In Mozambique, employers face several tax obligations, including social security contributions and payroll tax withholding.
Employer Social Security Contributions
- Employers contribute 4% of the employee's gross monthly salary to social security. There is no upper limit on this contribution.
Employee Social Security Contributions
- Employees contribute 3% of their gross monthly salary to social security.
Payroll Tax (PAYE)
- Mozambique operates a Pay-As-You-Earn (PAYE) system for income tax. Employers withhold income tax from employee salaries monthly, based on progressive rates.
Income Tax Rates for Residents
- Income tax rates range from 10% to 32% based on the employee's annual taxable income. These rates apply to residents whose income is not subject to definitive withholding tax.
Income Tax Rates for Non-Residents
- A flat rate of 20% is withheld for non-resident employees or those staying in Mozambique for less than 180 days.
Tax Year and Filing
- The standard tax year aligns with the calendar year (January to December). However, companies can adopt a different fiscal year with proper justification and approval from the Ministry of Finance. It must be kept for five consecutive years once changed.
- Tax returns for income tax must be filed between January and April of the following year. Payments to the tax authority are due by the 20th of the following month.
Other Employer Obligations
- Employers are responsible for registering employees with the tax authorities and social security system, handling tax filings and payments, calculating and withholding taxes, and remitting these to the authorities by the 20th of the following month.
Additional Considerations
- Fringe benefits, including cash and in-kind benefits, are considered part of an employee's taxable income.
- Definitive withholding tax rates apply to certain types of income, such as dividends, interest, royalties, and fees paid to non-residents.
This information is current as of February 5, 2025, and might be subject to change.
In Mozambique, employee tax deductions encompass various areas, including payroll taxes, social security contributions, and personal income tax, impacting both employers and employees.
Employer Obligations
- Social Security Contributions: Employers contribute 4% of the employee's gross salary to social security, with no upper limit. This contribution is mandatory and applies to all employees.
- Payroll Tax Withholding: Employers are responsible for withholding payroll taxes from employee salaries. The tax rate ranges from 0% to 32%, determined by the employee's income level. This requires precise calculation and timely remittance to tax authorities.
- Tax Registration: All employers paying employment income must register with Mozambican tax authorities and declare the commencement of their activities. Failure to comply may result in penalties. This includes providing necessary information like company registration details, tax identification number, operating license, and commencement of activity return.
- Social Security Registration: Employers must register with the National Social Security system within 15 days of commencing operations. They also need to register their employees within 30 days of their employment start date.
Employee Deductions
- Personal Income Tax (IRPS): Mozambique operates a Pay-As-You-Earn (PAYE) system, where income tax is deducted directly from employee salaries. Tax rates range from 0% to 32%, depending on income level, with the highest rate applying to monthly income above approximately USD 27,000 and 25% for income above USD 7,000.
- Social Security Contributions: Employees contribute 3% of their gross salary to social security, without an upper limit. Foreign employees leaving Mozambique permanently can apply for a refund of these contributions if they depart before becoming eligible for retirement benefits.
- Personal Deductions: Residents can deduct specific amounts from their taxable income related to their individual and family status: MZN 1,800 for married or single individuals, MZN 600 for one dependent, MZN 900 for two, MZN 1,200 for three, and MZN 1,800 for four or more dependents. Additionally, tax credits for international double taxation may apply.
- Tax Filing: Employee tax returns are due by March 31st, with final tax payments due by April 30th. Late filing and payments can incur penalties.
- Tax Residency: An individual is considered a tax resident if they reside in Mozambique for over 180 days in a tax year or maintain a permanent residence there on December 31st. Residents are taxed on worldwide income, while non-residents are taxed only on Mozambique-sourced income. Non-resident employees may be subject to a flat 20% withholding tax if they stay in Mozambique for less than 180 days or work as service providers.
- Tax Year: Mozambique's tax year runs from January 1st to December 31st.
- Currency: The official currency is the Mozambican Metical (MZN).
Please note that this information is current as of February 5, 2025, and might change due to legal and regulatory updates.
Value Added Tax (VAT) in Mozambique is levied on most goods and services consumed within the country, as well as on imported goods.
VAT Rates
- Standard Rate: 16% (This rate was reduced from 17% on January 1, 2023).
- Zero-Rated Supplies: A 0% rate applies to specific goods and services, including exports, certain basic foodstuffs, agricultural supplies, and some medical supplies.
- Specific Rates: Some goods and services are subject to specific rules, leading to effectively lower rates. These include:
- Public works (roads, bridges, water/power infrastructure for rural areas): 40% of the taxable base.
- Power (price set by authorities): 62% of the taxable base.
- Services priced based on aeronautical excises: 85% of the taxable base
- Water (price set by authorities): 75% of the taxable base
VAT Registration
- Threshold: Businesses with a turnover or import operations exceeding 2.5 million Mozambican Metical (MZN) annually are required to register for VAT.
- Digital Services: There is no VAT registration threshold for non-resident providers of digital services. Even a single sale requires registration.
- Process: Registration is done by submitting forms M/01C (Company Registration Declaration) and M/02 (Declaration of Commencement of Activity for Tax Purposes) to the tax authorities at least 15 days before starting taxable activities. This process grants a unique tax identification number (NUIT).
VAT Filing and Payment
- Returns: Monthly VAT returns (Form A) are required.
- Payment returns: Due by the last day of the following month.
- Credit returns: Due by the 15th day of the following month.
- Payment: VAT payments are due by the last working day of the month following the transaction.
- Deductions: Input VAT deductions must be claimed within 90 days of the invoice issuance date.
- Refunds: Taxpayers can request a VAT refund if their credit exceeds MZN 100,000 after four months, or MZN 500,000 in a single month. Exporters can claim refunds when their credit reaches MZN 20,000.
Exempt Goods and Services
- Exempt Supplies: Banking and financial operations subject to stamp duty, insurance/reinsurance operations subject to stamp duty, residential rentals, medical and sanitary services, and educational services.
- Zero-rated supplies: This category differs from exempt supplies in that the taxpayer charges no VAT to the purchaser but is allowed to deduct input VAT paid. Included in the exemptions are exports, agricultural products and services (including poultry and beekeeping), and supplies for vessels engaged in high seas activities.
- Imports: Some imports are exempt, mirroring domestically exempt goods. Other exemptions include goods under special customs regimes (e.g., SEZs, IFZs), imports by the Bank of Mozambique, re-imported goods by the original exporter, and certain goods for international shipping and aircraft.
VAT Invoices
Invoices issued in Mozambique must include:
- Supplier's name, address, and VAT registration number
- Invoice date and sequential number
- Buyer's name, address, and VAT registration number (if applicable)
- VAT amount and rate applied to each item
- Total amount after VAT
- Currency used
Other Indirect Taxes
A Specific Consumption Tax applies to certain goods manufactured in or imported into Mozambique, with rates ranging from 5% to 75%.
Note: This information is based on available resources as of February 5, 2025, and might not reflect the most recent updates. Consulting with a tax advisor is recommended for specific situations.
Mozambique offers various tax incentives to attract investment and stimulate economic growth.
Corporate Income Tax (CIT) Incentives
- Reduced CIT Rate: The standard CIT rate is 32%. However, specific sectors benefit from a reduced rate of 10%. These sectors include agriculture, aquaculture, and urban transport. This reduced rate is applicable until December 31, 2025.
- Withholding Tax (WHT) Reductions: WHT on payments to foreign entities providing services to Mozambican agricultural companies is reduced from 20% to 10% until the end of 2025. Additionally, WHT on interest from external financing for agricultural projects is eliminated until December 31, 2025.
- Accelerated Depreciation: New investments in agriculture, agro-processing, manufacturing, tourism, and urban transport sectors are eligible for accelerated depreciation (half the useful life) for facilities and equipment directly related to production. This incentive is contingent on the creation of at least 20 permanent jobs and is valid until December 31, 2025.
- Tax Credits, Deductions, and Exemptions: Additional incentives, including tax credits for investments, deductions for training costs and infrastructure development, and exemptions from customs duties and VAT on imported capital goods, are available depending on the sector and location of the investment.
Specific Sector Incentives
- Agriculture: Reduced CIT rate of 10%, reduced WHT, exemption from WHT on interest from external financing.
- Aquaculture: Reduced CIT rate of 10%.
- Urban Transport: Reduced CIT rate of 10%.
- Tourism and Hospitality: Incentives may include deductions for new technologies, professional training costs, investment tax credits, accelerated depreciation, and import duty and VAT exemptions. Specific requirements and investment thresholds apply.
- Large-Scale Projects (over MZN 12.5 billion): Exemption from customs duties and VAT on imported construction materials, machinery, equipment, and spare parts. Further sector-specific incentives may apply.
Other Tax Considerations
- Foreign Tax Credit: Resident companies can claim a credit for taxes paid abroad.
- Domestic Economic Double Taxation Relief: A tax credit is available to mitigate the impact of economic double taxation on dividends received from resident companies.
Application Procedures
Specific application procedures for tax incentives vary depending on the incentive and the sector. It's advisable to consult with Mozambican tax authorities or a qualified tax advisor for detailed guidance on eligibility criteria, required documentation, and application processes.
It's important to note that tax regulations and incentive programs can change. This information is current as of February 5, 2025, and may be subject to updates. Always verify with official sources or consult a tax professional for the latest information.