Legal, Tax

Cape Verde Legal and Tax Guide

We provide advice here on Cape Verde's very favourable tax environment for property investment regarding...

• IUP (property transfer tax)
• Stamp Duty, Land Registry and Notary fees
• Legal fees and Power of Attorneys
• Holding Tax
• Capital Gains Tax
• Wills and Inheritance Tax
• Taxes on Rental Income

Please note that this information is for guidance purposes and we always recommend that you use the services of a registered lawyer to ensure your transactions are correctly handled

Cape Verde property law is based on Portuguese property laws and is 99% identical.
Houses and villas are normally purchased on a typical freehold basis with locals and foreigners treated with the same legal rights. Apartments are normally bought on the "horizontal law" basis. Many overseas buyers will be familiar with this in that you pay shared community fees and the freehold is owned by the community of owners.

Property purchases are subject to registration at the local Public Notary whereupon the normal completion process occurs. In Cape Verde there are additional steps to register in the Land registry office, which is why we recommend the use of a local lawyer. In fact, it is much easier to provide your lawyer with a power of attorney (procuracao) to enable them to act for you in these activities. We can recommend reputable local lawyers and also UK based lawyers if you prefer.

Purchase Taxes for Property and Land in Cape Verde

All the costs, including the Notary fees, are typically about 5.5%-6% of the declared purchase price.

This broken down as follows:

• 3% of this is the I.U.P. tax. This is the Transfer Tax.
• 2.5-3% covers the other administrative costs and taxes such as Stamp Duty, Land Registry fees and the Notary costs.

The Power of Attorney document has to be signed at the notary too. Please be aware of this, as we normally recommend clients get this organised well before their property is finished. Your representative in Cape Verde will then be able to can get on with things as needed.

Property Holding Tax in Cape Verde

This is an annual municipal tax for property owners, paid in two installments per year. The rate is 3% of 25% of the attributed value (0.75% per year). The attributed value is determined by the authorities. This may well be less than the market value. This is payable in two instalments in April and September.

Capital Gains Tax

In Cape Verde, Capital Gains Tax for property is taxable when sale value is more than 130% of the value of the purchase (these figures relate to the declared values for the purchase and sale). In other words the tax free ‘Allowance' for Capital Gains is for the first 30% of any increase in value. The remaining capital gain is then taxed at a flat rate of 3%.

The ‘Allowance' for Capital Gains is for the first 100% of gain in the case of land purchased for construction. In other words tax is chargeable if the gain is more than double the purchase price. Again these figures refer to the declared price for the purchase and sale. We would ask you to refer to advice by a suitably qualified Cape Verdean accountant or solicitor for tax in this area, as this allowance relates to constructions in an approved urbanization by local government.

Inheritance Tax/Tax on Gifts of Property

This is flat rate tax 3% of attributed value, payable by the receiving party. Again the attributed value is determined by the authorities.

Wills in Cape Verde

It is advisable to seek specialist legal advice from your lawyer regarding the arrangement of wills to cover your property.

Income Tax on Rental Income in Cape Verde

Income tax for non-residents is charged at a flat rate of 20% on the profit. Certain expenses are allowable to be charged against the gross income received. These are:

• 10% allowance for maintenance, or wear and tear
• 30% on any interest paid on a mortgage
• Property Holding Tax

Other expenditure like condominium fees (or service charges), letting agents fees, accountancy fees, legal fees and other maintenance costs may be allowable.

Costs of purchase or capital expenditure to improve the property are not allowable.