At A Glance... Mozambican Tax System

General Information

Mozambican tax system - The Mozambican tax system is, nowadays, a modern tax system with a tripartite structure which compares to the most modern tax systems where the income, consumption and assets are taxed separately. However, the current structure is relatively recent, deriving from the 2002 tax reform, which has completely changed the pre-independence system which was previously effective. The new Mozambican tax system includes solutions customized to the new economic reality, including the application of differentiated rules according to the profile of the taxpayer, as well as the inclusion of international tax elements.

Official Currency - Metical (new family) - MZN/MT.

Business entities - Main business entities in Mozambique are joint stock companies (sociedades anónimas) or limited liability companies (sociedades por quotas). It is also possible for a business to incorporate through a single person company (sociedade unipessoal). Additionally, foreign companies typically operate in Mozambique, through subsidiaries, branches, representation offices and consortium agreements (partnerships).

Interest rates - The interest rates of reference in Mozambique are the taxa de facilidade permanente de depósito set at 1.75% and the taxa de facilidade permanente de cedência set at 9.0%1.

Accounting principles - The Mozambican accounting system is based on the French accounting Model. The financial institutions and certain foreign business entities (namely multinational enterprises) are governed by a system which follows the IFRS.

Tax incentives - Private investors in Mozambique may benefit from tax incentives provided certain requirements are met. Tax benefits are considered to be reduced tax rates, tax allowances, deductions to taxable income, accelerated reintegrations and amortizations, and also, tax credits. There are several exemptions and reductions on the Corporate Income Tax (Imposto sobre o Rendimento das Pessoas Colectivas - IRPC), namely for companies that invest in Special Economic Zones (Zonas Económicas Especiais) and Industrial Free Trade Zones (Zonas Francas Industriais). Tax benefits may also be granted, upon approval by the Investment Promotion Center (Centro de Promoção de Investimento - CPI) and the Special Economic Zones Office (Gabinete das Zonas Económicas de Desenvolvimento Acelerado).

Tax year - The tax year is the same as the civil year, although a company may adopt another accounting period, if so authorized.

Double taxation agreements - Mozambique has concluded Double Taxation Agreements (DTA) with the following countries: Portugal, Italy, Mauritius, United Arab Emirates, Special Administrative Region of Macau, South Africa, India, Vietnam and Botswana2.

Rulings - Taxpayers are entitled to get advanced rulings and other information from the tax administration. The tax administration is obliged to provide such information on tax matters.

Corporate Income Taxation

Residence - A company will be deemed as a resident in Mozambique if its domicile, head office or effective management is located in Mozambique.

Basis - A resident company is taxed on its worldwide income. A non-resident company is subject to tax only on its Mozambique-sourced income.

Taxable profit - Taxable profit is the sum of net profit of the accounting period plus any positive or negative asset variations suffered in the same period and not reflected in the net profit.

Tax losses - Tax losses computed for an accounting period may be carried forward and set off against taxable income of one or more of the subsequent five accounting periods. The carry-back of losses is not permitted.

Rate - Corporate income is subject to a 32% tax rate. However, until 31 of December 2015, agriculture and breeding activities benefit from a reduced tax rate of 10%. Non-documented expenses, as well as confidential or illegal expenses are subject to an autonomous tax rate of 35%.

Dividend taxation - Dividends shall be included in the taxable basis for corporate income taxation purposes. If such dividends are paid in connection with a minimum participation of 25%, held for, at...