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Legal and Tax information on buying property in Cape Verde
Buying Process
Cape Verde is an independent country which gained independence from Portugal in 1975. The legal system is similar to Portugal and Portuguese remains the official language although Creole, Portuguese based but with African influences, is spoken by many of the locals.
In an attempt to encourage foreign investment and property development, purchase taxes are relatively low. The mortgage market is still in its infancy although banks are increasingly prepared to lend once their eligibility criteria is met. Typical interest rates are around 7% and a normal Loan to Value (LTV) is about 70%. Most mortgages generally do not exceed 15 years. Please contact Assetz Finance for further details.
To proceed with a purchase, an initial reservation agreement (Contrato de Reserva) is required along with a full refundable deposit of around €2,000 or €3,000 to take the property off the market during a 14 day cooling-off period.
Off-plan purchasers then sign a Promissory Contract of Purchase and Sale (Contrato Promessa de Compra e Venda) which is a legally binding contract to purchase the property. This will outline the stage payments which are typically:
- 30% on signing the Promissory contract ( 28 days after the reservation agreement )
- 20% on completion of the infrastructure
- 20% on completion of foundations
- 20% on completion of walls and roof
- 10% on completion
At this time, checks are made at the Conservatôria Predial (Land Registry) and the Câmara Municipal (Town Hall) to ascertain that the developer has good title to the land and has the necessary building licence and to view official plans and tax information certificate.
Nearer to completion of the property, a Power of Attorney is arranged to permit a lawyer in Cape Verde to deal with all necessary legal matters leading up to completion. This will include obtaining tax numbers, attending the Notary to complete and sign the Escritura (final deed), registering title at the local land registry and preparing contracts for utilities such as electricity and water.
Prior to completion, a buyer must pay a purchase tax called "IUP" which is 3% of the purchase price. Notary fees, land registry fees and stamp duty usually total between 2.5% and 3% of the purchase price.
The basics of the Cape Verde tax regime for non-residents are as follows:
Income Tax
20% on the net profits of renting out property. Although there is no double taxation treaty between the UK and Cape Verde, you may reduce your UK income tax by the amount of income tax you have paid in Cape Verde. You do not therefore have to pay tax twice.
Capital Gains Tax
On a sale you would be subject to:
- Capital Gains Tax @ 15% of the gain
- Property Tax @ 3% of the gain if the selling price is more than 30% above the original purchase price
Inheritance Tax/Gift Tax
Payable by the beneficiary at the rate of 3% of the tax registered value (or the market price if the authorities consider it to be higher).
The contents of this webpage should not be taken as an authoritative statement of Cape Verde law and practice. Neither the author nor the publisher are responsible for the results of actions taken on the basis of information contained in this summary, nor for any errors or omissions. This text is not intended to provide legal, accounting or tax advice.
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