Corporate Taxation in Mozambique

The Fiscal System in Mozambique

Mozambique's tax system, managed by the Autoridade Tributária de Moçambique (AT), is designed to support the country's growing economy while attracting foreign investment. As of 2025, the system comprises national and municipal taxes, balancing direct taxes on income and wealth with indirect taxes on expenditure. This article provides an overview of the fiscal framework, focusing on key taxes relevant to investors, such as Corporate Income Tax (IRPC), Value Added Tax (VAT), and others, based on current regulations. For those eyeing opportunities in sectors like natural gas, agriculture, or tourism, understanding these taxes is essential for compliance and strategic planning.

National Taxes

Personal Income Tax (IRPS)
Corporate Income Tax (IRPC)
Inheritance and Donation TaxSpecial Gambling Tax
Value Added Tax (VAT)
Customs DutiesSpecific Consumption Tax (ICE)
Tax on Onerous Transfers
(SISA)Stamp Duty

Direct Taxes (on Wealth)

Personal Income Tax (IRPS): : Levied on individual income, including wages, business profits, and investments. Rates are progressive, up to 32%.

Corporate Income Tax (IRPC): : Targets corporate profits, detailed below.

Inheritance and Donation Tax:: Applied to wealth transfers via inheritance or gifts.

Special Gambling Tax:: Levied on gaming activities.

Indirect Taxes (on Expenditure)

Value Added Tax (VAT): Applied to goods and services, detailed below.

Customs Duties: Charged on imports, varying by product and trade agreements.

Specific Consumption Tax (ICE): Targets specific goods like alcohol, tobacco, and luxury items.

Tax on Onerous Transfers (SISA): Levied on property transfers, detailed below.

Stamp Duty: Applied to various documents and transactions, detailed below.

Municipal Taxes

Personal Municipal Tax (IPA): A local tax on individuals.
Municipal Property Tax (IPRA): Levied on property ownership.
Economic Activities Tax (TAE): Applied to local business operations.

Key Taxes for Investors

Corporate Income Tax (IRPC) in Mozambique

The Corporate Income Tax (IRPC) is a key component of Mozambique's fiscal system, targeting the profits of corporate entities, including income from illicit activities. Administered by the Autoridade Tributária de Moçambique (AT), IRPC applies to both resident and non-resident entities, with clear rules to ensure compliance while supporting Mozambique's investor-friendly environment. Below is a detailed overview for investors navigating this tax.

Scope of IRPC

IRPC is levied on the income of corporate entities, with distinct rules based on residency:

Resident Entities: Companies with headquarters or effective management in Mozambique are taxed on their worldwide income, ensuring all profits—domestic and foreign—are subject to IRPC.
Non-Resident Entities: Those without a Mozambican base are taxed only on income sourced in Mozambique, such as revenue from local operations or services.

Exemptions: Only the State and certain non-profit organizations are exempt from IRPC, making it broadly applicable to most businesses.

Taxable Income

The taxable income for IRPC is calculated as:

The algebraic sum of the net income for the year.
Positive and negative changes in equity during the same period, adjusted per legal requirements.

Tax Period

The standard tax period aligns with the calendar year (January to December).
Companies can request a different tax period from the Ministry of Finance, which, if approved, adjusts the timing of tax obligations.

Permanent Establishments (Branches)

Branches of foreign companies (permanent establishments) are taxed as if they were Mozambican companies, with necessary adaptations to ensure consistency in profit calculation.

Non-Resident Income

For non-residents, taxable profit is determined by:

Applying withholding tax rates of 10% to 20%, depending on the income type.
Alternatively, using Personal Income Tax (IRPS) rules for specific income categories.

Tax Rates

The standard IRPC rate is 32%, applied to the taxable income of resident entities and branches. For non-residents:

20% withholding tax applies to most income types, including:
- Service contracts with non-resident entities or individuals.
- Interest on third-party loans or supplies.
- Dividends paid to non-resident shareholders.
10% withholding tax applies to specific services, such as:
- Telecommunications services.
- International transport.
- Assembly and installation of equipment.

Transfer Pricing Rules

Mozambique enforces transfer pricing regulations to prevent profit shifting. These rules grant the AT authority to:

Adjust the tax base if transactions (e.g., undercapitalization) do not reflect arm's-length pricing.
Ensure fair taxation, particularly for dealings between related parties.

Practical Insights for Investors

Compliance: File IRPC returns annually, aligning with the approved tax period. Non-compliance risks penalties.
Planning: Non-residents should account for withholding taxes in contracts to avoid unexpected costs.
Incentives: Large investments may qualify for IRPC reductions via the Investment Promotion Agency (APIEX), especially in priority sectors like energy or agriculture.

Understanding IRPC is crucial for investors in Mozambique's growing market. For tailored advice, consult local tax experts or visit www.at.gov.mz for the latest guidelines.

Value Added Tax (VAT) in Mozambique

Value Added Tax (VAT) is a cornerstone of Mozambique's fiscal system, administered by the Autoridade Tributária de Moçambique (AT). It ensures a consistent revenue stream while supporting the country's investor-friendly environment. This guide outlines the essentials of VAT for businesses operating in Mozambique, particularly for investors in sectors like trade, manufacturing, or services.

Scope of VAT

VAT is an indirect tax applied to:

Transfers of Goods: Sales of tangible products within Mozambique.
Provision of Services: Services performed for consideration in Mozambican territory.
Imports: Goods entering the country, regardless of origin.

The standard VAT rate is 17%, applied uniformly across most taxable transactions.

Calculation and Payment

VAT is calculated monthly, with businesses acting as tax collectors for the state:

Mechanism: Taxable entities deduct the VAT paid on their purchases (input tax) from the VAT collected on their sales (output tax). The difference is remitted to the AT.
Frequency: VAT returns and payments are due monthly, ensuring regular compliance.

Exemptions

While VAT is broadly applicable, specific exemptions exist:

Public Entities: The State and public law entities are exempt when performing public good activities, even if these involve costs.
Small Businesses: Entities not required to maintain organized accounts and not engaged in import/export activities are exempt if their annual sales in the previous year were below 750,000 MZN (~$11,645 USD).
Specific Goods and Services: Certain transactions are objectively exempt, including:
- Essential goods (e.g., basic food items, medical supplies).
- Specific services (e.g., healthcare, education).

Practical Insights for Investors

Compliance: Businesses must register for a Unique Tax Identification Number (NUIT) to manage VAT obligations. Monthly filings require accurate records of sales and purchases.
Incentives: Large-scale investments, particularly in special economic zones, may qualify for VAT exemptions or deferrals through the Investment Promotion Agency (APIEX).
Challenges: Small businesses near the 750,000 MZN threshold should monitor sales to anticipate VAT obligations. Non-compliance can lead to penalties.
Support: The AT's portal (www.at.gov.mz) provides forms and guidance for VAT filing, with e-filing options expanding in urban areas.

VAT's straightforward 17% rate and clear exemptions make it manageable for investors. For tailored advice, engage local tax experts or consult the AT website for the latest updates.

Withholding Tax (WHT):

A standard WHT rate of 20% is applied to payments made by a resident entity to a non-resident for specific categories of income, including dividends, interest, royalties, and capital gains on shares. This rate constitutes the final tax liability for non-resident entities without a permanent establishment in Mozambique. Reduced WHT rates of 10% apply to certain income streams, such as those from shares listed on the Mozambique Stock Exchange, telecommunications services, or rural electricity distribution projects.

Social Security Contributions

Social security contributions are mandatory for both employers and employees and are managed by the National Institute of Social Security (INSS). The total contribution rate is 7%, with the employer paying 4% and the employee contributing 3% of their monthly salary. Foreign employees who can provide proof of contributions to a similar system in their home country may apply for an exemption

Investment Incentives and Special Regimes

Mozambique offers a wide range of investment incentives that vary based on the project's amount, location, and sector. The existence of this tiered framework demonstrates a highly nuanced approach to attracting and retaining high-impact capital. Key incentives include:

Tax Credits: A carry-forwardable tax credit of 5% to 10% on the total investment in assets can be offset against gross income tax for five years.

Accelerated Depreciation: New or rehabilitated buildings, machinery, and equipment used in industrial or agro-industrial activities can benefit from a 50% increase in normal depreciation rates.

Special Economic Zones (SEZs) and Industrial Free Zones (IFZs): Companies operating in these zones can benefit from significant tax reductions and exemptions. For example, IFZs offer a corporate income tax exemption for the first ten fiscal years, followed by discounted rates of 50% for the next five years and 25% for the life of the business.

Large-Scale Projects: Investments exceeding MZN 12.5 billion (approximately US$200,000) may receive a bespoke package of generic income tax incentives and exemptions on customs duties and VAT for the import of essential materials and equipment.

Double Taxation Agreements (DTAs)

Mozambique has DTAs with Portugal, Italy, Mauritius, United Arab Emirates, South Africa, Macau, Botswana, Vietnam, and India. These agreements reduce withholding taxes on cross-border payments (e.g., dividends, interest, royalties) and prevent double taxation, making Mozambique more attractive for investors from these countries. For example, a DTA may lower the 20% withholding tax on dividends for residents of DTA countries.

Practical Considerations for Investors

Tax Incentives: Large investments, especially in special economic zones or priority sectors (e.g., energy, agriculture), may qualify for tax breaks via the Investment Promotion Agency (APIEX). These include IRPC reductions or VAT exemptions for specific projects.
Compliance: Register for a Unique Tax Identification Number (NUIT) to engage in tax activities. File IRPC annually and VAT monthly. Non-compliance risks fines or operational delays.
Costs: While IRPC and VAT are significant, municipal taxes like IPRA or TAE are generally low but vary by locality.
Challenges: Navigating Portuguese-language forms and local bureaucracy can be complex. Engage local tax advisors or use one-stop shops like Balcão de Atendimento Único (BAU) for streamlined compliance.
Digital Tools: The AT's portal (www.at.gov.mz) offers forms, NUIT verification, and guidance. E-filing for VAT and IRPC is increasingly available in urban centers.