Doing Business in Cape Verde - Renewable Energy Sector Saul Fonseca - German Energy Solutions
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Munich, 21 July 2015
Doing Business
in Cape Verde
Renewable Energy Sector
Saul Fonseca
INTRODUCTION Doing Business in Cape Verde • Reasons to invest • Business structures • Foreign Investment • Tax System • Foreign Exchange Rules • Labor System • Renewable Energy Legal Framework
REASONS TO INVEST
Reasons to invest
• Civil law system (similarities with most continental Europe)
• Stable democracy: strong rule of law compared to most countries in
the region
• Economy open to foreign investments
• No discrimination between national and foreign investors
• Rights statutorily granted to foreign investors
• Easy transferability of profits and dividends
• Foreign exchange stability: 1EUR = 110CVE
Doing Business in Cape Verde
Reasons to invest
• Recent statutes adjusted to today’s economy:
• Tax regime
• Company and corporate law regime
• Specific regimes applicable to:
• Foreign investment
• Renewable energies sector
• Bilateral agreement with Germany for mutual protection of
investments (Decree 171/90, of 29 December): in force since
15 December 1993
Doing Business in Cape VerdeBUSINESS STRUCTURES
Business structures
• Foreign companies wishing to carry out business activities in Cape
Verde for more than 1 year, are required to set up a local entity:
• Branch; or
• Local company
• Most common type of limited liability companies:
• Limited liability companies by quotas (Sociedade por Quotas –
'LDA')
• Joint stock companies (Sociedade Anónima – 'SA')
Doing Business in Cape VerdeBusiness structures
LDA VS SA
Minimum share capital: CVE 1 Minimum share capital: CVE 1
Contributions of shareholders must be in Contributions of shareholders must be in
money money
Minimum of two shareholders Minimum of two shareholders
Sole shareholder: possible (if an individual) Sole shareholder: possible (if a company)
Corporate Bodies: Corporate Bodies:
•General Assembly and Management •General Assembly
•Supervisory body (optional) •Board of Directors (odd number of members)
•Supervisory body (mandatory)
Doing Business in Cape VerdeBusiness structures
• Fast track procedure for the incorporation of limited liability
companies by quotas or joint stock companies (Decree-Law 9/08, of
13 March 2008)
• One-stop shop (Citizens’ House - “Casa do Cidadão”)
• Limitations: adoption of pre-selected by-laws and appointment of a
chartered accountant and delivery of a statement by the chartered
accountant
• Online incorporation of companies – foreseen but not operational
yet
Doing Business in Cape VerdeIncorporation procedure
(Traditional)
1. Approval of the corporate name
2. Obtain tax identification number
3. Execute the company’s by-laws
4. Opening a local bank account in the company’s name and deposit the
amount required to subscribe the share capital
5. Register the incorporation of the company with the Commercial
Registry
6. Publish the company ’s by-laws in the Official Gazette;
7. File declaration of beginning of activities with tax authorities;
8. Registration with Social Security, National Directorate of Labor and
Labor Inspection Services
9. Ancillary licensing procedures (commercial/industrial/other)
Doing Business in Cape VerdeFOREIGN INVESTMENT
Foreign Investment
• Investment Law: applicable to all investments made in Cape Verde
by national or foreign investors who wish to benefit from
guarantees and incentives (Law 13/VIII/2012, of 11 July 2012,
amended by Decree-Law 34/2013, of 24 September)
• No minimum investment amounts
• Incorporation of a local company / registration of a branch are
foreign investment operations
• Resolution of disputes between the State and foreign investors
subject to arbitration subject to either (i) domestic arbitration law;
(ii) Washington Convention of 1965 or ICSID Convention; (iii) ICC
Rules
• Cape Verde Investments (Cabo Verde Investimentos): national
investment agency
Doing Business in Cape VerdeForeign Investment
Investor’s rights and guarantees
• Non-discrimination between domestic and foreign investors
• Protection of private property against acts of seizure, nationalization
or expropriation and, if for public interest, right to fair compensation
• Right to convert and transfer abroad all investment revenues:
• Net operating profits (dividends and interest on capital)
• Royalties and commissions
• Income from the sale of shares and partial or total sale of any part of an
investment;
• Compensation for expropriation or loss
• Expatriates and Cape Verdean workers who, at the time of hiring,
have been residing abroad for more than five years, have the right to
transfer abroad income from services rendered to companies
financed with resources from abroad
Doing Business in Cape VerdeBenefits
• Corporate Income Tax credit
• 50% on “relevant investments” made in renewable energy
production and manufacture and installation of renewable
energy equipment
• 30% on “relevant investments” made in other business activities
• Relevant Investments: newly acquired tangible fixed assets used in
the investment project and acquisition of patents and licenses for use
of technologies certified by the relevant authority
• Tax credit cannot exceed 50% of the tax due per year and the excess
may be carried forward for 10 years
Doing Business in Cape VerdeBenefits
• Exemption of Single Property Tax on real estate assets purchased
exclusively for the installation of the investment project
• Not automatic, subject to acceptance by the relevant
Municipality
• Exemption of Stamp Duty on financing agreements for the
investment project
• Job creation benefits
• Training, internships and scholarships benefits
Doing Business in Cape VerdeBenefits
• Customs duties
• Exemption on the import of certain assets linked to the primary
object of the investment project (excludes equipment and
vehicles over 5 years old)
• Exemption on materials incorporated or used in the production of
goods and services for the production of electricity with
renewable sources, if the company is registered in the Industrial
Registry
Doing Business in Cape VerdeBenefits
• Investment Agreement (“Convenção de Estabelecimento”)
• Exceptional incentives granted by the Council of Ministers on a
contractual basis
• Only available for investment projects:
• Relevant for the promotion and swifter growth of the national
economy
• Above CVE 10 billion (approximately EUR 90M)
• Able to create at least 100 jobs within a maximum period of 3
years.
• In case of investments outside urban districts of Praia, Sal and Boa
Vista – reduction of requirements by 50%
• Benefits cannot be combined with general tax benefits
• Tax rate resulting from the contractual benefits cannot be lower
than 1/5 of the tax rate in force
Doing Business in Cape VerdeTAX SYSTEM
Tax System Recent major tax reform in order to provide the country with a system similar to the ones in place in the most developed countries around the world CORPORATE INCOME TAX (Imposto sobre o Rendimento das Pessoas Coletivas – “IRPC” ) • Levied both on profits obtained in the territory and abroad by resident companies • Non-resident companies with a permanent establishment (PE) in Cape Verde are also subject to IRPC on Cape Verdean-source income attributable to the PE Doing Business in Cape Verde
Tax System
• General rate: 25%; fire brigade surcharge of 2% is applied in the
Municipalities of Praia and Mindelo (final tax rate of 25.5%)
• Micro and small-sized companies: single special tax (SST) of 4% levied
on the gross amount of sales, to be paid quarterly. Replaces IRPC, fire
brigade surcharge and VAT, as well as the contribution to social
security attributable to the company
• Dividends: 10% WHT; exemption if the following conditions are
cumulatively fulfilled:
• Direct or indirect participation in share capital ≥10%;
• Held consecutively for one year prior to the date at which the
profits are made available; and
• None of the entities benefits from a favorable tax regime
• Interest payment: general rule of 20% WHT is applied
Doing Business in Cape VerdeTax System PERSONAL INCOME TAX (“Imposto sobre o Rendimento das Pessoas Singulares - “IRPS”) • Due by individuals residing in Cape Verde for more than 183 days in aggregate over the year or having their habitual residence therein at 31 of December • Rates: progressive rates ranging between 16.5% up to 27.5% for income above CVE 1.800.000 • Residents in Cape Verde are taxed on worldwide income • Non-residents are taxed on Cape Verde income only Doing Business in Cape Verde
Tax System SINGLE PROPERTY TAX (Imposto Único sobre o Património – “IUP”) • Levied on transactions involving transfer of real estate assets • IUP is also due on the ownership of immovable property on an annual basis by the owner of the real estate • Rate: 1.5% on the amounts declared in the public deeds and/or the patrimonial value of the properties transferred Doing Business in Cape Verde
Tax System VALUE ADDED TAX (Imposto sobre o Valor Acrescentado – ‘VAT’) • Levied on sales of goods, provision of services and importations • Rate: 15.5% (applicable during the fiscal year of 2015) • 2015 State Budget increased VAT from 15% to 15.5% (except for the “transmission of water and electricity”) to fund the reconstruction of villages damaged by the Fogo volcano eruption STAMP DUTY (Imposto do Selo – ‘SD’) • Levied mainly on financial and corporate operations • Lump sums in local currency and rates ranging from 0.5% to 15% Doing Business in Cape Verde
FOREIGN EXCHANGE
Foreign Exchange Regime
• Foreign exchange (“Forex”) regulations apply to all transactions between
Forex residents and Forex non-resident entities, regardless of their nature
(personal or business transactions).
• Currency transfers between a resident entity and a non-resident entity are
subject to Forex procedures, which vary depending on the type of
transaction.
• Forex operations must be carried out through local banks or financial
institutions duly authorized to carry out such operations,
• Forex residents:
• Individuals who are habitually residents (for more than one year) in
Cape Verde
• Companies with head offices in Cape Verde
• Branches, agencies or any other form of representation in Cape
Verde of companies with head offices abroad
Doing Business in Cape VerdeForeign Exchange Regime
• Forex non-residents:
• Individuals habitually resident abroad;
• Companies with head offices abroad with no form of corporate
representation.
• Forex operations:
• Opening of offshore bank accounts by residents – Prior
authorization
• Payment of goods, current operations and invisible items of
trade operations – Free
• Capital operations – Prior authorization
• Other operations – Prior verification
• Transfer of investment revenues abroad: relevance of the Foreign
Investor status and Bilateral Agreement with Germany
Doing Business in Cape VerdeLABOR SYSTEM
Labor System
• Equal treatment for foreign and national employees
• As a rule, employment contracts with foreign workers must be drafted
in writing and stamped by the National Directorate of Labor in order
to be effective
• 3 types of employment contract
• Without term (general rule)
• With fixed term
• For uncertain term
• Minimum salary: roughly EUR 100
• Social security contributions are payable by the employee on their
gross income at a rate of 8% and by the employer at 15%
Doing Business in Cape VerdeLabor System
• In order to enter the country for a temporary “assignment”
employees must apply for a Temporary Visa (“Visto Temporário”).
There is no “work visa”. Two types are available:
• Ordinary Visa (“Visto Ordinário”):
• Valid for a single entry only
• Allows the holder to stay in the country for a period up to 180 days
• Multiple Entries Visa (“Visto de Múltiplas Entradas”):
• Valid for multiple entries
• Allows the holder to stay in the country up to a 90-day period,
within one year following the date of its issuance.
Where to apply: Foreign embassies or consulates of Cape Verde
Doing Business in Cape VerdeLabor System
• If initial visa is not sufficient:
• Extension of the Temporary Visa (up to 1 year)
• Apply for the conversion of the Temporary Visa into a Residence Visa
(“Visto de Residência”) within 15 days prior to the expiry date of the
Temporary Visa
• Allows the holder to stay in the country for a period of 1 year
Where to apply (extensions and conversion): Migration services in Cape Verde
Doing Business in Cape VerdeRenewable Energy Legal Framework
RE Legal Framework
• Framework Law on Electricity (Decree Law 54/99, of 30 August,
amended in 2006 and 2013)
• General rules:
• Production: license
• Transport: concession
• Distribution: concession (license in case of remote areas not
comprised in concessions)
• Cape Verde 50% Renewable by 2020 Strategy and Action Plan
(Resolution 33/2011, of 5 September)
• Strategic Plan for the Renewable Energy Sector (PESER) and
Renewable Energy Development Zones (ZDER) (Resolution 7/2012, of
3 February)
Doing Business in Cape VerdeRE Legal Framework
• Key statute: Legal Regime on Independent Production and Self-
Production of Electricity based in Renewable Sources
(Decree-Law 1/2011, of 3 January, amended in 2013 and 2014)
• 3 regimes, all open to private initiative and to the accumulation of
licenses:
• General regime: independent production and self-production –
License granted by the Energy General Directorate, upon opinion
of the Economic Regulation Agency
• Microgeneration: self production with connection power up to
100kVA – Registration of the producer in the Self-Production
Registry System
• Simplified regime for decentralized rural electrification –
License granted by the Ministry in charge of the energy sector
Doing Business in Cape VerdeRE Legal Framework General Regime – remuneration • Fixed amount set by the Economic Regulation Agency for each kWh injected in the grid for a period of 15 years as of the date of connection to the grid • Amount may be lowered by the producer in case of tender • No inflation rate updates and no amendments during 15-year period • After 15-year period reduction of 20% to 35% set by the Economic Regulation Agency (depending on the technology) • Payment: (i) by the Concessionaire; or (ii) through credits of renewable production, always within 30 days of the issuance of the invoice • 0.5% compensation fee to the Municipalities/State Doing Business in Cape Verde
RE Legal Framework
General Regime - procedure
• Projects within ZDERs do not require environmental impact assessment
procedure or studies
I. Granting of reception capacity:
• Simplified annual tender for attribution of power available for the next
two years – 2 stages
• Expressions of interest until 30 June each year
• Tender stage
• Upon request of the interested party in case there are no expressions
of interest or the tenders do not have any participants – 2 alternatives
• Other interested parties – simplified tender stage, with right of first
refusal granted to the initial interested party
• No other interested parties – direct award
Doing Business in Cape VerdeRE Legal Framework
General Regime - procedure
II. Establishment License (max. 3 years)
• Must be requested within 6 months as of granting of reception
capacity
• Technical, economic and financial capability review of the promoter
III. Operating License (max. 30 years)
• May be transferred with authorization by the General Director of
Energy
Doing Business in Cape VerdeThank you!
Saul Fonseca
Saul.Fonseca@mirandalawfirm.com
Portugal Cape Verde
A Av. Eng. Duarte Pacheco, 7 Travessa Luís de Melo, 9 - 1st Fl
1070-100 Lisboa – Portugal P.O. Box 958
Praia - Santiago - Cape Verde
T: +351 217 814 800
F: +351 217 814 802 T: +238 261 13 44
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