Cape Verde approves new ITI Code – Property Transfer Tax

Last June, Law No. 54/X/2025, of June 6, was published, establishing a new and unprecedented legal regime for property transfer tax, known as the ITI Code – Property Transfer Tax. Although its entry into force is only scheduled for January 1, 2026, due to its relevance and the innovations introduced into the Cape Verdean legal-tax regime, we believe it is pertinent, from now on, to present an initial approach to the innovations that this new legal regime will introduce into our tax regime next year and the tax implications that taxpayers should be aware of in real estate transactions in Cape Verde.

Bearing in mind that in recent years the Cape Verdean legal and tax system has been subject to profound reconfiguration, namely, since 2013 with the approval of new structural legal diplomas for the tax administration and for taxpayers, such as the CGT (General Tax Code), CPT (Tax Procedure Code) and CET (Tax Enforcement Code), and also the CIRPS (Personal Income Tax Code) and CIRPC (Corporate Income Tax Code), a restructuring of the regulations regarding the tax on the transfer of real estate has long been urgent in order to keep up with legislative modernization, seeking to make it more suited to the current needs of our society and, above all, fairer in terms of tax incidence.

It should be noted that Law No. 79/V/98 of December 7, which created the IUP (Single Property Tax), is in force in Cape Verde. It also includes its regulations, approved by Decree-Law No. 18/99 of April 26, and has been applied to real estate transfers to this day (and will continue until December 31, 2025). This law is clearly outdated and does not meet the demands of Cape Verdean society or the new ways of doing business in the real estate sector.

The reform, approved by Law No. 54/X/2025 of June 6, advances the modernization of tax legislation, filling gaps and distortions in the previous property tax regime, which had become outdated due to the evolution of the real estate, tourism, and urban development sectors. The new regime expanded the objective and subjective scope, including legally complex operations, but economically equivalent to the transfer of real estate, also aiming to combat tax evasion, but in line with the principles of tax justice, neutrality and collection efficiency.

This tax arises as a response to the distortions and injustices generated by an archaic tax system, based on the Single Property Tax (IUP), which is out of step with the country’s current economic and real estate reality.

Consequently, it adapts to new ways of transacting real estate, such as traditional promissory contracts, assignments of contractual positions, and the use of irrevocable powers of attorney, aiming to modernize the system and ensure more effective collections tailored to the dynamics of the Cape Verdean real estate market. A parenthesis is also opened here to reference that simultaneously with the ITI code, the new IPI Code – Property Tax – was also published through Law No. 55/X/2025, of June 6, which repealed Law No. 79/V/98, of December 7, and Decree-Law No. 18/99 of April 26, so that, from January 1, 2026, we will have in force two modern and essential diplomas for the real estate legal trade..

What is ITI and what is its incidence?

The ITI (Tax on Property Transfers), whether for a fee or free of charge, is a municipal tax levied on transfers of real estate located in each of the municipalities within the country. Therefore, it is a municipal tax in which the revenue generated is allocated exclusively to municipal coffers, thus promoting greater local financial autonomy.

It is applied to rural, urban, and mixed-use properties, and applies not only to the right of ownership (full ownership) but also to partial forms of this right over real estate. Our civil law provides that the content of the right of ownership is materialized in the full and exclusive enjoyment, use, and disposal by the owner of the property belonging to him, within the limits of the law and in compliance with the restrictions imposed by it. When exercising the rights granted by law to the owner for ITI purposes, their transfer is subject to taxation.

With the new law, transactions subject to ITI extend far beyond traditional purchases and sales, becoming subject to objective taxation of onerous transactions, such as: promises of purchase and sale with delivery of the property to the prospective purchaser; leases with an acquisition clause; and the acquisition of interests in companies that own real estate when there is capital control. The law also considers onerous transactions subject to tax in cases involving the assignment of a contractual position in a promissory agreement, powers of attorney with an irrevocability clause and respective substitution, and, in specific cases, assignment of a contractual position or resale agreement by the prospective purchaser in a promissory agreement of acquisition and sale.

Regarding acts of gratuitous transfer, transfers upon death (inheritance) and donations involving the actual transfer of real estate are also subject to ITI. The law now approved, to a certain extent, provides for the incidence of tax on transactions frequently used to transact real estate in Cape Verde and which, to a certain extent, were used as a means of transferring real estate rights with economic benefits without there being any respective taxation on these transactions.

Who should pay the ITI, subjective incidence?

The taxable person, subjectively levied, is the one bound by the obligation to pay the tax. This is generally the individual or legal entity acquiring the real estate. However, the law provides for other specific situations in which the obligation to pay the tax may not fall exclusively on the acquirer. For example, in cases of a promissory exchange contract with the transfer of the property to only one of the promisors, with the tax immediately due by the acquirer of that property, as if it were a purchase and sale. This may also be the case in cases of assignment of a contractual position, in which the tax is due by the original purchaser and all successive purchasers.

The triggering factor for the tax obligation arises when the property is transferred or when one of the onerous transactions provided for by law equivalent to such transfer occurs. The tax liability is levied on the taxable value of the property, considered to be the market value recorded in the tax register, to which the 1% rate generally applies.

The law also provides for specific exemptions in both objective and subjective terms. Regarding subjective terms, in line with other tax laws, the State and local authorities are exempt from the tax, so there is no surprise here. The innovation lies in the fact that the law provides for tax exemptions on real estate acquisitions by credit institutions, through a deed of payment in lieu of performance or in execution, bankruptcy, or insolvency proceedings. This means that, if financial institutions request the adjudication of real estate in the aforementioned legal proceedings, they will no longer be required to satisfy the tax obligations inherent in the transfer. In turn, in objective terms, the exemption applies to properties listed as national monuments or properties of public interest, under applicable law.

Notwithstanding the specific exemption cases provided for by law, local authorities also have the discretion to grant full or partial exemptions on the acquisition of rural or urban buildings based on economic, social, or cultural development strategies, based on a proposal approved by the municipal assembly.

Relationship with other codes and tax legislation.

The ITI Code does not operate in isolation and must be directly linked to other important legal instruments of the Cape Verdean tax system, namely, the General Tax Code, which is subsidiarily applicable and whose reference is made directly to it, particularly in matters of expiry of the right to tax assessment, and also the Tax Procedure Code, in which taxpayers can always avail themselves of the guarantees provided therein to safeguard their rights, as well as the Tax Enforcement Code and the IPI Code based on the references expressly provided for in the ITI Code. This integration thus avoids the duplication of legal regimes within the same branch and gives greater coherence to the tax system. The application of the new ITI regime, starting January 1, 2026, will change the way in which legal transactions involving real estate in Cape Verde should be structured, since, as we have seen, its incidence is no longer limited to the simple transfer (purchase and sale) of the property, encompassing other transactions in which there is no transfer of property rights over real estate and which were previously not taxed, which will imply greater caution in the transactions to be concluded.

A necessary but technical reform:

The creation of the ITI represents a significant change in Cape Verde’s tax architecture, particularly for municipalities. By replacing an outdated system with a modern and more comprehensive one, the legislator seeks to respond to the challenges of an increasingly dynamic, sophisticated real estate market, prone to new transaction methods.

This law not only significantly expands the concept of property transfer but also introduces strict technical criteria and mechanisms to prevent tax evasion, while allowing local authorities to apply strategic exemptions. Therefore, it is a law that requires an integrated reading of other tax laws and careful attention to the structure of each transaction.

Every real estate transaction must, more than ever, be carefully planned, with qualified legal support, to avoid future disputes with the tax administration and local authorities, as well as unnecessary fines and penalties.