Business law in Cape Verde
Business law in Cape Verde is primarily influenced by Portuguese legal traditions due to the country’s historical ties as a former Portuguese colony. Cape Verde operates under a civil law system, which is largely codified and structured to support the country's evolving economy and international trade relationships. Business law in Cape Verde is designed to create a conducive environment for both local entrepreneurs and foreign investors, promoting economic growth and development.
Key Aspects of Business Law in Cape Verde:
1. Legal Framework
The legal framework for business activities in Cape Verde includes a combination of constitutional law, commercial laws, and regulations set by various government agencies. Some key elements include:
The Constitution of Cape Verde: The Constitution provides the fundamental legal framework and guarantees for businesses, including the right to freely engage in economic activities and protection of property rights.
Civil Code: The Civil Code regulates personal rights, property, contracts, and obligations, which are relevant for businesses, especially in terms of civil transactions and dispute resolution.
Commercial Code: The Commercial Code of Cape Verde governs the registration and operation of businesses in the country. It covers a range of business matters, including the formation of companies, contracts, and commercial transactions.
The Cape Verdean Companies Act: This act establishes the legal framework for the incorporation, governance, and dissolution of business entities in Cape Verde, including corporations and partnerships.
Foreign Investment Law: This law governs foreign investment and ensures that foreign investors can operate within Cape Verde under favorable conditions. It provides for investment incentives and guarantees against expropriation.
Labour Code: Cape Verde's Labour Code regulates employment relationships, including employment contracts, labor standards, and social security.
Tax Law: Cape Verde's Tax Code regulates the taxation of businesses in the country. It covers corporate tax, VAT, and other forms of taxation for businesses.
Intellectual Property Law: Cape Verde protects intellectual property rights through the application of national laws as well as international agreements such as the World Intellectual Property Organization (WIPO) conventions.
2. Types of Business Entities
Cape Verde offers a variety of business structures, including:
Sole Proprietorship: A business owned by a single individual who is responsible for all aspects of the business, including liabilities and debts.
Partnerships: Partnerships in Cape Verde are governed by the Commercial Code and can take the form of general partnerships (Sociedade em Nome Coletivo) or limited partnerships (Sociedade em Comandita). In a general partnership, all partners are personally liable for the debts of the business, while in a limited partnership, there are both general and limited partners with differing liabilities.
Limited Liability Company (Sociedade por Quotas - Lda): This is the most common business structure in Cape Verde for small to medium-sized businesses. The liability of shareholders is limited to their capital contributions. The company must have at least two shareholders and a minimum share capital.
Public Limited Company (Sociedade Anónima - SA): A public limited company is suited for larger businesses. Shareholders' liability is limited to their contributions. It is required to have a board of directors and a supervisory body. The minimum share capital is set higher than that for a limited liability company.
Branch of a Foreign Company: Foreign companies can establish a branch in Cape Verde. The branch is considered an extension of the parent company and must comply with Cape Verdean business and tax laws.
Cooperative (Cooperativa): Cape Verde also allows the formation of cooperatives. A cooperative is typically a business entity owned and operated by a group of individuals for mutual benefit, commonly used in sectors like agriculture and fisheries.
3. Business Registration and Formation
To operate a business in Cape Verde, entrepreneurs must go through the following steps:
Choose a Business Structure: Decide on the type of business entity, such as a sole proprietorship, partnership, limited liability company, or corporation.
Register the Business: Businesses must be registered with the Commercial Registry (Registo Comercial) to obtain a business registration number. This process typically involves submitting documents such as the company’s statutes, identification of owners and directors, proof of capital contribution, and company name.
Obtain a Tax Identification Number (NIF): Every business must obtain a tax identification number (NIF) from the Tax Authority (Direção Geral dos Impostos) for tax purposes.
Open a Corporate Bank Account: A corporate bank account must be opened to handle all business financial transactions.
Obtain Necessary Licenses and Permits: Depending on the nature of the business, additional licenses or permits may be required, particularly for sectors such as hospitality, construction, and health.
Social Security Registration: Employers are required to register with the Social Security Fund (Instituto Nacional de Previdência Social) and make social security contributions on behalf of their employees.
4. Taxation in Cape Verde
Cape Verde has a tax system designed to encourage business development while ensuring government revenue. Key aspects include:
Corporate Income Tax: The corporate income tax rate is 25% for most businesses. However, there are certain incentives and reduced rates for companies operating in specific sectors, such as tourism, renewable energy, and infrastructure.
Value Added Tax (VAT): Cape Verde operates a Value Added Tax (VAT) system with a standard rate of 15%. Some goods and services, such as food, healthcare, and education, are exempt or subject to a reduced rate of 5%.
Personal Income Tax: Personal income tax in Cape Verde is progressive, ranging from 10% to 25%, depending on income levels. The tax system applies to employees and self-employed individuals.
Withholding Tax: A withholding tax is applied on certain payments, including dividends, interest, and royalties. The rate may vary based on the type of payment and the recipient’s status.
Social Security Contributions: Employers must contribute to the Social Security Fund for employee benefits, including pensions and healthcare. The employee contribution is typically 8%, while the employer contributes 11%.
Other Taxes: Additional taxes include property taxes, municipal taxes, and capital gains taxes. Taxes may also apply to specific industries or activities, such as banking, mining, and transportation.
5. Labor and Employment Law
Cape Verde’s Labor Code outlines the legal rights and obligations of employers and employees. Key provisions include:
Employment Contracts: Employment contracts can be written or verbal. Written contracts are preferred, especially for permanent employment. They must outline the terms of employment, including the job description, working hours, salary, and benefits.
Minimum Wage: Cape Verde sets a minimum wage for workers, which varies depending on the industry and the employee’s role. The minimum wage is designed to provide a basic standard of living.
Working Hours and Overtime: The standard workweek in Cape Verde is 40 hours, typically divided into five 8-hour days. Overtime pay is required for work beyond the standard hours, usually at a higher rate.
Vacation and Leave: Employees are entitled to 22 days of paid annual leave. There are also provisions for sick leave, maternity leave, and paternity leave.
Termination and Severance: Employers must adhere to legal procedures when terminating an employee’s contract. Termination may require notice, and severance pay may be due depending on the length of employment.
6. Intellectual Property Law
Cape Verde protects intellectual property rights through national laws and international treaties. Key areas of protection include:
Trademarks: Businesses can register trademarks with the National Institute of Intellectual Property (INPI). Trademarks are protected for 10 years and can be renewed indefinitely.
Patents: Patents are granted for inventions that are new, inventive, and industrially applicable. The protection term for patents is typically 20 years.
Copyright: Copyright protects original works such as books, music, and films. Protection generally lasts for the life of the author plus 50 years.
Industrial Designs: Cape Verde protects industrial designs, including the appearance of products. Protection is granted for a period of 10 years.
7. Foreign Investment in Cape Verde
Cape Verde actively encourages foreign investment as part of its economic development strategy. The Investment Code provides a favorable legal framework for foreign investors, with the following features:
Incentives for Foreign Investment: Foreign investors can benefit from tax exemptions, customs duties exemptions, and investment subsidies, particularly in areas like tourism, renewable energy, and infrastructure.
Foreign Ownership: There are no general restrictions on foreign ownership in Cape Verde, though some sectors may have specific requirements or restrictions. Foreign investors can establish fully-owned businesses in most sectors.
Investment Promotion Agency: The Cape Verde Investment Promotion Agency (CPI) assists foreign investors by offering services such as providing information on investment opportunities, helping with the regulatory process, and offering guidance on financial and tax incentives.
8. Dispute Resolution
Disputes in Cape Verde can be resolved through the following methods:
Litigation: The country has a court system that handles business-related disputes, including commercial courts, civil courts, and labor courts.
Arbitration: Cape Verde supports arbitration as an alternative method of dispute resolution. International arbitration is also possible, and Cape Verde is a member of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).
Mediation: Mediation is becoming more common for resolving business disputes, and there are professional mediation services available.
Conclusion
Cape Verde has a business-friendly legal environment, with a comprehensive legal framework designed to support both domestic and foreign investment. The country’s efforts to promote economic development, especially in sectors like tourism, renewable energy, and infrastructure, have created opportunities for international business. While Cape Verde offers various incentives for investors and a transparent legal structure, businesses should still be aware of the specific local regulations, taxes, and labor laws that may affect their operations. With continued legal reforms and growing economic stability, Cape Verde remains an attractive destination for business development in West Africa.
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