of tourism facilities; Exemption from real estate transfer and property taxes; 100% fiscal exemption for the first five-year period ; For the ten years following the first five, the fiscal imposition shall be 50%; Tax deduction on profits reinvested in similar activities ; Tax deduction for expenses incurred in training the local taskforce ; Tourism Utility Act ( Law Decree 11/ 94 of 14 February 1994); Duty-free imports, customs emoluments of goods and materials required for export products ; Free export of goods. ( Law Decree 42 / IV / 92, of 6 April 1992 )

6

OTHER INCENTIVES For the foreign investor whose economic activities are exclusively oriented towards the domestic market.; For foreign investment in the financial sector, since it is ruled by specific legislation.

BUSINESS OPPORTUNITIES Industry Apparel, footwear production, fish processing, marine salt extraction, cement, pouzzolane, kaolin, calcareous rocks, biscuits, packaging, carpentry and furniture, graphic arts and animal ration. Construction Production of inert material (sand, and gravel), cement-based art crafts and similar; Services rendered to the African Portuguese speaking countries. Fisheries Fish-processing plants and fishing vessels. Agriculture Flower cultivation, fruit trees, and plants. Services „Teleport „services, electronic data communication international ship registry, Hovercraft, tourism and industry support services, free trade zones; Public passenger‟s carriers, marketing advertising agencies, financial services; Shipping (West Africa bound), coasting trade, feeder and “trumping” services. Tourism Luxury hotel Resort hotel Executive hotels Sport, Fishing and Diving Hotel

7

Sectors under Privatization ENAPOR - Port authority sector CABNAVE - Shipping yard EMPROFAC - Import of pharmaceutical drugs and medical and hospital Equipment TACV - National Airline Company INTERBASE, P.E. - Cold Storage of Fishing Catches

FOREIGN INVESTMENT STATUTE PROCEDURES  Foreign Investment  Submitting the Application : All foreign or external investments are subject to previous authorization, following the provisions of ( Article 3rd of Law 89 / IV/ 93 ).

Applications for the Foreign Investor Title shall contain two forms, and can be obtained from CI window free of charge. The stamped copies sealed by the investor in triplicate, duly filled up and signed, should be addressed to the Minister of Finance and Regional Planning, together with the following :

Copy of the identification card of each investors; Investors‟ Curriculum vitae and bank statement of deposit of capital ; Location where the project shall be implemented; Specific viability study of the impact onto the environment, in special cases. 

Deadline for Reply - The Minister‟s final decision shall be notified to the investor within 30 days, counting from the date of submition to CI. In cases where CI requets additional information from the investor, the 30-day waiting period is suspended until the petitioner supplies the CI with the requested information.



Receiving Investment Authorization - Upon granting of the authorization, the Minister of Finance and Regional Planning issues a Certificate of External Investment, which CI sends to the investor or his legal representative. This certificate confers to the investor, acccess to the incentives, as stated in the Foreign Investment Code ( Law 89/ IV/ 93). The certificate shall be declared nul, if investment operation does not occur within the specified deadline .



Project Registration - All external investments referred to in Article 5 th of Law 89/IV/93 are subject to registration at the Central Bank. All three copies of the registration form are to be submitted to the banking institution.



Site Inspection - The start - up or reopening of business is subject to prior inspection by the competent authorities, thirty days from the date of investment application. 8

 FREE-EXPORT ENTERPRISE - Statutory Requirements  Application - Applicants should complete the form accordingly.  Deadline for Reply - The same procedure for exteral investment shall apply.

CI may request additional information from the investor, in which case, the 30day waiting period is suspended until the requested information is provided . 

Certificate of Free-Zone Enterprise - The Minister of Finance and Regional Planning issues a Certificate of Free - Zone Enterprise for the applicant , and copies are also forwarded to the national entities with competence over the mater of economic labour.



This certificate confers to the investor, the right to usufruct from all incentives, foreseen in the applicable legislation.

Note: Only those enterprises engaged in production of market-oriented goods and services, exclusively for exports or sale to other freezone enterprises in Cape Verde, are eligible to apply for such status.

 THE MAIN STEPS FOR ESTABLISHING A COMPANY IN CAPE VERDE

The potential investor willing to establish a business in Cape Verde, may opt for any of the following legal, judicial, in-country operating companies . a) b) c) d) e)

Partnership Incorporation Limited Company (SARL) Joint-stock Company (Ltd) Corporations

The most common companies in Cape Verde are Limited Company (SARL), Corporations and Joint-stock Company (Ltd).

9

 Registering an Enterprise in Cape Verde

For registering an enterprise in Cape Verde, the investor should : 1)

Purchase a certificate issued by the Commercial Registry office that confirms that no other company has been registered under the same name ;

2)

Furnish by-laws drawn up by the founders and present corporate charter or memorandum of association to a public notary ;

3)

Attach an official Bank statement of account, for confirmation of deposit of the legaly authorized joint-stock ;

4)

Obtain certification from the public notary for publication in the Official Government Bulletin of Cape Verde.

5)

Carry out registration at the Ministry of Finance for payment of taxes due;

6)

Purchase registration at the Chambers of Commerce for the exercise of business activity .

TAX SYSTEM  Sole Personal Income Tax (IUR)

In Cape Verde, all enterprises are liable to pay IUR tax rates, provided that they derive their income therein. IUR falls upon the overall annual (common year) of various sources of income, namely: (i) Rental income; (ii) Commercial or industrial income; (iii) Capital gains; (iv) Incomes derived from agriculture and fisheries; (v) Income from financial transactions, including those from lotteries and gambling; (vi) Income from salaries or independent work.

The taxes under the declarative system, foreseen in Article 57 of Law 1/96, of January 15th, as regards to the tax payers, are as follows:

10

Hired labor or pensioners:

Discount rates, as applicable to income derived from the payment of invoices, services rendered, and the execution of activities rated as liberal profession, in line with Law 1/96, of January 15th, 2002 are retained at the source. The artificial collectives of public or private domain pay IUR taxes, provided they have a head office, an effective board of directors or are domiciled in Cape Verde. The entities that reside in and are engaged in any commercial, industrial, agricultural or fisheries-related activities, as their main occupation, and the sound establishments of non-residents pay IUR taxes derived from their declared profits. In order to estimate the income (profit) before income taxes, total operating and non-operating expenses of the income statements are used, and are verified and fixed in accordance with auditing principles and, eventually, amended, following the IUR‟S regulatory norms.

Following the system of verification, IUR tax is fixed at 30% for the tax-payers.

Annual income Less than or Equal to Up to Up to Up to Up to More than

Value

Rate (%)

180.000$00

0%

300.000$00 630.000$00 1.260.000$00 1.890.000$00 1.890.000$00

2,5% 8,5% 15% 21% 24%

Following the system of estimates, IUR tax is fixed at 20% for the tax payers.

11

With regards to liquidation, the following taxes are assessed on the incomes:

a) Interest from time deposits: A 20% interest rate is applicable to all current account deposits, safe for deposits made by the emigrants. b) Dividends and other capital gains: A 15% on the remaining incomes is applicable from investment funds, namely dividends, sharing of profits of business associations, anticipation of profits and value added. c) Profits earned by non-residents: A 20% tax rate shall fall on invoicing profits made by non-residents, even if not owners of any stable establishment. d) A 15% tax rate is applicable to profits made from gambling, lotteries, and billing volume.  Sole Enterprise Assets Tax (IUP)

Municipal State Tax : A 2% tax rate is applicable on public deeds Procedures and on the value of the infrastructures (buildings).  Stamp tax

A 0.7% stamp-duty rate falls on vouchers resulting from sales, transactions And provision of services. OTHER USEFUL INFORMATION Labor accident - insurance and occupational disease

Class 1 - 2% Class 3 - 6%

Social security Safety Net Duties Responsibility of the enterprise - 15% Responsibility of the employee - 8% (Compulsory retention at the source)

12

OPERATING COSTS

Energy supply cost ( CVE / Kwh ) Tariff D Applicable to household use, commercial establishments, public services, of low level consumption from the electric meter. Grade A = Up to 40 Kwh = 20$50

Tariff 1 Applicable to ordinary consumers and low level energy users and other industrial users in factory mills and related services. Power loading = 120$00/ Kwh

Energy rate = 16$00/ Kwh

Data : Official Government Bulletin nº 37, Series I of 30 th December 2002

Water supply cost ( CVE / Kwh ) ( CVE / m3 )

Tariff I Domestic

Grade A Up to 6m3 200$00

Grade B From 6 to 10m3

Grade C Up to 10 m3

280$00

350$00

Tariff II Industrial – applicable to enterprises and factory users and related offices

300$00

350$00 Tourism – applicable to hotels, pensions, and other related services.

Data: Official Government Bulletin nº 37, Serie I of 30 th December 2002 13

Telecomunications The cost of installing a fixed phone is approximately 3.045 CVE; plus a monthly user fee of 250 CVE. Cape Verde Telecom publishes the tariffs that are applicable to telephone calls. Other services such as cellular phones, Internet and Fax are available upon request to Cape Verde Telecom. Note: All listed prices are liable to changes.

Land Sales prices of land vary across the Integrated Tourism Development Zones (ZDTI). Various land use modalities are available and negotiations are encouraged for specific conditions. In order to acquire land in the ZDTI, the potential investor should contact CI. For the purchase of land located in industrial estates, the potential investor should contact the Town Hall.

Working Schedule (Monday through Friday)

Public institutions - From 08H00 to 12H00; and from 14H00 to 18H00 Banks - 08H00 to 15H00 (customers) Trading companies - Monday through Friday - From 09H00 - 12H30 From 15H00 - 19H00 - Saturday - From 09H00 to 13H00

14

BUSINESS CONTACTS

LEGISLATION FRAMEWORK th

 Foreign Investment - Law 89/IV/93, of December 13 , 1993; rd

 Regulatory - Decree - Law 1/94, of December 3 , 1994; th

 Tourism Utility Law - Law 42/IV/92, of April 06 , 1992; th

 Free Trade Zone Enterprise Statute - Law 99/IV/93, of December 30 , 1993; th

 Incentives to Export and Re-export- Law 92/IV/93, of December 15 , 1993

( In supplement to Law 47/93); th  Industrial Statutes - Law 108/89, of December 30 , 1989.  Code of Commercial Enterprises - Legislation decree nº 3/99 O. B. 3/99 of 29 March CI – Cape-verdean Promotion Investment Agency USEFUL SUPPORT INSTITUTIONS (+238) CI-ACI ( Head office ) Information (CVTelecom)

Telephone

Fax

2604110 / 2604111

2622657

102

TACV

2608200

2618323

TAP

2615826

2611266

SAA

2411358/1365

2411093/38

Chamber of Commerce ( leeward )

2617234

2617235

Chamber of Commerce ( windward )

2328495

2328496

Useful Site links Governo de Cabo Verde (government) CI-ACI

www.governo.cv www.virtualcapeverde.net

Instituto Nacional de Estatísticas (statistics)

www.ine.cv

Banco de Cabo Verde (central bank)

www.bcv.cv

Cabo Verde Telecom (telecom provider)15

www.nave.cv

16