Mozambique

Corporate - Taxes on corporate income

Last reviewed - 30 July 2020

Corporate entities and other entities with headquarters or effective management in Mozambique (i.e. resident entities) are subject to corporate income tax (CIT) based on their worldwide income. On the other hand, corporate entities and other entities without headquarters or with a permanent establishment (PE) in Mozambique (i.e. non-resident entities) are only subject to CIT on the income earned in Mozambique.

CIT is levied on taxable profits, defined as accounting profits adjusted to comply with tax law rules, at a tax rate of 32%. Non-resident entities without a PE in Mozambique are only subject to withholding tax (WHT) in Mozambique in respect to income earned in Mozambique.

Specific tax regime and tax benefits for mining activity

Under the specific tax regime for mining activity, namely the tax on mining production (TMP), the value of mining products is determined by the price of the last sale by the taxable person, which must match with the price of reference in the international market, or, if there was no sale, is determined by the price of reference in the international market.

The rates for mining products are as follows:

  • 8% for diamonds.
  • 6% for precious metals, precious stone and semi-precious stone, and heavy sand.
  • 3% for base metals, coal, and others.
  • 1.5% for sand and stone.

Such rates can be reduced to 50% when the products are used in Mozambique for the development of local industry.

The settlement of the TMP is performed on the tenth day of the month that follows the production.

Surface tax (ST) is a tax due for entities undertaking a mining activity in the country. ST is based on the type of mining title and year of activities, with exception of the mining concession for mineral water that has an amount of 85,000 Mozambican metical (MZN) per mining title.

The additional settlement for the TMP and ST must be made within 30 days from the tax settlement.

At the end of each year, the taxpayer must report the yearly profit for each mining title separately.

The holder of the mining title also pays the tax on mining resource rent (TMRR), and, for its deduction, the concessionaire must provide information to the tax authorities on the accumulated net cash flows, corresponding to the taxable income.

The applicable rate for TMRR is 20%.

At the beginning of the fiscal year, each taxpayer must prepare a forecast to TMRR that must be regularly updated and presented by 31 May of the fiscal year. The TMRR is paid in two instalments (50% in August and 50% in November) based on the forecast.

The specific tax regime for mining activities was recently amended by Law no. 15/2017 of 28 December, which introduced the following changes:

Capital gains

  • Capital gains arising from the onerous or gratuitous alienation, whether direct or indirect, of mining rights situated in Mozambique are considered as capital gains.
  • Capital gains are taxed in full (32% rate), the liability for payment is jointly and severally liable between seller, purchaser, and holder of the mining right, and the respective tax must be paid within 30 days from date of alienation.

Stability clause

  • Possibility to negotiate a tax stability for a period of ten years, effective upon a proven investment of 5 million United States dollars (USD).

US dollar accounts

  • Possibility to adopt US dollars as the currency to present the company’s accounts, subject to prior authorisation from the Minister of Finance, not subject to alteration during the life of the project.
  • Companies are eligible if an investment equal to or greater than the equivalent of USD 500 million is made and more than 90% of its transactions are in US dollars.

Audited accounts

  • Companies are required to have the accounts certified by an independent auditor.

Specific tax regime and tax benefits for oil and gas operations

In accordance with the specific tax regime and tax benefits for oil and gas operations, the obligation to pay the tax on oil production (TOP) is deemed to be at the time that the oil produced comes to the station defined in the concession agreement.

The settlement of the TOP is made by the taxpayer, which must submit the official form to the tax administration by the tenth day of the following month of the production, and, if the taxpayer fails to do so, the tax administration will make the necessary assessments based on the elements it has and the application of penalties established in article 22 of the mentioned regulation.

The TOP rates are the following: 10% for crude oil and condensate and 6% for natural gas and liquefied natural gas (LNG), which can 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).

After the settlement made by the taxpayer, the tax administration shall evaluate the official model and can make corrections to it. If a correction is to be made, the tax administration has the prerogative to conduct an additional settlement, in which it must charge or cancel the calculated difference, and this amount must be corrected in 30 days from the tax assessment.

It is important to mention that the government has a period of time to notify the taxpayer to pay in kind, which is within 12 months in advance, starting from the first day of the month to which the tax relates, indicating the quantity of oil and delivery point.

In order to have benefits established in Law no. 27/2014 of 23 September, the taxpayer must apply to the Customs Services for the exemption. In this request, the applicant must attach the global list of the goods to import for the determination of eligible goods for the exemption.

The violation of this regulation is subject to impeditive sanctions, suspensive sanctions, and extinctive sanctions.

The specific tax regime for oil and gas was recently amended by Law no. 14/2017 of 28 December, which introduced the following changes:

Capital gains

  • Capital gains arising from the onerous or gratuitous alienation, whether direct or indirect, of petroleum rights situated in Mozambique are considered as capital gains.
  • Capital gains are taxed in full (32% rate), the liability for payment is jointly and severally liable between seller, purchaser, and holder of the petroleum right, and the respective tax must be paid within 30 days from date of alienation.

Stability clause

  • Possibility to negotiate a tax stability for a period of ten years, effective upon a proven investment of USD 100 million.

US dollar accounts

  • Possibility to adopt US dollars as the currency to present the company’s accounts, subject to prior authorisation from the Minister of Finance, not subject to alteration during the life of the project.
  • Companies are eligible if an investment equal to or greater than the equivalent of USD 500 million is made and more than 90% of its transactions are in US dollars.

Audited accounts

  • Companies are required to have the accounts certified by an independent auditor.

Local income taxes

See Municipality taxes in the Other taxes section.