Sale agreements, Public Deeds and Registration.
IUP - Single Property Tax (3%).
Related costs and duties.
1st Step - Due Diligence
After choosing the property and prior to acquisition, a Property Registration Certificate should be requested from the Land Registry Office, containing a description of the property and all registrations in force, in order to check whether the property is subject to any onus or encumbrance - in particular mortgages, legal actions, rights of way, etc...
It is also advisable to confirm from the competent Municipal Council whether or not the property has a habitation licence (in the case of an urban property), or the localisation map of the property (in the case of a plot of land for construction) and the property’s fiscal patrimonial value.
2nd Step - Reservation
In a preliminary phase of the purchase operation, the seller will normally require that the buyer makes a reservation on the property, in order to withdraw it from the market. This reservation is made via payment of a "reservation deposit" - that normally varies between €1.000 and €6,000. These amounts will subsequently be deducted from the amount to be paid in the form of a deposit.
3rd Step - Promissory Purchase Agreement
Transactions involving properties should be preceded by a Promissory Purchase Agreement for the property, although this is not obligatory. This contract will specify elements such as the identity of the parties, description of the property, price, form of payments, date scheduled for signature of the Public Deed of Sale and other conditions agreed between the parties. Given that this is a private contract, the Promissory Purchase Agreement is not liable to any fees or duties. Upon signature of the Promissory Purchase Agreement, the buyer will be requested to provide a deposit - that normally varies between 10% and 30% of the price of the property. In the event that, for any reason, the agreement is not upheld, and in function of the party at fault, the deposit will be lost by the prospective buyer or the prospective seller will be obliged to return twice the deposit amount.
4th Step - Public Deed of Sale
Transactions involving real estate property are subject to a public deed and registration in the Land Registry Office, using the services of a Notary Public for this purpose. Only in this manner, can the buyer guarantee and defend his legal property. The Public Deed of Sale is granted in the Notary Public’s Office, before a Notary Public in Cape Verde. In this document, right of ownership of the property is transferred, and the deed should reflect the clauses previously agreed in the Promissory Purchase Agreement. The Public Deed of Sale implies payment of the notary fees that are equivalent to around 1.4% of the property’s sale price.
For the purposes of the Public Deed, the buyer shall also provide the following:
Iidentification document (Passport);
Power of attorney in the event that the buyer decides to be represented by a proxy;
Promissory Purchase Agreement;
Fiscal identification number.
5th Step - Payment of the Single Property Tax (IUP)
A Single Property Tax (IUP) has applied in Cape Verde since 1999, in the framework of taxation on all property owned. The IUP is a municipal tax with a single rate of 3% that falls upon the value of the contract that determined transfer of the property or, in the event of free transfer (donation), the patrimonial value attributed by the Tax Administration. This tax is due from the buyer or beneficiary, regardless of whether or not he is resident in Cape Verde, within a maximum deadline of 30 (thirty) days after signature of the Public Deed of Sale. The IUP or Single Property Tax is paid directly to the Municipal Council where the property is located and falls due whenever the right of ownership on the property is transferred.
Sales Costs vs Capital Gain
At the time of transfer of the property, even when made free of charge, when the value of the sale is more than 30% higher than its previous purchase price (i.e. capital gains exist) the Single Property Tax (IUP), at a single rate of 3%, shall apply exclusively to this excess amount, owed by the seller, regardless of whether or not he is resident in Cape Verde, to be paid within a maximum of 30 (thirty) days after signature of the Public Deed of Sale. When the property is a plot of land for construction, there will only be grounds for payment of IUP if the sale price is over 2 times higher than its purchase price. The IUP or Single Property Tax is paid directly to the Municipal Council where the property is located and falls due whenever the right of ownership on the property is transferred.
Ownership costsDuring the period of time in which the owner holds at the property, it is subject to the Single Property Tax, (IUP) which is charged annually to the owner or user of the property (on December 31 of each year) by the competent municipal tax administration service, on the basis of the amount specified in the land register at that date. The single rate of 3%,will be applied to the property's “fiscal patrimonial value ” which corresponds to 25% of the patrimonial value attributed to the property by the Permanent Evaluation Commission or by the body subsequently determined by the Tax Evaluation regulations (which should be that specified within the land register). This amount falls due on December 31 of each year, with the obligation to pay this amount up until April 30 of the following year. When the outstanding amount exceeds 5000 Cape Verdean escudos (€46; £31) it may be paid in 2 tranches on April 30 at September 30.
Many real estate developers in Cape Verde provide the buyer with the possibility to choose a rental agreement system when purchasing the property. Through receipt of a predefined remuneration (normally varying between 4% and 7% of the price of the property per year), the buyer authorises the seller or a third party to manage the property for tourism purposes, wherein the buyer maintains the right to use the property for a certain number of weeks per year.
Owners of properties from which revenue is earned are obliged to present an annual income tax return in the form of the IUR- Single Income Tax on which they will pay a single rate of 20% on all earnings obtained, from which an amount of 80,000 Cape Verdeean escudos (€726; £485) may be deducted in the form of a minimum living allowance, plus 10% of property income obtained, to cover the property’s maintenance and conservation expenses. Whenever the property is rented to an entity that maintains organised accounts, the latter may retain 10% of the rental amount at source. In the annual income tax return, the owner should indicate the amount thereby retained, in order to benefit from the respective credit.
It should also be emphasised that for all Portuguese buyers a Double Taxation Treaty exists between Cape Verde and Portugal, which permits tax paid on the earnings obtained in one of the countries to be deducted from the earnings to be declared in the country of origin. No other countries have tax agreements with Cape Verde therefore taxes wil have to be paid in their regions in addition to Cape Verde.
6th Step - Registration of property rights
The last step in the process of acquiring a property in Cape Verde consists in registration of its acquisition in the Land Registry Office. The registration may only be accepted by the Land Registry Office after payment of the IUP - Single Property Tax. Registration of acquisition of property implies payments of duties and registration fees equivalent to approximately 1.2% of the property's sale price.
In order to Register the property, the buyer needs to present the following:
Identification document (passport);
Certificate of the Public Deed of Sale (issued by the Notary Office);
Proof of payment of the IUP-Single Property Tax.
It is important that the entire proceedings are accompanied by an attorney whose fees will be equivalent to around 0.5% of the cost of the property. On certain occasions, real estate property transfer operations may be made by means of concessioned agents (real estate brokers) at a rate that varies between 3% and 5% of the value of the transacted property.