In Mozambique the business activities can be carried out by individual(s) or commercial companies.
Persons who wish to set up a company can choose between two types :
- LDA – “Sociedade por quotas”
- SARL – “Sociedade Anonima”
To incorporate a company (Lda or SARL) the following documents must be presented :
- A certificate confirming that no other company with similar name to that selected already exists
- Proof that minimum share capital specified has been paid up
- The company’s Articles of Association
- Identification of shareholders
The company is considered to be registered and ready to commence activity when:
- Its Articles of Association have been published in Boletim da Republica (Official Gazette)
- The company has been registered with the Commercial Register and in the local office of the Tax Department
- The company has been issued with an operating licence.
Direct Foreign Investment
Proposal for Direct Foreign Investment projects must be submitted to the Centro de Promoção de Investimentos (CPI). The proposal must contain the following information:
- A specific request by the investors for authorisation
- Particulars and curriculum vitae of all investors or, in a case when the investor is a company, the relevant financial statements
- Description of technical, commercial and financial viabilities and details of management, human resources structure, implementation schedule and operating methods of the implementing company
- Minutes of Articles of Association of the project implementing company
The Government grants foreign investors the following guarantees
- Protection of property of rights and assets constituting the investment
- Repatriation of profits
- There are three types of incentives which depend on the nature, location and value of the investment:
- Exemption on custom duties for the capital goods (equipment) imported under the project
- Tax reduction for a period not exceeding ten years
- Special incentives not specifically mentioned in the law granted on a case by case basis, for projects of special importance for the national economy
Local representation (Branch)
The granting of licences for agencies or commercial representations are under the Ministry of Industry, Trade and Tourism and regulated by Decree No. 71/98 of 23 December 1998.
VAT – Value Added Tax was implemented in Mozambique on 1 June 1999. VAT is applicable on the transaction of goods and services within the national territory, as well as on imports of goods to the country. The VAT rate is 17%.
Specific Goods Consumption Tax Over and above the payment of VAT, there is also a specific goods consumption tax which is payable on the importation and production of specific luxury goods. These include, for example luxury vehicles, tobacco and alcoholic beverages. Rates vary between 20% – 75%.
|Corporate Income Tax Rate||35||(a)|
|Capital Gains Tax Rate||18|
|Branch Tax Rate||35|
|Branch Remittance Tax||0|
|Net Operating Losses (Years)|
- (a) Corporate Tax for the agricultural sector is 10% for ten years (1998-2007). Thereafter the rate will be 35%.
- (b) Non-resident companies without a permanent establishment in Mozambique are subject to a 15% withholding tax on gross income derived from Mozambique.
Corporate Income Tax
Resident companies (companies with their head office or effective management and control in Mozambique) carrying on industrial, commercial or agricultural activities in Mozambique are subject to Corporate Tax (Income tax) on profits derived from Mozambique and on one-third of their profits (before taxes) earned abroad. Non-resident companies are subject to Corporate Tax on their profits derived from Mozambique.
Investments in new projects or in the rehabilitation of existing inactive projects benefit from a 50% reduction in the Corporate Tax Rates during the period necessary for recovering the investment, which may not exceed ten years. For investments in the provinces of Niassa, Cabo Delgado and Tete, the reduction is 80% of the normal rates.
After the end of the period of the tax reductions described above, additional benefits, which vary according to the location of the project, are granted. Investments located in the provinces of Cabo Delgado, Niassa and Tete benefit from a 50% reduction in the Corporate Tax Rates for a period of six years. A 40% reduction in the Corporate Tax Rates for a period of three years is granted to investments located outside the provincial capitals in the provinces of Manica, Nampula, Sofala, and Zambezia. Investments outside the provincial capitals in the other provinces of Mozambique benefit from a 25% reduction in the Corporate Tax Rates for a period of three years.
Special tax benefits are granted to investments for the rehabilitation or expansion of operating projects. For a five-year period, an immediate 100% write-off is allowed for investments in new equipment and in the construction of civil installations and agricultural infrastructure.
Capital gains on profits derived from the sale of fixed assets are included in ordinary income and are subject to tax at the regular rate. The capital gains is the difference between the sales price and the acquisition cost adjusted for depreciation and by an official coefficient for currency devaluation.
The tax year is the calendar year.
Companies are required to pay provisional Corporate Tax in advance in eight equal monthly instalments from May to December of the current tax year. The total amount due is determined by applying the Corporate Tax rate to 75% of the estimated profits for the tax year. Companies must file financial forecasts of estimated profits by March 31 of the tax year.
Tax returns must be filed by May 31 of the year following the tax year, and final assessments are issued by August 15. The balance of any tax due is paid or a refund is made in October.
Dividends are subject to a final 18% withholding tax.
Foreign Tax Relief
The only form of foreign tax relief provided to resident companies is the provision that only one-third of foreign-source profits (before taxes) is subjected to Corporate Tax.
Determination of Trading Income
Taxable income is the income reported on the companies’ financial statements, subject to certain adjustments. Expenses considered indispensable in the production of income or the maintenance of a production unit are deductible. The tax authorities may restrict or disallow the deduction of entertainment expenses they deem to be excessive.
Inventories must be valued consistently by any of the following criteria:
- Cost of acquisition or production
- Standard costs in accordance with adequate technical and accounting principles that have been approved by the Ministry of Planning and Finance
- Any other special valuation, provided it has the prior authorization of the tax authorities
Changes in the method of valuation must be justified and acceptable to the tax authorities. Any profits resulting from such a change are taxable.
Provisions for the following items are deductible:
- Doubtful accounts as a percentage of accounts receivable
- Inventory losses
- Obligations and expenses that are subject to a judicial process
- Other provisions imposed by the Government for specific activities
Maximum depreciation rates are fixed by law for general purposes and for certain specific industries. If rates below 50% of the official rates are used, the company will not be able to claim total allowable depreciation over the life of the asset. The following are some of the maximum straight-line depreciation rates fixed by law.
Rates % Commercial building 2 Industrial building 4 Office equipment 10 or 14,28 Motor vehicles 20 or 25 Plant and machinery 10 or 16,66
Relief for Losses
Tax losses may be carried forward for three years. No carryback is allowed.
Group of Companies
There are no provisions for filling consolidated returns.
Treaty Withholding Tax Rates – and ratified
Mozambique has signed a double taxation agreement with Portugal and has also signed one with Mauritius, yet it is still not in force.
Who is liable
Tax on remuneration is called professional income tax (IRT).
Residents are subject to professional tax only on employment income earned in Mozambique and on work performed abroad paid for by a Mozambique company. Non-residents are subject to professional tax on Mozambique source income.
Residents are defined as persons who
- Reside permanently in Mozambique
- Have resided in Mozambique for more than 180 days in a tax year, or
- Have resided in Mozambique for 180 days or less, but on December 31 the last day of tax year, occupy a residence under circumstances indicating an intent to continue occupancy on a regular basis
In general, professional income tax is levied on employment income paid in cash or in kind. However, subsidies for meals and entertainment and travelling allowances up to certain amounts are not taxable.
Income Tax Applicable to Employees
The income tax rates applicable to resident individual employees, whether national or foreigners, is the following:
|Net Aggregated Income||Tax Rates|
|Exceeding MT||Not Exceeding MT|
Taxes on Self Employed
Who is liable?
If carrying out business activities independently, individuals providing consulting services or engaged in technical, artistic or scientific work are subject to professional income tax at the following rate:
|Net Aggregated Income||Tax Rate
Over the remaining amount
Social Security Rates
Social security contributions are payable monthly on all salaries, wages, regular bonuses or other regular income, excluding meal subsidies. The employer contributes an amount equal to 4% of monthly salary and the employee contributes 3% of monthly salary. The employer withholds employee’s contributions.
The Central Bank controls all transfers of capital (including direct investments) and payments into and out of Mozambique. For specific projects and in certain other situations, the Central Bank may authorize the maintenance of foreign-currency bank accounts.
In general, the repatriation of profits and of proceeds from the sale or liquidation of an investment is permitted for approved foreign investment projects.
All non-resident foreigners require a visa to enter Mozambique. Applications for a visa may be made personally by the visitor at any Mozambican Diplomatic Mission or by the individual or organisation playing host to the visitor in Mozambique, through the National Immigration Directorate in Maputo.
Normal visas are issued to tourists and private visitors, including those travelling on business. People visiting the country on official business are given official visas.
The visa will normally be issued within ten days, or within three to five days upon payment of an “urgency” fee.
Entry visas are normally valid for 30 days renewable for two further periods of 30 days each. Multiple entry visas may be obtained for a period of up to 180 days, but only after arrival and having had a business venture approved in the country. A competent Mozambican authority must endorse these applications to the effect that the person is authorised to carry out the project or business activity envisaged in the country.