The tax year is, as a general rule, the calendar year. A different tax year is allowed in the case of PEs of non-resident entities, which can adopt the tax period of the non-resident company. Resident persons that carry on activities that justify the adoption of a different taxation period or that are controlled by entities that already adopt a different taxation period may also adopt a different taxation period, provided they are duly authorised by the Minister of Economy and Finance. The different tax year should, however, coincide with the period to which the financial statements concern. If the option of a tax year different from the calendar year is taken, the new tax period must be maintained for a minimum of five years.
CIT assessment must be prepared by the companies on annual returns, based on the accounting records and on adjustments prescribed by the tax regulations.
The submission of the annual tax return is due by the last working day of May for companies using the calendar year as their tax year. For companies with a tax year that is not coincident with the calendar year, the presentation of the tax return is due by the last day of the fifth month subsequent to the respective year-end.
Payment of tax
Mozambican companies and non-resident companies with a PE in Mozambique must pay CIT as follows:
- In three advance payments (based on 80% of the preceding tax year’s CIT), due in May, July, and September of the respective tax year; or, if the tax year chosen is not coincident with the calendar year, in the fifth, seventh, and ninth months of the respective tax year.
- In three special advance payments (based on 0.5% of the preceding year’s turnover less the advance payments made in previous years, which cannot be less than MZN 30,000 or more than MZN 100,000) due in June, August, and October of the respective tax year; or, if the tax year chosen is not coincident with the calendar year, in the sixth, eighth, and tenth months of the respective year.
Final tax should be paid by the last working day of May or the fifth month after the tax year-end in cases where a different tax year is adopted.
Tax audit process
The tax authorities may carry out an inspection whenever necessary. Normally, the inspection occurs after the taxpayer files a refund application or on a random basis.
Statute of limitations
The statute of limitations period is five years, but the company documents must be kept for ten years.
Topics of focus for tax authorities
Based on our experience and through assistance provided to several clients during audit reviews, we noted that the Inspectors are focusing their attention on the following aspects:
- Confirmation of the amounts reported on the monthly VAT forms and the annual tax return to determinate if the figures are the same or not or if there are non-declared sales.
- Confirmation of whether the non-deductible costs were added back to the tax computation for CIT purposes.
- Deductibility of VAT.
- Analysis of supplier invoices to confirm the right of deduction of VAT.
- Analysis of the company’s sales for verification of whether there are undisclosed sales.
- Authorisation for electronic invoicing.
- VAT on self-assessment.
- Mandatory books, namely, ledger (diário), day book (razão), and inventory and balance (inventário e balanço).
- WHT on payments to non-resident entities.
- Thin capitalisation.
Although the principle of 'substance over form' is generally applicable in tax affairs, there are no express General Anti-Avoidance Rules in Mozambique. Nevertheless, there are some specific anti-avoidance rules dealing with:
- Sham transactions: Simulated transactions are disregarded for tax purposes; consequently, taxation falls on the actual transaction.
- Treaty shopping: Benefits contemplated under DTTs are not granted to residents of the other contracting state where the benefits are utilised by a third party that is not resident in such state.
- Thin capitalisation: See Interest expenses in the Deductions section for further details.
- Controlled foreign companies (CFCs): See the Group taxation section for further details.
- Restrictions of deductibility of costs incurred with individuals or legal persons that are based in privileged tax jurisdictions: See Payments to foreign affiliates in the Deductions section for further details.
Advance binding tax rulings (ATRs)
In order to promote and ensure clarity and certainty about the interpretation and application of the applicable taxation laws to a given arrangement or transaction, taxpayers are entitled to obtain an ATR from the MTA. An ATR binds the MTA to comply with the tax arrangements set out in the ruling, provided that the taxpayer has correctly supplied all relevant information and that the arrangement or transaction is formally and materially implemented in line with the terms of the application. The MTA can only cease to comply with an ATR if there is a judicial court decision that overthrows such ATR.
Although it is a prerogative of the taxpayer to seek and obtain an ATR, in practise, there are situations in which it is compulsory to obtain an ATR. This is the case, for example, of cross-border arrangements or transactions where a DTT is applicable.
Tax clearance certificates (TCCs)
A TCC is documentary evidence issued by the MTA to confirm that the taxpayer is up to date with any tax payments and has met all applicable tax obligations at the date of issue. TCCs are required for a number of reasons, including, but not limited to, submission of bids for any contracts awarded by the government and public entities and, in some cases, by private entities that have strict procurement policies in place; applications for work permits and resident permits, including renewals; payments to non-resident entities under many cross-borders transactions; and applications to obtain or renew certain business permits.
The procedures and requirements to obtain TCCs vary depending on the purpose for which the TCC is required. In certain cases where the taxpayers benefit from tax exemptions or where DTTs apply, TCCs are only issued on the basis of an ATR that confirms the exact tax treatment applicable to the case in hand. According to the law, TCCs must be issued within 15 days from the date of application. In practice, however, it is common to experience delays, which can be quite significant in a number of cases. TCCs are valid for a period of 90 days.