As Mozambique is one of the poorest and least developed nations in the world, it is not surprising that it has a largely unskilled workforce and high unemployment. A large majority of the Mozambican population is engaged in the informal or shadow economy. Accordingly, the current rate of unionisation is very low (estimated to be 2.5% of the labour force). Despite the introduction of the reformed Labour Law in 2007, the overall structure of the labour market remains rigid and an impediment to investment and business.
Foreign companies operating in Mozambique may find it challenging to deal with the complexities of the country’s tax system. The primary concerns for a foreign company that needs to comply with tax laws in Mozambique are: Individual income tax (IIT) for employees in Mozambique, social security costs, GST, withholding tax, business tax and permanent establishment concerns.
Foreign nationals wishing to work in Mozambique are required to obtain a work permit. However, work permits are generally only granted in instances where the employer can prove that the position cannot be filled by any suitable Mozambican applicants. Foreign nationals can mainly either be employed under the ‘quota’ or outside the ‘quota’ system.
There are two types of business forms available to foreign companies in Mozambique. Each of these business forms has distinct advantages and disadvantages, as well as differing scope of business activities, registration requirements and minimum capital requirements. In most cases it will depend on the degree of commitment a company has to Mozambique and the planned business activity.
When setting up a company in Mozambique, you have the following options:-
This article provides a general guideline for foreign businesses on entering Mozambique for business purposes. In particular, it looks at common pathways to establishing a business presence in Mozambique, generally through a corporation or branch office. In addition, various economic, tax and regulatory factors are provided throughout as a source of useful information to assist those who will enter the Mozambican economy. The guide also looks at some immigration requirements such as obtaining appropriate visa status.
Data is based on the time of writing, November 2015 or closest available dates.
GEO Solutions or DIY Employment
Companies entering Mozambique must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities. A GEO or Mozambique Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a Mozambican entity established that can run payroll.
A DIY approach will typically take 6-9 months until there is a properly incorporated WFOE ready to run payroll and cost up to 6 figures if registered capital is required. Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.
|Management Fee for Employer of Record Services / Monthly Payroll Costs||
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Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. Income tax and social security (where applicable) are deducted at source and paid to the local tax authorities.
|Tax Returns Supplied||
|Corporate Tax Requirements||
The Mozambican tax year is the calendar year. Companies must submit their tax returns by 31 May each year, with supporting documents filed by the end of June.
Companies must make three provisional payments of corporate tax: May, July and September. The total amount of the payment should be 80% of the result of the tax assessed, less the amount of tax withheld by third parties in he previous year. Other special provisional corporate tax payments may be due in June, August and October if the result of the following formula is positive: 0.5% x turnover (with a minimum limit of MZN 30,000 and a maximum limit of MZN 100,000), less the provisional payment made in the previous year.
|Employers Social Security and statutory contributions||
Employers are required to contribute 4% of the employee’s gross monthly remuneration. For more details, please refer to the section on Employment.
|Employees Social Security and statutory contributions||
Employees are required to contribute 3% of the employee’s gross monthly remuneration. For more details, please refer to the section on Employment.
|Corporate Income Tax Rate||
The current corporate income tax rate is 32%.
VAT is imposed on the supply of taxable goods and services as well as imports in Mozambique. Taxable persons charge VAT on their taxable supplies (output tax) and are charged with VAT on goods which they receive (input tax).
The current standard rate of VAT imposed on taxable goods and services is 17%, with reduced rates available for certain items (0%).
Banking, financial and certain health, education and philanthropic services are exempt. Services related to drilling, research and construction of infrastructure in the context of mining and oil activities during the exploration phase and the export of goods and services are zero- rated.
Mozambique imposes withholding taxes (WHT) on payments made to both resident and non-residents on certain classes of income earned: