Foreign enterprises operating in Mozambique may find it difficult to navigate the country’s complicated tax structure. Individual income tax (IIT) for employees in Mozambique, social security charges, VAT, withholding tax, business tax, and permanent establishment problems are the key considerations for a foreign firm that needs to comply with tax rules in Mozambique.
VAT
In Mozambique, VAT is levied on the supply of taxable products and services, as well as imports. VAT is charged on taxable suppliers (output tax) and VAT is charged on items received by taxable people (input tax).
The standard rate of VAT on taxable goods and services is now 17%, with lower rates available for some categories (0 percent ).
Exemptions apply to banking, financial, and some health, education, and charity services. Drilling, research, and infrastructure development in the framework of mining and oil activities during the exploration phase, as well as the export of products and services, are all zero-rated services.
Withholding Tax
Mozambique levies withholding taxes (WHT) on several types of income produced by both residents and non-residents:
- 20 percent dividends (10 percent for stocks listed on the Mozambique Stock Exchange)
- 20 percent royalties
- 20% for technical services
Payments made to non-residents for the following services are subject also subject to a 10% withholding tax:
- telecommunications services, international transport services, and the assembly and installation of telecommunications equipment
- services related to construction and rehabilitation of productive infrastructures, transport, and distribution of electricity in rural areas, under the scope of public projects of rural electrification
- services from charters of marine vessels to conduct fishing and cabotage activities
- services relating to the maintenance of freight aircraft.
Taxes on corporate income
Corporate entities and other entities with effective management or headquarters in Mozambique (i.e. resident entities) are subject to corporate income tax (CIT) on their worldwide earnings. Non-resident entities, on the other hand, are only subject to CIT on revenue earned in Mozambique if they do not have a headquarters or a permanent establishment (PE) in the country.
CIT is a 32 percent tax on taxable profits, which are defined as accounting profits adjusted to comply with tax law regulations. Non-resident entities without a Mozambique-based PE are only subject to withholding tax (WHT) on income earned in the country.
Specific tax regime and tax benefits for mining activity
The value of mining products is determined under the specific tax regime for mining activity, namely the tax on mining production (TMP), by the price of the taxable person’s most recent sale, which must match the price of reference in the international market, or by the price of reference in the international market if there was no sale.
The following are the rates for mining products:
- a reduction of 8% for diamonds
- 6 percent for valuable metals, semi-precious stones, and heavy sand.
- 3% for basic metals, coal, and other commodities.
- Sand and stone are 1.5 percent.
When the products are employed in Mozambique for the development of local industry, these rates can be cut to 50%.
The TMP settlement takes place on the tenth day of the month following the production.
Surface tax
Surface tax (ST) is a tax imposed on firms engaged in mining in the country. With the exception of the mineral water mining concession, which has a sum of 85,000 Mozambican metical (MZN) per mining title, ST is based on the type of mining title and year of activity.
TMP and ST extra settlements must be made within 30 days of the tax settlement.
The taxpayer must declare the yearly profit for each mining title separately at the end of each year.
Capital Gains
Capital gains from the onerous or gratuitous alienation of mining rights in Mozambique, whether direct or indirect, are considered capital gains.
Capital gains are taxed in full (at a rate of 32 percent), the seller, purchaser, and holder of the mining right are jointly and severally accountable for payment, and the respective tax must be paid within 30 days of the date of alienation.
