close
Share with your friends

Mozambique - Indirect Tax Guide

Mozambique - Indirect Tax Guide

Explore the requirements and rules that apply to indirect taxes in Mozambique.

Explore the requirements and rules that apply to indirect taxes in Mozambique.

Lion standing in a field

General

Types of indirect taxes (VAT/GST)

This report covers the main rules regarding Value Added Tax (VAT).

What is standard VAT/GST rate?

17 percent.

Are there any reduced rates, zero rates or exemptions?

VAT exempt transactions that grant the right to recover input VAT (also known as zero-rated supplies) include:

  • exports and international transport
  • certain basic foodstuffs (maize, bread, etc.)
  • illuminating paraffin and jet-fuel
  • products from activities of production of rations for animal feed for human consumption
  • farming goods and services for sugarcane production
  • goods to be used as raw material in alimentary oil and soap industry
  • mosquito nets, common bicycles and condoms. 

VAT exempt transactions without right of deduction (also known as simple exemptions) include:

  • banking, financial, insurance and reinsurance
  • medical, sanitary, garbage removal, educational, funeral and ambulance transport services
  • education and related goods
  • non-profit organizations or public entity services and goods (including social assistance, sports and cultural activities, guide services at museums and state-owned parks)
  • goods for the disable
  • human organs and blood
  • milk
  • medicine and other pharmaceutical products
  • supplies for nurseries, homes for abandoned or disabled children and the aged, rehabilitation centers, and similar public and non-profit entities 
  • services by the state or non-profit entities 
  • cultural, educational or technical newspapers, magazines and books
  • supply of staff by religious or philosophical entities
  • stamps
  • gaming and betting
  • alimentary oil and soaps
  • sugar and certain sugar industry products
  • public transportation services.

What are the general and specific place of supply rules, if applicable?

The place of supply of goods is where the transport or dispatch to the acquirer begins or where the goods are when the supply takes place.

The place of supply upon the importation of goods is deemed to be Mozambique. Whenever supplies are made by import and eventual subsequent supplies of goods are transported or dispatched from a foreign territory, such supplies are deemed to take place prior to importation into Mozambique.

The general rule for the place of supply of services, or where a supply of services is made in national territory by a supplier with headquarters, permanent establishment or residence in Mozambique, is deemed to be Mozambique.

The place of supply shall:

  • for services relating to immovable property, be the place where such property is located
  • for work performed on movable corporeal property and evaluation, be the place where the services are physically carried out
  • for scientific, sporting, recreational, educational or services of similar nature (including activities of organizers of such services), be the place where it is physically carried out
  • for transportation, be the place where the transport takes place, proportionally in terms of distances covered.

The following services, rendered by a supplier without headquarters, permanent establishment or residence in Mozambique, are subject to VAT in Mozambique (reverse-charge) when the recipient is a taxable person:

  • transfer or right of use copyrights, licenses, trademarks and similar rights
  • advertising and telecommunication services
  • services of consultants, engineers, lawyers, economists and accountants, consultancy bureau in all fields, including organization, research and development
  • data processing and supply of information 
  • banking, financial insurance and reinsurance transactions
  • supply of staff
  • abovementioned services provided by agents
  • leasing of movable corporeal property, including the financial leasing thereof
  • the following electronic services:
    • website supply, web page hosting, distance maintenance of programs and equipment
    • supply of software and updating thereof
    • supply of images, text, information and databases
    • supply of music, films and games, including gambling and broadcasting of political demonstrations, cultural, artistic, sporting, and leisure activities
    • provision of distance learning services
    • other similar services.

The abovementioned services will, however, not be taxable if the supplier of such services is a resident of Mozambique and the recipient is not a resident.

VAT/GST registration

Who is required to register for VAT/GST?

The following persons are required to register: all corporate or individual entities, including non-residents carrying out taxable economic activities, importers and persons who have incorrectly included and charged VAT on their invoices.

Is voluntary VAT/GST registration possible for an overseas company?

No.

Does an overseas company need to appoint a fiscal representative?

As a rule no. But in some circumstances, when a taxable transaction is performed within Mozambique, such appointment may be required.

Is VAT/GST grouping* possible?

No.

VAT/GST compliance

How frequently are VAT/GST and other indirect tax returns submitted?

Monthly, on the last day of the following month when there is a VAT payable, or until the 15th of the following month in case of a VAT credit.

Can returns be filed and payments be made electronically?

Electronic payments are allowed, however, the VAT returns together with the proof of payment have to be submitted at the tax authority’s offices in hard copy.

What are the exchange rate rules?

Invoices should be issued in Mozambican currency; however, it may be issued in a dual currency (i.e. Mozambican currency and any other currency). The sale exchange rate provided by the Mozambican Central Bank should be used. Local bank exchange rates are also accepted.

VAT/GST recovery

Can an overseas company recover VAT/GST and other indirect taxes if not registered for VAT/GST locally?

No.

Is it a prerequisite that output tax be charged before input tax can be claimed?

No.

Are there any exemptions with the right to recover or deduct input VAT?

Please consider our comments above regarding zero-rated transactions.

Also, input VAT cannot be deducted on the following:

  • passenger vehicles, pleasure boats, helicopters, aircrafts and motorcycles
  • fuel used for cars and 50 percent of diesel fuel (diesel for tractors used for farming purposes and large vehicles transporting passengers and goods is fully deductible) 
  • business expense trips
  • entertainment, including lodging, food, drink and tobacco
  • telephone communication costs, except if related to fixed company telephones.

In addition, where VAT incurred relates to transactions that grant the right to deduct input VAT and transactions that do not grant such right, input VAT should be apportioned through the pro rata method or direct allocation method. The latter can only be applied with prior approval from the tax authority.

For what period of time may input tax not previously claimed be claimed (i.e. prescription)?

Input tax should be claimed within 90 days from the invoice date.

Where a VAT return reflects a refund due to the taxpayer, is the refund paid to the taxpayer or is the taxpayer required to utilize the refund as a credit against future payments?

A VAT refund may be requested or carried forward to be utilized against future payments.

One of the following requirements must be met when applying for a refund:

  • if 4 months subsequent to the tax period in which the excess began, the taxpayer still has a credit of more than 100,000 Mozambican metical (MZN)
  • the taxpayer ceases to carry on the business
  • the business is changed to exclusively perform operations which do not give rise to the right of deduction, or an election is made for a taxation scheme different from the normal taxation scheme
  • the tax credit exceeds MZN500,000 
  • the tax credit exceeds MZN20,000 if requested by exporters (upon the presentation of a guarantee, as well as other supporting documentation) 

A refund request usually triggers a tax inspection by the tax authority.

It should be noted that there are also special VAT regularization mechanisms for the following:

  • public projects financed by international financial institutions and development partners
  • diplomatic and consular missions and international organizations with diplomatic status
  • petroleum and mining activities after commercial production, which exports represent, at least, 75 percent of their turnover.

Invoices

Is a business required to issue tax invoices?

Yes. All invoices should be in Portuguese. It is acceptable if English wording is alongside the Portuguese wording.

The general rule to issue an invoice by an individual or corporate person is:

  • the individual or corporate person must be a resident and carry on a profitable or non-profitable economic activity, on an independent and regular basis
  • residents or non-residents that carry on any taxable transaction subject to individual or corporate income tax (IRPS or IRPC), on an independent basis.

In addition, the invoice should contain certain features to be considered valid.

Is it possible/mandatory to issue invoices electronically?

Yes it’s possible, not mandatory.

Is it possible to issue recipient-created tax invoices?

No.

Audits

Do tax audits take place on a regular basis?

Audits take place on a regular basis (the tax authority establishes certain criteria for selecting taxpayers to be audited).

Requests for refunds will generally be subject to an audit.

During audits, support documentation and VAT deduction timing are reviewed.

Are audits done electronically in your country/territory (e-audit)? If so, what system is in use?

No.

What penalties can arise from non-compliance?

A penalty that can go up to 4 times the tax due, limited to MZN2.5 million, will be levied for late or non-payment.

Interest at the Maibor rate plus 2 percent will be levied on outstanding VAT due.

Special indirect tax rules

Are there unique country/territory-specific indirect tax rules that differ from 'standard' indirect tax rules in other jurisdictions?

Yes, there are some unique country-specific indirect tax rules in place.

The following special VAT regimes exist for small businesses:

  • VAT exemption regime: applicable to entities not subject to formal bookkeeping or that have import/export transactions and with annual turnover not exceeding MZN750,000. Input VAT cannot be deducted.
  • VAT simplified regime: applicable to entities not subject to formal bookkeeping or that have import/export transactions, and with annual turnover between MZN750,000 and MZN2,500,000. Input VAT cannot be deducted. Entities must pay 5 percent on turnover except on gains from sale of tangible assets.

Special VAT rules also apply on travel agencies and organizers of tourism tours and to the trade of second hand goods.

A special simplified tax regime is also applicable for small taxpayers (defined by law) with annual turnover not exceeding MZN2,500,000. These entities pay 3 percent tax on turnover and do not have to pay any other taxes (VAT, CIT, PIT, etc.).

Does a reverse charge mechanism apply?

Yes.

Can VAT on reverse charges be claimed as input tax, to the extent that the expense on which the reverse charge VAT is accounted for, is used for taxable purposes?

Yes.

Can non-residents appoint local agents in order to avoid reverse charge VAT by virtue of charging standard rate VAT and accounting for such VAT through the agent?

Yes for some transactions.

Are there indirect tax incentives available (e.g. reduced tax, tax holidays)?

There is an exemption of VAT on the import of certain equipment under the tax benefits regime applicable for foreign investment in Mozambique, upon the fulfillment of the required criteria and procedures.

Rulings

Is it possible to apply for formal or informal advance rulings from the tax authority?

Yes.

Are rulings and decisions issued by the tax authorities publically available?

No.
 

Other indirect taxes

Are there other indirect taxes not commented on above?

Yes, other indirect taxes include:

  • import duty
  • specific consumption tax
  • property transfer tax
  • stamp duty.

For further information please contact

Quintino Cotao
Managing Partner, Tax
KPMG in Mozambique
T: +258 21 355 200
E: qcotao@kpmg.com

Yussuf Mahomed
Partner, Tax
KPMG in Mozambique
T: +258 21 355 200
E: yussufmahomed@kpmg.com

Footnote

*By ‘grouping’ we mean: either a consolidation mechanism between taxpayers belonging to the same group (payment and refund are compensated but taxpayers remain distinct) or a fiscal unity for VAT/GST purposes (several taxpayers are regarded as a single taxpayer).

Disclaimer

All information contained in this document is summarized by KPMG in Mozambique, a member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Connect with us