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Payroll & Tax in Mozambique

Mozambique payroll & taxation

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, VAT, withholding tax, business tax and permanent establishment concerns.

Your Payroll Options in Mozambique

Remote Payroll

A remote payroll in Mozambique is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Mozambique. This applies to both local and foreign employees. One option for a non-resident company to payroll its employees (local and foreign) in Mozambique is to use a fully outsourced service like a GEO or PEO which will employ and payroll the staff on their behalf.

Local Payroll Administration

In some cases, a company will register their business in Mozambique under one of the forms available but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal Payroll

Larger companies with a commitment to Mozambique may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete the incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Mozambican payroll and can fulfil all tax, withholding tax and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Mozambican employment laws.

Fully Outsourced Payroll & Employment

Companies can outsource the employment and payroll of their staff in Mozambique to a GEO, like Shield GEO. This is possible for both foreign workers and Mozambican nationals. This is the easiest, fastest and safest way to payroll staff in Mozambique.

Shield GEO manages all aspects of payroll for workers in Mozambique, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.

Read more about outsourced payroll and employment through Shield GEO.

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Setting up payroll in Mozambique

Information Explanation
Currency ?

Metical, MZN

Tax Figures

Information Explanation
Corporate Income Tax ?

The current corporate income tax rate is 32%.

Income Tax Rate ?
Grossed income Tax Rate (%)
0 - MZN 42,000 10
MZN 42,001 - 168,000 15
MZN 168,001 - 504,000 20
MZN 504,001 - 1,512,000 25
Above MZN 1,512,001 32
Payroll Tax ?

No

Sales Tax ?

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.

 

Withholding Tax ?

Mozambique imposes withholding taxes (WHT) on payments made to both resident and non-residents on certain classes of income earned:

  • Dividends: 20% (10% for stocks listed on the Mozambique Stock Exchange)
  • Royalties: 20%
  • Interest: 20%/0%
  • Technical services: 20%
  • Payments made to nonresidents for the following services are subject also subject to a 10% withholding tax: (1) telecommunications services, international transport services and the assembly and installation of telecommunications equipment; (2) services related to construction and rehabilitation of productive infrastructures, transport and distribution of electricity in rural areas, under the scope of public projects of rural electrification; (3) services from charters of marine vessels to conduct fishing and cabotage activities; and (4) services relating to the maintenance of freight aircraft.
Employee Social Security (EE SS)

Employees are required to contribute 3% of the employee’s gross monthly remuneration. For more details, please refer to the section on Employment.

Employer Social Security (ER SS)

Employers are required to contribute 4% of the employee’s gross monthly remuneration. For more details, please refer to the section on Employment.

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