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Mozambique

Country Name: Republic of Mozambique
Currency: Mozambican Metical (MZN)
Primary Tax Authority: Autoridade Tributária de Moçambique (Mozambique Revenue Authority)
Key Legislation:

  • Corporate Income Tax Code
  • Personal Income Tax Code
  • Value Added Tax (VAT) Law
  • Investment Code
  • Customs Code
  • Tax Procedures Code

Fiscal Authority Allocation

Centralized Fiscal System:
Mozambique operates a centralized tax system. The Mozambique Revenue Authority is responsible for administering and collecting taxes, including corporate income tax (CIT), personal income tax (PIT), value-added tax (VAT), and customs duties.

Corporate Income Tax (CIT)

Standard Rate: 32%
Mozambique imposes a corporate income tax rate of 32% on resident companies and non-resident companies with a permanent establishment in Mozambique.

Corporate Forms and Taxation:

  1. Resident Companies: Taxed on worldwide income.
  2. Non-Resident Companies: Taxed only on Mozambique-sourced income.

Exemptions and Incentives:

  • Investment Incentives: Mozambique’s Investment Code offers tax holidays, reduced CIT rates, customs duty exemptions, and VAT relief for companies investing in priority sectors such as agriculture, infrastructure, energy, tourism, and manufacturing.
  • Special Economic Zones (SEZs): Companies operating in SEZs enjoy CIT reductions, customs duty exemptions, and VAT exemptions for a period of up to 10 years.

Goods and Services Tax (GST) / Value-Added Tax (VAT)

Standard Rate: 17%
Mozambique imposes VAT at a standard rate of 17% on most goods and services. VAT applies to both domestic production and imports.

Exemptions:
Certain essential goods and services, such as healthcare, education, and financial services, are VAT-exempt. Exports are zero-rated, allowing businesses to claim refunds on VAT paid on inputs used in producing export goods.

Personal Income Tax (PIT)

Progressive Rates:
Mozambique applies a progressive personal income tax system to residents’ worldwide income and non-residents’ Mozambique-sourced income.

Resident Tax Rates for 2023 (Annual Income):

  • Up to MZN 42,000: 10%
  • MZN 42,001 to MZN 168,000: 15%
  • MZN 168,001 to MZN 504,000: 20%
  • Above MZN 504,000: 32%

Non-Resident Tax Rate:
Non-residents are taxed at a flat rate of 20% on Mozambique-sourced income.

Deductions and Allowances:
Deductions are available for expenses such as pension contributions, social security, and certain personal allowances, including medical expenses and charitable donations.

Additional Mandatory Contributions

Social Security Contributions:
Employers and employees must contribute to Mozambique’s social security system, which provides pensions, healthcare, and other benefits.

  • Employer Contribution: 4% of gross salary.
  • Employee Contribution: 3% of gross salary.

Withholding Taxes

  • Dividends: 10%
  • Interest: 20%
  • Royalties: 20%
    Mozambique imposes withholding taxes on payments to non-residents, including dividends, interest, and royalties. These rates may be reduced under Mozambique’s double taxation agreements (DTAs).

Transfer Pricing Rules

Mozambique follows the arm’s-length principle for related-party transactions. Companies must ensure that cross-border transactions between related entities are conducted at market value. Transfer pricing documentation is required for large multinational corporations.

Special Tax Regimes

  • Special Economic Zones (SEZs): Companies operating in SEZs benefit from CIT holidays, customs duty exemptions, and VAT relief for up to 10 years. These zones are designed to promote foreign direct investment in sectors such as manufacturing, agriculture, and infrastructure.
  • Investment Incentives: Mozambique’s Investment Code offers tax incentives for companies investing in strategic sectors such as agriculture, renewable energy, and tourism. Incentives include CIT reductions and customs duty exemptions.

Other Taxes

  • Customs Duties: Mozambique, as a member of the Southern African Development Community (SADC), applies customs duties based on the SADC Common External Tariff. Rates range from 0% to 20%, depending on the type of goods. Raw materials and essential goods may qualify for reduced or zero customs duties.
  • Excise Taxes: Excise taxes are levied on alcohol, tobacco, petroleum products, and luxury goods.
  • Property Transfer Tax (SISA): A tax of 2% is levied on the transfer of real estate.

Double Taxation Agreements (DTAs)

Mozambique has signed several double taxation agreements (DTAs) with countries such as Portugal, South Africa, Mauritius, and India. These agreements help reduce withholding taxes on cross-border income and prevent the double taxation of income earned in Mozambique and other jurisdictions.

Local Taxes

Local governments in Mozambique may impose property taxes, business license fees, and local service levies. However, most significant taxes, including CIT, PIT, and VAT, are centrally administered by the Mozambique Revenue Authority.

Compliance and Reporting

Annual Filing:
Corporate tax returns must be filed within three months following the end of the financial year. Personal income tax returns are generally due by March 31st. VAT returns are filed monthly or quarterly, depending on the size of the business.

Penalties for Late Filing:
Penalties for non-compliance or late filing include fines and interest on unpaid taxes. The Mozambique Revenue Authority charges interest at 1% per month on overdue taxes, with additional penalties for tax evasion or underreporting.

Recent Developments

Oil and Gas Sector Growth:
Mozambique’s growing oil and gas sector, particularly the liquefied natural gas (LNG) industry, is a significant driver of foreign direct investment. The government offers tax incentives for companies engaged in oil and gas exploration and production, including CIT reductions and customs duty exemptions.

Renewable Energy Initiatives:
Mozambique is promoting investment in renewable energy projects, particularly hydropower, solar, and wind energy. Companies investing in renewable energy infrastructure benefit from tax incentives, including CIT holidays and VAT exemptions.

Digital Taxation and E-Government:
The Mozambique government is modernizing its tax administration by introducing electronic tax filing and payment systems. These digital initiatives aim to improve tax compliance and enhance the efficiency of tax collection.

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