Worldwide VAT, GST and Sales Tax Guide
Maputo GMT +2
EY
Rua Belmiro Obadias Muianga 179
Maputo 366 Mozambique
Indirect tax contacts
Tehcine Aboobacar +258 21 353 201 tehcine.aboobacar@mz.ey.com
Mauro Daud +258 21 353 207 mauro.daud@mz.ey.com
A. At a glance
Name of the tax
Value-added tax (VAT)
Local name Imposto sobre o Valor Acrescentado (IVA)
Date introduced 1 April 1999
Trading bloc membership South African Development Community (SADC) Common Market for Eastern and Southern Africa (COMESA) African Continental Free Trade Area (AfCFTA)
Administered by Mozambican Tax Authority [Autoridade Tributária de Moçambique (AT)] (http://www.at.gov.mz/)
VAT rates
Standard 16%
Reduced 5%
Other
Zero-rated (0%) and exempt
VAT number format XXXXXXXXX (9 digits)
VAT return periods Monthly
Thresholds
Registration None
Recovery of VAT by non-established businesses No
B. Scope of the tax
VAT applies to the following transactions:
• The supply of goods or services made in Mozambique by a taxable person
• The importation of goods from outside Mozambique
For VAT purposes, the Mozambican territory includes the land, the maritime zone and the airspace delimited by borders, comprising the areas where, under international law, the Republic of Mozambique has sovereign rights in relation to the prospecting, exploration and production of natural resources, the seabed, the subsoil and the suprajacent waters.
The following services provided by non-established businesses are examples of supplies within the digital economy, and subject to VAT via the reverse-charge mechanism:
• Supply of websites, web pages, remote maintenance of programs and equipment
• Software supply and updates
• Supply of image, text, information and databases
• Supply of movies, music, online gambling, political, cultural, artistic, sporting, scientific and recreational emissions or manifestations
• Online learning
• Other similar services
There are no other specific e-commerce rules for imported goods in Mozambique.
Online marketplaces and platforms. No special rules exist for online marketplaces and platforms in Mozambique.
Registration procedures. Taxable persons must submit application form (Modelo 01/C) and a declaration of commencement of activities for tax purposes (M/02), to obtain and activate their tax number. The application form must be manually filled out and submitted at the tax department of the area where the taxable person is established. There is no deadline for the registration of the business for tax, but the declaration of commencement of activities must be submitted 15 days prior to commencement of activities. It normally takes around two days for the VAT registration process to take place and for a VAT registration number to be issued to the taxable person.
Deregistration. Deregistration is carried out when a taxable person ceases taxable activity and submits application form (Modelo 03) in paper at the tax department where it complies with its tax obligations. The deregistration form must be submitted along with the final tax returns and final accounts with reference to the cut-off date. The submission of the cessation of activities form must be done within 30 days from the date of cessation of activities or the date on which the income ceased to be earned.
The deregistration process generally takes one to three years and usually involves a tax audit.
Changes to VAT registration details. If there is a material change in a taxable person’s VAT registration details, it must notify the tax authority as soon as the change takes place. Material changes may include the following:
• Name of business
• Address
• Business activity
• Contact details
• Use of any special VAT regime
The notification must be made via form M/02. As per the VAT registration, the form is to be submitted in paper at the tax department where the taxable person complies with its tax obligations.
D. Rates
The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT, including the zero-rate.
The VAT rates are:
• Standard rate: 16%
• Reduced: 5%
• Zero-rate: 0%
activities (e.g., banking supplies). VAT included on invoices that do not meet the legal requirements is also not deductible. In addition, input tax may not be recovered for some items of business expenditure.
Examples of items for which input tax is nondeductible
• Light passenger vehicles, recreational boats, helicopters, aircrafts and motorcycles
• Business expense trips
• Fuel used for cars and 50% of diesel fuel (diesel for tractors used for farming purposes and large vehicles transporting passengers and goods is fully deductible)
• Telephone communication costs (e.g., mobile phones), except if related to fixed line telephones in the name of the taxable person
• Entertainment, food, drink and tobacco and accommodation for individuals not connected to the business
• Luxury and entertainment expenses
• Tax paid on transfer of goods and services is subject to taxation at the reduced rate of VAT
Examples of items for which input tax is deductible (if related to taxable business use)
• Acquisition of goods and services, and importation of goods
• Tax paid as beneficiary of taxable operations by non-established taxable persons, in cases where they do not have a legal representative and have not invoiced the tax
• Sale of light passenger vehicles, recreational boats, helicopters, aircrafts and motorcycles in the scope of its social object/business activity
• Repairs, maintenance and other provision of services related to secondhand goods
• Accommodation and food expenses incurred by independent professionals on their own account
• Telephone communication costs (landline)
Partial exemption. Input tax directly related to exempt supplies of goods or services is not generally recoverable. If a taxable person makes both exempt and taxable supplies, it may not recover input tax in full, as some costs are eligible for deduction, and some are not. This situation is referred to as “partial exemption.”
Where a taxable person makes taxable and exempt supplies, it will not be allowed to deduct the VAT incurred on the acquisition of goods and services related to exempt activities (unless it formally renounces/waives exemption) but could be allowed to deduct the VAT incurred on acquisitions made in the scope of non-exempted (i.e., taxable) activities.
The method used for the partial deduction by default is pro rata, where the VAT paid on acquisitions would be deductible only in the percentage corresponding to the annual turnover of the previous year (provisional deduction, then subject to adjustments based on the sales performed in the respective year) resulting from the transactions that are eligible for deduction (not exempted).
Alternatively, the taxable person may formally request the tax authorities an authorization to perform deductions based on the direct allocation method, for deduction of the total tax paid on goods and services used for activities subject to VAT.
Approval from the tax authorities is not required to use the partial exemption standard method in Mozambique. Special methods are not allowed in Mozambique.
Capital goods. In Mozambique there are no special input tax recovery rules for capital goods. The normal rules outlined above apply. Capital goods are not defined in the VAT law. Input tax incurred on capital goods is deducted in the same way as any other purchase. If the taxable person makes both exempt and taxable supplies, the pro rata deduction method applies, and this is for all inputs and not per item/asset. See the Partial exemption subsection above.
• Rendering of services for which it is common that an entry or transport ticket, ticket or any other bearer issued document is issued proving payment
• Other services whose value is lower than MZN100
For supplies to nontaxable persons, if the customer requests a full VAT invoice, then the supplier is required to issue it. Also, if the recipient of the goods or services is not the final consumer, then a full VAT invoice is still required, but retailers and service providers may issue an invoice with the price with VAT includes.
Records. Registered taxable persons are required to keep accounts and records that evidence all active and passive transactions and fixed assets, as prescribed by the VAT Act and local accounting rules. In Mozambique, examples of what records must be held for VAT purposes include VAT returns and records (e.g., financial statements, trial balance, invoices).
In Mozambique, VAT books and records can be kept outside of the country. However, it is mandatory for a taxable person that has its registered headquarters, permanent establishment or tax representative based in Mozambique, to hold its records in Mozambique.
Record retention period. Registered taxable persons must keep books and records for at least 10 years from the end of the taxable period to which they relate.
Electronic archiving. Electronic archiving is not allowed in Mozambique. All records must be held in paper and for a period of 10 years from the end of the taxable period to which they relate.
I. Returns and payment
Periodic returns. The VAT reporting period is monthly. Returns must be filed together with payment of the VAT due.
Returns must be filed by the end of the following month. For returns with a VAT credit position, returns must be filed by the 15th day of the following month.
Periodic payments. Any VAT due must be paid together with submission of the return, i.e., by the end of the following month. Payment of VAT can made via account deposit in person (i.e., cheque or cash into the tax authorities bank account), or wire transfer.
Electronic filing. Electronic filing is allowed in Mozambique, but not mandatory. An electronic filing platform has recently been implemented in Mozambique by the tax (https://edeclaracao. at.gov.mz/). At the time of preparing this chapter, the electronic filing platform is not available for all taxes, but it is allowed for VAT. Taxable persons still have the option to file returns manually, i.e., by paper.
It is important to note that sales subject to a reduced rate of 5% are declared on the new specific form introduced by the tax administration. However, this form, which has been used by taxpayers who make sales at reduced rates, was not formalized through an order or any other legal means, but rather adopted as a common practice by the tax administration.
Payments on account. Payments on account are not required in Mozambique.
Special schemes. Exemption regime. The exemption regime allows certain taxable persons to not charge and account for VAT on their supplies and cannot recover input tax incurred on their purchases. This regime is optional for taxable persons that do not have, or are not obliged to maintain, organized statutory accounts; are not involved in imports or exports and have an annual turnover that does not exceed MZN750,000.
Simplified regime. The simplified regime allows certain taxable persons to only charge VAT at 5% on their supplies and cannot recover input tax incurred. This regime is optional for taxable persons that do not have, or are not obliged to maintain, organized statutory accounts; are not
involved in imports or exports and have an annual turnover higher than MZN750,000 but not exceeding MZN2.5 million.
Mining, oil and gas sectors. Mining, oil and gas companies, as well as public projects funded by development agencies may benefit from a special VAT certificate and voluntary regularization regimes. The special regimes allow suppliers to charge VAT on their invoices as per the requirements of the VAT Code. The customer is then only required to pay the invoice net of VAT and deliver to the supplier the VAT certificate for the VAT amount. The special VAT certificate is issued by the General Directorate of Taxes on request.
Annual returns. Annual returns are not required in Mozambique.
Supplementary filings. No supplementary filings are required in Mozambique.
Correcting errors in previous returns. If a taxable person discovers an error or an omission from a previous periodic declaration, this can be corrected through the submission of a substitution return. The correction can be made either by paper or online. Where the original VAT return for the period has a VAT refund credit, the credit for that specific tax period is suspended until confirmed by the tax authorities. In this case the following documentation must also be submitted:
• Copy of the VAT returns that relates to the credit.
• A written note explaining the credit for the total period to which the credit relates, the type of transaction(s) undertaken, identification of the taxable person and base of incidence of the tax.
Digital tax administration. There are no transactional reporting requirements in Mozambique.
J. Penalties
Penalties for late registration. A taxable person who fails to register is liable to a penalty between MZN3,000 and MZN260,000. The range is provided by the legislation and the graduation of the fine depends on the discretionary power of the tax authority based on the seriousness, intention, economic situation of the taxable person and amount of VAT payable. In general, the lower fine is applied, unless the offense is recurring.
Penalties for late payment and filings. A taxable person who fails to file a VAT return by the required due date is liable to a penalty between MZN6,000 and MZN130,000. In addition, a fine between the amount of the tax due and its double may also apply, which is reduced up to 10% in the case of voluntary disclosure.
In addition to the fine and tax due, there is also interest for late payment, which is calculated based on the Maputo Interbank Offered Rate (MAIBOR) (12 months plus 2%). At the time of preparing this chapter, the MAIBOR has been abolished by the Central Bank, but the tax law has not been updated with this change. MIMO (Mozambique Interbank Market Rate) is now the prevailing rate on which the additional 2% is applied.
Where a taxable person fails to self-assess and pay across any outstanding VAT due, the tax authorities may proceed with a tax assessment. This assessment is based upon the VAT returns submitted in the previous months. If the taxable person fails to pay the VAT assessed or to object, within the established deadline, proceedings for coercive collection of the tax are triggered.
Penalties for errors. Errors and omissions that are not corrected by the taxable person within the legal deadlines (i.e., within one year, subject to penalties, and within the tax period following that in which the invoice was issued, without penalties) are subject to additional assessment by the tax authorities in line with the penalties outlined above under the Penalties for late payment and filings subsection.
Failure to notify, or late notification to the tax authorities of changes to a taxable person’s VAT registration details could result in a penalty varying from MZN3,000 to MZN14,000. In addition, it could have other implications, such as impediment of the tax authority to notify the taxable