Value-added tax (VAT)
VAT is an indirect tax that is largely directed at the domestic consumption of goods and services and at goods imported into Mozambique. The tax is designed to be paid mainly by the ultimate consumer or purchaser in Mozambique. The standard rate is 16%. However, there are certain selected supplies that are subject to a reduced rate of 5% and a few cases where VAT is not due on the full taxable amount, leading to lower effective rates.
Supplies of goods
Supplies of goods are considered to be the transfer of the right to dispose of tangible property generally against a consideration, which includes commercial transactions, hire purchases, sales in instalments with reservation of ownership, commissions, consignments, and applications of goods forming part of a business for private use or for non-business purposes when tax has been deducted on such goods, use of goods on which tax has been deducted for a purpose or in a sector where right of deduction is excluded.
Goods that have been acquired, produced, or imported that are not physically present at the establishments of the taxable person are presumed to have been disposed of for VAT purposes, and goods that are physically present at the establishments of the taxable person are presumed to have been acquired for VAT purposes.
Supplies of goods are subject to VAT in Mozambique if the goods are located in Mozambique at the moment their transport or dispatch to the customer begins or, if there is no transport or dispatch, if the goods are located in Mozambique at the moment on which they are put at the disposal of the customer. Transactions of goods transported or dispatched from overseas before being imported into Mozambique are also subject to VAT in Mozambique.
Supplies of services
The meaning of 'services' is very broad as it includes all the transactions carried out that are not a supply of goods or an import of goods.
The general rule is that the taxable operation takes place at the place where the supplier’s business, PE from which the services are rendered, or its permanent address is situated.
However, the following exceptions should be taken into consideration:
|Place of supply
|Services related to immovable property
|Place in which the property is located, regardless of where the service provider is based.
|Works on movable assets
|Place where the actual service is totally or mainly rendered, regardless of where the service provider is based.
|Services of artistic, scientific, sports, recreational, educational, and similar nature
|Place where the actual service is performed.
|Place in which the transport takes place, taking into account the actual distance covered.
VAT reverse-charge mechanism
Supplies of the following services by non-resident suppliers are subject to VAT in Mozambique through the application of the reverse-charge mechanism, provided the customer is a taxable person (the same supplies would not be subject to VAT in the case where the customer is a foreign entity):
- Cession of, or authorisation for use of, copyright, licences, trademarks, and similar rights.
- Advertising services.
- Telecommunication services.
- Services provided by consultants, engineers, lawyers, economists, and accountants, as well as study offices in several areas, such as organisation and research and development (R&D).
- Supply of information and data.
- Banking, financial, insurance, and reinsurance operations.
- Disposal of personnel in favour of a third party.
- Intermediary services that intervene in the name and on behalf of a third party in the performance of services.
- The obligation of not performing, even if partially, a professional activity or a right mentioned above.
- Leasing and renting (including financial leasing) of movable assets.
- Services supplied electronically, such as:
- Supply of websites, web-hosting, and distance maintenance of programmes and equipment.
- Supply of software and respective updates.
- Supply of images, text, and information and provision of databases.
- Supply of music, films, and games, including games of chance and gambling games, and of political, cultural, artistic, sporting, scientific, and entertainment broadcasting and events.
- Supply of distance teaching.
- Other ancillary services.
- Intermediary services in respect to all services listed above.
In case the foreign supplier of the services above does not appoint a tax representative in Mozambique to comply with the inherent tax obligations, it is the customer (Mozambique tax resident entity and subject to VAT) that must report the VAT. The customer must add the VAT amount to both the output VAT and input VAT (if applicable) on the VAT return of the month in which the invoice from the non-resident supplier is received. This means that if the customer is entitled to claim input VAT, there will be no extra VAT payable to or claimable from the MTA (i.e. in normal circumstances the VAT reverse-charge mechanism is cash-flow neutral).
It is crucial to highlight that the input VAT may only be claimed if 90 days have not elapsed from the invoice issuance date to the reporting date (the timeframe for claiming input VAT). Failure to adhere to this timeframe may lead to the exclusion of the VAT amount from the input VAT. If included, it might be disallowed, potentially resulting in additional payable VAT.
Import of goods
VAT encompasses the entry of goods into the Mozambican territory, with the exception of circumstances where goods enter the territory under a special customs or economic regime, such as Special Economic Zones (SEZs), Industrial Free Zones (IFZs), bonded warehouses, temporary importation, or external or internal transit arrangements.
Standard VAT regime
All taxpayers with a turnover or goods import operations higher than 2.5 million Mozambican metical (MZN) fall within the standard VAT regime. These taxpayers and those that choose to be framed in the standard regime normally pay VAT on expenses (input tax) and charge VAT on supplies made (output tax). This mechanism, therefore, ensures that only the so-called ‘added-value’ is taxed. Due to VAT being a self-assessment system, the output tax collected may be reduced by input tax paid. Thereafter, the net amount is payable to, or refundable by, the MTA. The self-assessment returns are due regularly within prescribed periods (tax periods).
Zero-rated supplies (complete exemptions)
The VAT Act contains a list of the supplies of goods or services that are regarded as zero-rated supplies. Most of the items refer to exports and international transport, but other specified goods and services utilised for farming purposes, certain basic foodstuffs, mosquito nets, common bicycles and iron bicycles up to 4 speeds, condoms, and insecticides, among others, are also regarded as zero-rated supplies.
Under a zero-rated supply, a vendor does not charge VAT on the consideration for the supply and obtains a refund or credit for the VAT paid on taxable supplies utilised in the making of the zero-rated supplies.
In addition to zero-rated supplies, the VAT Act contains a list of the supplies of goods or services that are exempt from VAT. Exempt supplies include, among others, banking and financial operation subject to stamp duty, insurance and reinsurance operations subject to stamp duty, residential rentals, medical and sanitary services, and educational services.
In the case of an exempt supply made by a vendor, the vendor does not charge VAT on the supply and is not entitled to a deduction or credit for the VAT paid on goods and services supplied for the making of the exempt supply. Accordingly, vendors treat the VAT paid by them, and for which they do not obtain a deduction or credit, as another cost and recover it in the consideration they charge for the making of the exempt supply.
Reduced rate supplies
A reduced rate of 5% was recently introduced on the transmission of the following goods and services:
- Provision of medical and health services (and closely linked services) by private hospitals, clinics, dispensaries, and similar.
- Educational services provided by private establishments integrated in the National Education System and recognised by the Ministry of Education, including the supply of related goods and services.
- Vocational coaching/training services, along with the supply of related goods and services (e.g. accommodation, food, and teaching material), when carried out by private entities.
- Provision of services consisting in private lessons taught on school or higher education subjects.
Note: Input VAT incurred on expenses subject to a reduced rate of 5% is not eligible for deduction.
Customs duties are charged on importation of goods into Mozambique, and the applicable rates vary from 0% to 20% depending on the classification per the Custom Tariff Schedule (the Customs Tariff Schedule is based on the World Customs Organisation 2012 Harmonised System), unless the goods imported benefit from a specific exemption or fall under a special customs regime (e.g. temporary importation, bonded warehouse, SEZ, IFZ), in which case the payment is suspended while the goods remain in that regime.
Customs duties are levied on the customs value of the imported goods, which is determined in accordance with the definition of Article VII of the General Agreement on Tariffs and Trade (GATT) signed in 1994. In short, the following elements form part of the customs value: cost, insurance, and freight (CIF) of the goods imported. However, there are specific cases where other elements can be added to the customs value as long as they involve payments abroad. Such elements can comprise:
- handling charges
- packaging costs
- royalties and licensing fees directly related to the goods imported, and
- the value of any part of the proceeds from resale, assignment, or further use of the goods.
Import of goods from Southern Africa Development Community (SADC) countries and the European Union (EU) may enjoy preferential treatment under the applicable international trade agreements, provided that the origination of the goods in question is proved by means of certificates of origin.
Excise duties are charged on certain goods manufactured locally or imported, which are identified in a specific table that is an integral part of the Excise Duty Act and indicates the applicable rates. Amongst others, the said table includes goods such as tobacco, beer and other alcoholic beverages, vehicles, cosmetics, cloths, aircraft, boats, etc.
Examples of excise duty rates include the following:
|Rates vary by year and depending on the nature of the beverage.
|Air vehicles without engines
|Boats and other recreational or sportive crafts
|Clothes and respective accessories
Property transfer taxes (National SISA)
In Mozambique, a property transfer tax is charged on transfers of real estate, excluding the land, which is owned by the state. The rate of tax is 2% of the selling price of the building. When the beneficiaries live in a country with a privileged tax regime, the applicable rate is 10%. In areas not covered by municipalities, SISA is collected by the MTA (National SISA).
Stamp duties (SD)
SD is charged to contracts, acts, documents, titles, books, and other items occurring or deemed to be occurring within the Mozambican territory listed in the General SD Table that are not subject to or exempt from VAT, such as the acquisition of real estate, the lease of real estate, the transfer of shares in public limited liability companies, the use of credit, and guarantees.
SD is borne by the person with economic interest in the realities subject to tax. In certain situations, the Stamp Duty Code clarifies who is deemed to have an economic interest in a particular transaction, eliminating eventual doubts.
The applicable rates, depending on the nature of the different acts and tax events and the possibility, or not, to determine the respective value, are 'ad valorem' rates, or fixed and predetermined amounts. These rates vary generally from 0.03% to 50% on the amount of the transaction supported by the document to be stamped. Where the stamp duty comprises fixed amounts, it ranges from MZN 0.50 to MZN 5,000.
There are no payroll taxes other than social security contributions (see below).
Social security contributions
Social security contributions are payable by employers and employees on monthly remuneration. The aggregate rate of contribution is 7%, with 4% paid by the employer and the remaining 3% by the employee. No ceiling is applicable.
Upstream petroleum industry: Petroleum Production Tax (PPT)
PPT is charged on oil and gas produced in each concession area and is due by the entities performing petroleum operations under a concession agreement in Mozambique.
PPT is charged at the following rates:
|Crude oil and condensate
|Natural gas and liquified natural gas
The basis to which the tax rate is applied is determined under specific rules, which are based on the average selling prices of oil and gas in the month the tax refers to. It should be noted that the tax must be paid in cash but may, in some circumstances, be demanded in kind.
Mining industry: Mining Production Tax (MPT)
MPT is charged on minerals extracted, concentrates, and mineral water resulting from mining operations carried out in the Mozambican territory, irrespective of there being a mining title or not.
MPT is charged at the following rates:
|May be reduced by 50% in cases where the production is to be used for the development of local industry. It is considered local industry if the sale is for the national hydrocarbon company (ENH, E.P.).
|Precious metals, precious stone and semi-precious stone, and heavy sand
|Base metals, coal, and others
|Sand and stone
Mining industry: Surface Tax (ST)
ST is charged to entities undertaking a mining activity in the Mozambican territory and is based on the type of mining title, its area, and year of activities, with exception of the mining concession for mineral water that has an amount of MZN 85,000 per concession.
|# of years of activities
|1st and 2nd
|4th and 5th
|7th and 8th
|1st to 5th
|1st to 5th
Mining industry: Mining Resource Rent Tax (MRRT)
MRRT is a windfall tax that is charged to mining concession and mining certificate holders on the accumulated net cash flow earnings from the moment such cash flows give rise to internal rate of return (IRR) that is equal to or higher than 18% before CIT.
In particular, accumulated net cash flows should be calculated at the beginning of the fiscal year in which the mining concession / certificate is granted and for each fiscal year thereafter. The cash flow for each fiscal year will be calculated as follows:
|Formula for computation of MRRT cash flow:
|Financial expenses (e.g. interest and other financial charges)
|capital expenditures (CAPEX), excluding the mining title acquisition costs
|Start-up costs for seven years before the mining concession was granted
|Yearly cash flow
It is expected that during the early years of the MRRT calculation that these yearly cash flows will produce negative results. These negative yearly cash flows should be accumulated from one year to another for purposes of the MRRT calculation. In other words, the cash flow closing balance in year 1 will be the opening cash flow balance in year 2, etc.
However, any negative net cash flow balance that is transferred from one year to another should be subjected to an 18% uplift rate (except in the case of non-production in a fiscal year during production phase). As soon as the net cash flow balance turns into a positive cash flow in a particular year, then that positive net cash flow will be subject to a 20% MRRT tax rate. Naturally, as soon as the positive cash flows are subject to MRRT, then no cash flows are transferred anymore from one year to another; in other words, the opening net cash flow balance in the following year will be zero.
Gambling industry: Special Tax on Gambling
The Special Tax on Gambling is charged to gambling concession holders and is levied on the gross revenues derived from the gambling business net of the individual gains awarded to gamblers, pursuant to the terms defined in the concession agreement.
Municipal taxes include the following:
Municipal tax on real estate
The municipal tax on real estate is levied annually on the value of immovable assets situated within the municipality and owned or possessed by corporate entities. Effective tax rates range from 0.4% (for housing purposes) to 0.7% (for office purposes or mixed activities) of the building value, depending on the municipality.
Municipal SISA is charged on the transfer for consideration of ownership rights or of other minor rights over real property that takes place within municipal areas. Other than the territoriality aspect and the nuances associated with it, the regime applicable to Municipal SISA and National SISA are the same.
Municipal vehicles tax
The municipal vehicles tax is levied on the use of specific vehicles (e.g. light and heavy vehicles less than 25 years old, motorcycles less than 15 years old, aeroplanes, and boats for private use). This tax is due by the owners who are residents of a municipality, regardless of the place of registration of the vehicle owned.
The rate varies, depending on specific criteria, such as type of fuel, engine capacity, period of registration, and weight.
Municipal Tax on Individuals
Municipal Tax on Individuals represents the minimum contribution of each citizen to the public expenses of the municipality and is due by all persons, national or foreign, between the ages of 18 and 60 who are residents in a certain municipality.
The applicable rates range from 1% to 4%, depending on the municipality, and are levied annually based on the highest minimum monthly salary as of June 30 of the preceding year. Employers are responsible for withholding the Municipal Tax on Individuals.