Employers in Mozambique have a responsibility to contribute to the National Institute of Social Security (INSS) on behalf of their employees. The employer contribution rate is 4% of the employee's gross salary. This 4% contribution is calculated based on the employee's total gross salary before any deductions. Employers are responsible for withholding employee contributions (3%) and remitting both their portion and the employees' portion to the INSS.

Work Accident Insurance

Depending on the industry and risk level, employers may be required to contribute to work accident insurance. Rates vary by industry.

Professional Tax

Employers might be liable for a professional tax, which is a specific tax levied on businesses based on activities and turnover. The specific rates and applicability depend on the nature of the business.

Additional Notes

Certain industries might have additional employer tax contribution requirements. Also, it's important to note that Mozambique's tax landscape can evolve. Therefore, staying updated with the latest laws and regulations is essential.

In Mozambique, a progressive income tax system is used, meaning the more an employee earns, the higher the applicable tax rate. The current income tax brackets can be found on the Mozambique Tax Authority (Autoridade Tributária de Moçambique) website. Income tax is calculated and withheld by the employer based on the employee's monthly salary.

Social Security Contributions (INSS)

Employees in Mozambique are required to contribute to the National Institute of Social Security (INSS). The employee contribution rate is 3% of the gross salary. The employer is responsible for withholding the employee's social security contribution from their salary and remitting it to the INSS.

Allowances and Deductions

Mozambique's tax code allows for certain deductions and allowances that can reduce an employee's taxable income. Each taxpayer is entitled to a monthly personal allowance, the amount of which is updated periodically. Taxpayers may also receive deductions for dependents such as children or spouses who meet specific criteria.

Additional Notes

Non-resident employees working in Mozambique are subject to a flat 20% income tax rate. Certain tax benefits or exemptions might apply to specific scenarios, such as income earned abroad.

VAT, or Imposto sobre Valor Acrescentado (IVA), is an indirect tax in Mozambique, levied on the consumption of goods and services. The standard VAT rate in Mozambique is 17%.

Services Subject to VAT

A wide variety of services provided within Mozambique are subject to VAT. These include professional services such as accounting, consulting, and legal services, technical services like maintenance, engineering, and IT, hospitality and tourism-related services, transportation services, rental services, telecommunication services, and entertainment services.

Concept of Supply

The concept of "supply" triggers VAT. A supply of services occurs when a service is provided for economic consideration in Mozambique.

Place of Supply for Services

The location where a service is deemed to be supplied is crucial for VAT purposes. For services related to real estate, the place of supply is where the real estate is located. For B2B services, the place of supply is generally where the recipient/customer is located. For B2C services, the place of supply may depend on specific rules for different types of services.

VAT Liability

Businesses providing taxable services in Mozambique must generally charge and collect VAT from their customers. Businesses with a turnover exceeding the VAT registration threshold are required to register for VAT. In some situations, the recipient of a service may be liable for VAT under the "reverse charge" mechanism, often when a foreign supplier provides services to a Mozambican business.

VAT Invoicing

Taxable businesses must issue VAT invoices compliant with Mozambican regulations. These invoices must contain specific details such as supplier and customer information, date and invoice number, description of the service provided, taxable amount, and VAT charged.

VAT Calculation, Filing, and Payment

VAT is calculated by applying the 17% rate to the taxable value of the service. Businesses can generally deduct VAT paid on their business purchases (input VAT) from their VAT liability on sales (output VAT). VAT returns must be filed and payment made by the specified deadlines.

VAT Exemptions

Certain types of services are exempt from VAT in Mozambique, including financial services, medical and healthcare services, and educational services.

Additional Notes

Certain types of services have particular VAT rules. Also, Mozambique's VAT laws and regulations are subject to change.

Mozambique offers a range of tax incentives to stimulate investment and economic growth in specific sectors and regions.

Industrial Free Zones (IFZs)

Businesses operating within IFZs can benefit from various incentives. These include exemption from Corporate Income Tax (IRPC) for the first 10 years, reduced IRPC rates after the initial exemption period, exemption from import duties on goods intended for production, and streamlined administrative and licensing procedures.

Sector-Specific Incentives

Agriculture and Agro-processing

Investments in agriculture and agro-industries, particularly in less developed regions, can benefit from tax incentives.

Mining and Petroleum

This sector has specific deductions and allowances, including accelerated depreciation.

Tourism

Investments in the tourism industry may be eligible for tax incentives.

Infrastructure Development

Businesses investing in infrastructure projects might be eligible for tax incentives.

Regional Investment Incentives

Businesses investing in designated underdeveloped regions of Mozambique may be eligible for tax benefits.

Additional Incentives

Accelerated Depreciation

Businesses investing in new equipment and machinery might be eligible for accelerated depreciation allowances, reducing their taxable income.

Employment-Based Incentives

There may be incentives for businesses creating jobs in certain sectors or for hiring specific categories of workers.

Reinvested Profits

Reduced tax rates may apply to profits reinvested in the business under certain conditions.

Accessing and Applying for Incentives

Many tax incentives in Mozambique are subject to approval by the Investment Promotion Centre (CPI) or other relevant authorities. Businesses need to understand the eligibility criteria and the application process to gain access to incentives. It is recommended to seek guidance from tax advisors or legal professionals for successful applications and to navigate the incentive framework.

Important Considerations

Mozambique's tax landscape and incentive programs can evolve, so it's crucial to stay updated with the latest information. Eligibility and benefits vary depending on the specific incentive, industry, location, and project size.