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GHR beyond - Cape Verde

Publications 4. June 2024

Cape Verde

Overview

The Cape Verde Islands, commonly known as Cape Verde, form a group of islands in the Atlantic Ocean off the west coast of Africa. The islands present a diverse mix of traditions and have a rich ecosystem that varies from island to island. Although trade relations between Switzerland and Cape Verde are not particularly strong yet, economic ties already exist, especially in the tourism and investment sectors. Switzerland also supports Cape Verde in various areas of development cooperation, including the promotion of sustainable development and the strengthening of the economy.

There are several technical agreements between Switzerland and Cape Verde. However, no investment protection agreements, double taxation agreements or free trade agreements have been concluded.

Services (especially tourism) and real estate transactions are particularly economically relevant, while the balance of trade in goods is rather modest. According to Switzerland's foreign trade balance, there were no imports from Cape Verde in 2023, while the export volume amounted to CHF 2.2 million. The main exports comprised chemicals, fertilizers, and machinery.

Around 50 Swiss nationals live in Cape Verde, while around 950 Cape Verdean nationals live in Switzerland.

In this edition of GHR beyond, we focus on property issues and their acquisition opportunities for Swiss nationals in Cape Verde and Cape Verdeans in Switzerland.

 

From Switzerland to Cape Verde

The Legal Protection of Foreign Investment in Cape Verde

Generelles zu den Kapverden

Cape Verde is an archipelago located in the Atlantic Ocean, about 600 kilometers off the west coast of Africa. Its location is undoubtedly the first factor of attraction: Cape Verde is located in the very center of the Atlantic, a geostrategic position that allows it to act as a link between several continents.

The Cape Verde Islands are part of the Macaronesia ecoregion, along with the Azores, the Canary Islands, Madeira and the Selvagens Islands. The country is made up of ten islands, nine of which are inhabited. The estimated population of Cape Verde is around 520,500 (five hundred and twenty thousand and five hundred), according to the World Bank. Visitors to the country can expect magnificent and diverse experiences. On some of the islands you can enjoy beautiful beaches, on others you can discover nooks and crannies through enchanting mountain paths, and on others you can enjoy cultural events such as festivals, carnivals, theater and a wide variety of music. The capital, Praia, is located on the island of Santiago, the largest and most populous of the ten islands, with strong cultural traditions, as well as being the political and economic center of the country.

Portuguese is the official language of Cape Verde, and the state is creating the conditions to implement Creole as an official language alongside Portuguese. Many people speak English and French, as a result of learning at school and contact with foreigners or emigrants. The official currency is the Cape Verdean escudo (CVE), which is pegged to the euro. Currently, EUR 1.00 corresponds to approximately CVE 110.26500. Currency parity with the euro has been an important factor in financial stability.

The political system is democratic and multi-party, with a mitigated parliamentary slant. The President of the Republic and Parliament are elected by popular, universal and secret ballot, and the government is headed by a Prime Minister and composed of ministers and secretaries of state. Political, economic and social stability is a reality. The good functioning of the courts and institutions in general, as well as security, complete this framework conducive to foreign investment.

As a relatively new country, discovered in the 15th century and which became independent in 1975, there is still a lot to do and build, from agriculture to health, from transport to fishing, taking advantage of the vast exclusive maritime zone, from the digital economy to industry, including the energy sector. Tourism is the leading sector in the economy, contributing almost a quarter of the country's GDP. Remittances from emigrants are another important source of income. The young and increasingly qualified population meets the need for skilled labor that development demands.

Foreign Direct Investment – Legal Framework

Focusing now on the legal component, foreign investment enjoys strong legal protection. The right to private property is enshrined in the Constitution of the Republic, and no one can be expropriated except in situations where the public interest requires it, and always through a process of evaluation and fair compensation. The general legal framework for investment ensures the stability needed for large investments and the security of the capital invested.

general legal framework for investment is essentially the result of three pieces of legislation, namely the Investment Law, Law no. 13/VIII/2012, of June 11, amended by Decree-Law no. 34/2013, of September 24, (henceforth Cape Verdean Investment Law or CVIL), the Law that creates, develops and regulates the procedures for recognizing and monitoring investment projects that, due to their relevance, require special treatment (the Investor's One-Stop Shop), Decree-Law no. 42/2025, of August 27, and, lastly, the Code of Tax Benefits, Law n.º 26/VIII/2013, of January 26, amended by Law n.º 102/VIII/2016, of January 6, has two main objectives: firstly, to boost investments by creating a favorable environment, namely in terms of the regulatory framework and tax benefits. Secondly, to bring efficiency, speed and transparency to project licensing processes.

The Investment Law guarantees freedom of private initiative, since investment in any sector is absolutely free, Article 11 of the CVIL; the law also guarantees non-discrimination, since all investors, regardless of their nationality, are subject to the same obligations and rights, Article 5(1) of the CVIL. The Cape Verdean Investment Law provides legal protection against requisition or expropriation, Article 6 of the CVIL; the transfer of funds abroad is permitted, Article 7 of the CVIL; confidentiality is required, in the sense that the information provided in the context of carrying out an investment project is considered to be of a reserved nature and treated with the strictest confidentiality by the authorities, Article 12 of the CVIL.

Cabo Verde TradeInvest (CVTI)

Cabo Verde TradeInvest is the national body that assists the government and proposes policies for the sector. It analyzes and proposes changes to regulations and it is on its platform that the licensing process for the most relevant projects for the country must take place. Summarizing, it is the central investment body. After the initial contact with the investor, Cabo Verde TradeInvest communicates with the other state authorities to obtain the necessary authorizations to approve the project. It operates as a one-stop shop, providing clarity and objectivity to the licensing process and promoting speed!

Projects that have an impact on the country can benefit from special contractual tax benefits, through an Establishment Convention to be agreed with the government.

Conclusion

In conclusion, Cape Verde represents an ocean of opportunities, set in a context of security and stability, and the investment general legal framework has important guarantees and incentives for foreign investment. The legislator has sought to complement these general guarantees with additional regulations, such as the Green Card, which grants a residence permit to foreign investors, and the Project of Differentiated Merit, i.e. projects that enjoy special tax benefits because they contribute, in net terms, to improving the balance of payments, or because they use technology, production and marketing processes that minimize environmental impacts, among other hypotheses provided.

 

From Cape Verde to Switzerland

Acquisition of real estate in Switzerland by foreigners

Introduction

Since 1985, the Federal Law on the Acquisition of Real Estate by Persons Abroad ("BewG", commonly also known as "Lex Koller") has been regulating the acquisition of real estate foreign individuals and legal entities.

The following information relates only to acquisitions by foreign individuals.

Acquisition of real estate

The acquisition of real estate entails not only the transfer of real estate under land law but also any legal transaction granting a foreign individual actual power of disposal over real estate in Switzerland.

The term 'acquisition of real estate' includes not only the direct purchase of real property but also the acquisition of rights in rem to real estate, as well as the acquisition of ownership or usufruct of shares in a legal entity dedicated to the development, purchase, sale, and rental of real estate (commonly referred to as a real estate company)

Foreign Individuals

Any person not possessing Swiss nationality is considered a natural person abroad. However, nationals from EU/EFTA countries and nationals of the United Kingdom of Great Britain and Northern Ireland possessing a valid settlement, residence or short-term residence permit (C, B or L permit) or so-called third-country nationals with a valid settlement permit (C permit) are treated in exactly the same way as Swiss nationals in legal terms, provided they have moved their domicile to Switzerland. These foreigners are therefore not subject to the provisions of Lex Koller.

Mandatory Authorization

Policy

Grundsätzlich müssen Personen im Ausland um eine Bewilligung bei den zuständigen Kantons- und Bundesbehörden ersuchen, bevor sie ein Grundstück in der Schweiz In principle, persons abroad must apply for a permit from the competent cantonal and federal authorities before they are allowed to acquire a plot of land in Switzerland. It is irrelevant whether the real estate is already owned by a foreigner and what legal basis underlies the acquisition of real estate.

The canton in which the real estate is located is responsible for granting the permit. The permit can only be granted for reasons provided for by the BewG or, if applicable, the cantonal introductory law.

Exceptions

The following legal transactions are exempt from mandatory authorization (non-exhaustive list):

  • Acquisition of a principal residence, provided that this residence serves as the legal domicile of the person abroad and is actually occupied. The acquisition of a main residence requires the granting of a residence permit.
     
  • Acquisition of a secondary residence by cross-border commuters or by persons abroad who maintain an exceptionally close relationship with the place of the secondary residence that is worthy of protection.
     
  • Acquisition of real estate serving as a permanent establishment of a commercial, manufacturing or other business conducted in a commercial manner, a craft enterprise or a liberal profession.
     
  • Acquisition of real estate by inheritance (only legal heirs under Swiss inheritance law) as well as by sale to relatives in the ascending and descending line and their spouse or registered partner.

The aforementioned exceptions are handled differently in the cantons. Furthermore, the authorities must generally determine that the acquisition is not subject to authorization.

Only a certain number of vacation homes and residential units in apartment hotels can be acquired by persons abroad per year and canton. The quotas vary greatly per canton.

The permitted net living space of secondary residences, vacation homes, vacation homes and apartments in aparthotels may not exceed 200 m2 as a rule and the total area of the real estate may not exceed 1,000 m2 as a rule. According to federal court rulings, approval is possible up to a maximum net living space of 250 m2 provided that a corresponding additional need can be demonstrated. The additional need is assessed on the basis of the situation and needs of the acquiring person abroad.

Net living area includes all interior spaces that are suitable for living, including kitchen, built-in closets, atrium, vestibule, hallway, service rooms, sauna, Turkish bath, fitness and relaxation area, indoor swimming pool, stairs, etc. Balconies, staircases (outside the living area), cellars, screeds, etc. are not included in the net living area.

Political discussion about the tightening of Lex Koller

The National Council approved a motion from the competent economic commission, according to which the Lex Koller should be tightened. The tightening was already discussed in 2017, but was not pursued at the time. The discussion is currently becoming topical again, as certain political parties are seeking to tighten the law. The intended tightening relates in particular to the currently permit-free purchase of business premises in Switzerland by persons abroad as well as the permit requirement for foreign nationals from third countries who reside in Switzerland.

Conclusion

The acquisition of real estate in Switzerland by persons abroad should be carefully consudered and prepared.

 

How it is in Practice

Knowing the legal requirements for intercontinental business relationships is only one side of the coin. It is at least as important to get involved in local everyday life and to be able to deal with the pecularities and customs.

Cape Verde is a small archipelago with a manageable number of inhabitants, but each of the 10 islands is completely different. The geographical location of the Cape Verde islands presents the inhabitants with economic and cultural challenges.

One person who has been tackling these challenges with enthusiasm for almost 10 years is José Steiner.The man from Schwellbrunn with Swiss-Portuguese roots told us in an interview what his everyday life is like and why Cape Verde became his new home.

May you introuce yourself to our readers?

My name is José Steiner. Born in Schwellbrunn as a Swiss-Portuguese dual citizen, I spent my first 9 years in Appenzell Ausserrhoden and then 5 years in Thurgau before my family moved to Portugal. I studied tourism in Portugal.

I work as a distiller in the Kriol Distillery that I founded - the first and only vodka distillery in Cape Verde. Our vodka has won international awards and we already export to Portugal and the USA.

How did you come to build the bridge between Switzerland and Cape Verde?

Through the classic - love. I met my current wife, Lívia, during my training in Portugal. She is Cape Verdean and wanted to return to Cape Verde after completing her studies. I followed her.

In Praia, we initially operated a store for the import and sale of spirits. Cape Verde itself is known for its grogue, a type of rum, but until then had not produced any other spirits itself, which was due to the limited agricultural possibilities on the one hand, but also a lack of distillery capacity on the other.

After completing additional training as a distiller in Holland, I finally decided to overcome the bureaucratic hurdles and open a distillery in Cape Verde that produces vodka rather than grogue. We were finally able to start in June 2019, but were slowed down by the corona pandemic shortly after the start - we finally went into full and regular production in 2021. At the beginning, we produced gin in addition to vodka, but due to the high demand for our vodka (300 to 700 bottles per day) we currently have to do without gin production - but hopefully this will change in the near future with the installation of a second plant, because I like our gin, which also offers the opportunity to process the variety of Cape Verdean botanicals.

What do you particularly like about this activity, where do you see the greatest opportunities?

Cape Verde offers a lot of freedom. Regulations are (still) less extensive compared to Europe, which opens up many opportunities to give the realization of ideas a chance.

Added to this are the pleasant climate, high level of security and Portuguese-influenced rule of law. The islands are diverse in terms of flora, fauna and culture. The people are warm and open.

Cape Verde itself has little industry and commerce, but there are still many business opportunities in addition to tourism, which is also supported by the government.

Where do you see the greatest challenges and opportunities for improvement?

Personally, even after almost 10 years, I'm still struggling to get used to the Cape Verdean understanding of punctuality. Everything works, but it takes time.

Time is generally an important factor to consider. Cape Verde is relatively remote and has to import a large proportion of its goods. Long delivery times, often with considerable delays, are a daily challenge. The rather high transportation costs lead to a sharp increase in the price of goods, which puts a strain on people's incomes. Another challenge is the strong economic dependence on tourism.

In your opinion, what should be considered when doing business between Switzerland and Cape Verde?

The opportunities for doing business in Cape Verde are enormous. But if you really want to gain a sustainable foothold in Cape Verde, you need good planning and staying power. As already mentioned, the clocks on Cape Verde tick more slowly, and the archipelago and its inhabitants have very typical characteristics that every entrepreneur needs to experience locally in order to understand how things work here. Those who take this to heart will embrace these islands just as I have.


 

Each issue of GHR beyond is intercontinental, but also very local. We always prepare content with one of our local partners, with whom we collaborate on legal issues with local relevance. We sincerely thank our partners for this tremendous effort and the opportunity to build intercontinental bridges with local expertise on this side and the other.

This edition of GHR beyond - Africa Edition has been produced by the following authors and law firms. Please contact the authors at any time if you have any questions or require further information on a particular topic.

 

In cooperation with

Oliver Araújo

 


An article by Stephan Hofer, Markus Brülhart

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