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.
The main labour law governing Mozambican employment is the Labour Law, which applies to both foreign and national employees. There is also a law which governs the hiring of foreign employees, under which foreign employees are hired in accordance with a prescribed quota. If no part of the quota is available, the procedure is more complex, as additional requirements must be met (for example, professional experience, academic level or professional training, and the respective evidentiary documentation, for example, a certificate or diploma).
The Labour Law is applicable to employment contracts both concluded and executed in Mozambique.
All employment contracts must be made in writing (except those for a duration not exceeding 90 days). Contracts must be dated and signed by both parties and must contain the following clauses:
Identification of the employer and the employee.
Professional category, tasks or activities agreed.
Duration of the contract and conditions for its renewal.
Amount, form and periodicity of remuneration.
Date of commencement of execution of the employment contract.
The date of termination of the contract, and a justification of the form of contract utilised, in the case of fixed term contracts.
The date of signature of the contract, in the case of a fixed term contract for a determined period, and its termination date.
Under Mozambican labour law, there are 3 types of employment contracts:-
Term contracts are only allowed for the fulfilment of temporary tasks e.g. temporary replacement of an employee, performance of tasks required by an exceptional or abnormal increase of production, as well as to carry out seasonal activity; performance of activities that do not relate meeting the employer’s permanent needs; performance of construction work, a project or other specific, temporary activity, including execution, management and supervision of civil construction works, public works and industrial repairs, under a contract; and provision of services complementing the latter, in particular subcontracting and outsourcing services.
Fixed-term contracts are allowed a maximum duration of two years. They may be renewed twice by agreement of the parties. Small and medium enterprises are exempted from this requirement, being free to freely enter into fixed-term contracts without regard for the limitation on renewals for the first 10 years of their activity.
If the employee continues his or her employment, fixed-term term contracts are assumed to be converted to permanent employment contracts following completion or the maximum number of renewals. As an alternative, both parties may opt for payment of compensation equivalent to 45 days wages for each year of service.
Unfixed-term employment contracts are only permissible when it is not possible to predict with certainty the date of termination, subject to a justifiable reason. Such contracts are deemed to be converted into a permanent employment contract if the employee remains in service after being given notice of termination or, in the absence thereof, after seven days following the return of the replaced employee or completion of the activity, service, construction work or project for which he had been hired.
The general rules on hiring foreigners are set out in Decree 55/2008 of December 30. Employment contracts concluded with a foreign citizen must comply with the following rules:
Collective bargaining agreements
Collective employment regulation instruments may be negotiated (collective bargaining agreement, accession agreement and voluntary arbitration decision) or not negotiated (compulsory arbitration decision). Collective bargaining agreements may be made by company agreement (signed by a trade union association and a single employer for one company), collective bargaining agreement (signed by a trade union association and several employers for various companies) or collective bargaining agreement (signed between trade union associations and employers’ associations).
Collective bargaining instruments are binding on employers parties thereto or covered thereby, as well as all employees of the company, regardless of their membership of the signatory union and date of joining the company.
|Statutory Working Hours ?||
A normal employee is not permitted to work more than eight hours per day and 48 hours per week, spread over six week days. However, this may be extended up to nine hours a day, provided the employee is granted an extra half-day of rest per week.
For employees under a collective bargaining agreement, the normal daily work may exceptionally be extended up to 12 hours, provided that the weekly duration does not exceed 56 hours.
|Medical Leave ?||
There is no mandated medical leave under the law.
|Annual Leave Accrual Entitlement ?||
Employees are entitled to statutory leave based on the type of contract they are under and the duration of service with the employer:
|Maternity Leave in Mozambique ?||
Mozambican female employees are entitled to fully-paid maternity leave of up to 60 days.
|Probation Period ?||
Probationary periods may not exceed the following statutory limits:
The trial period has the following maximum duration:
Either party can terminate an employment contract at will during the probationary period, provided that he or she gives advance notice of at least seven days.
If the duration of the trial period is not set out in writing in the employment contract, it is presumed that the parties wished to exclude it.
|Pension Requirements ?||
Resident foreign employees are not required to make social security contributions if they can prove to the National Institute of Social Security that they are contributing to a similar social security scheme in another country.
Under the law, the compulsory social security system includes protection in the events of sickness, maternity, disability, old-age and death, and covers all employees, both domestic and foreign, residing in the Mozambican territory, and their dependent relatives (Act 4/2007 of February 7 and Decree 53/2007 of December 3).
Registration of employees and employers at the National Social Security Institute (Instituto Nacional de Segurança Social/INSS) is mandatory. Registration of employers must take place within 15 days of the date of commencement of business or acquisition of the company.
Both employers and employees are required to make contributions to the INSS scheme. The base for the calculation of the contributions includes the basic wage, bonuses, commissions and other payments of a similar nature paid on a regular basis, as well as management bonuses.
The current contribution rate is 7% [4% (employer) and 3% (employee)].
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.
Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Mozambique. For companies which intend to employ their staff directly through their incorporated Mozambican entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Mozambique.
As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Mozambique.
The Shield GEO solution is an attractive alternative where
– the company is looking to employ staff quickly
– the company doesn’t have an appropriately incorporated entity in Mozambique
– the company wants to work within a defined budget
– the company wants to limit its initial commitment in Mozambique
– the company needs help with tax, employment, immigration and payroll compliance in Mozambique
|Management Fee for Employer of Record Services / Monthly Payroll Costs||
Please contact us for a quote
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.
|Income Tax Rates||
Liberian residents are taxed on a worldwide basis. Non-residents are only subject to tax on their Mozambican-sourced income.
Individuals are considered resident in Mozambique for tax purposes if they meet any of the following conditions:
Individuals are subject to Mozambican personal income tax on income from the following categories:
|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.
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.
|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.
|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.
|Corporate Income Tax ?||
The current corporate income tax rate is 32%.
|Income Tax Rate ?||
|Payroll Tax ?||
|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:
|Other Tax ?||
|Time to prepare and Pay Taxes ?||
|Time required to start a Business ?||
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.
A foreign company that wishes to get a work permit for one of its employees must first set up its Mozambican subsidiary/branch/representative office. This Mozambican entity may then apply for the work permit.
Under these general rules for hiring foreigners issued by the Ministry of Labour, foreign nationals may be hired under one of the following systems: hiring under the quota system; hiring under investment projects approved by the Government, short-duration hiring; or hiring with authorisation (outside the quota).
Step 1: Obtain a certificate of equivalence
Before a work authorisation can be granted, a certificate of equivalence must be obtained from the Mozambique Ministry of Education. The applicant will be required to submit proof of his or her relevant educational qualifications i.e. diplomas and certificates – duly translated, if they were issued in a language other than Portuguese.
Time: 2 weeks to 3 months from date of submission
Step 2: Work authorisation application
For work permits within the prescribed quota (Comunicação de trabalho no âmbito da quota) the following documents are required to be submittedto the Mozambique embassy / consulate in their country of residence::
For submissions of communications to the minister of labour (‘out of quota’), the process is infinitely easier and does not depend substantially on whether or not there are Mozambicans available for that post (or skilled staff). Instead, it depends upon whether or not the company has exhausted its foreign employee quota.
The applicant for a work permit can only start working when the work permit is issued, except for some cases provided by law in special regimes such as for industrial trade zones.
For the oil and mining sectors, the employer may employ foreign citizens within 15 days after admission in accordance with the quota regime by means of communication with the minister of labour.
If the company intends to hire foreign employees for short-term employment (not exceeding 30 consecutive or interpolated days), no ministerial authorisation is required apart from legally-required elements to the proper provincial entity. This initial term may be extended, provided that relevant authorisation is obtained and its total duration does not exceed 90 days.
Foreign nationals who are self-employed individuals, shareholders or representatives of shareholders in Mozambique are required to obtain a work authorisation in their personal capacity.
Time: 1-5 business days (within the quota), 15 days (outside the quota)
Step 3: Obtain a residence permit
Precarious Residence Permits are granted to foreign nationals who intend to remain in Mozambique for more than 90 days. This authorisation is renewable annually. Temporary residence permits are valid for a maximum period of one year and renewable for one-year periods. They are granted to foreigners who have had precarious residence for at least five years and to foreigners who enter the country for residence purposes.
The following documents must be submitted with the application for residence permit (Autorização de Residência precária) for work:
Entry visas and residence permits are granted automatically to family members of a foreign national who holds a valid work authorisation or permit. However, an expatriate’s spouse who is an employee must file an application for a residence permit through his or her employer.
Once you get in touch with us, one of our consultants will take all the work off your hands, coordinate with our local partners to get all the required permits organised, provide the processing time, costs, document-checklist and keep you informed through the process. Contact us to know more.
|Category||Description of Visa|
Business visas are granted to individuals ‘who comes to the country in connection with an activity which he/she undertakes’. As such, while the purpose and permissibility of the business visa is unclear, holders are not entitled to work in Mozambique.
Time: 3-6 months
When setting up a company you may want to consider these factors:
Generally, Mozambique does not impose any restrictions on foreigners wishing to invest in the country. In deciding on whether to invest in Mozambique, you may also want to consider the following when making your decision :-
Location will be another factor. Separate cities and regions may have different rules, costs and availability. It is always recommended to seek advice from relevant professionals, such as business or legal advisors, accountants and others depending on your need.
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.
In Mozambique, there are two main types of corporations (registered companies) that can be set up:
However in practice, only private and public limited corporations are widely used.
1.Private limited company (sociedades por quotas)
Investment capital requirements
No minimum capital requirements. However, there must be a minimum of two shareholders, up to a maximum of thirty.
The only exception to this is the single person quota company (Sociedade Unipessoal por Quotas) which may be set up by a single quota holder who must be a private individual.
The share capital is divided into participations called “quotas”, whose par value is expressed in local currency. Quotas are always nominative (that is, the identity of their holders must expressly be stated in specific corporate documents such as the articles of association, company registration, etc.).
Transfers of quotas inter vivos requires the drafting of a written document signed by the parties and must be communicated in writing to the company and registered at the Commercial Registry Office (Conservatória do Registo das Entidades Legais).
Quota holder liability is limited to the value to which each of them has subscribed.
The company is managed by a minimum of one or more directors.
The management structure of the quota company comprises the general meeting (deliberative body) and board of directors (management body). Supervisory boards are optional.
Accounting / auditing requirements
Private companies do not automatically need to be audited.
2.Public limited company (Sociedade Anónima)
Investment capital requirements
There are no minimum capital requirements, however the entire share capital must be fully subscribed and 25% of the capital must be paid up at the time of incorporation.
SAs must be incorporated with a minimum of three shareholders, who may be natural or corporate persons, nationals or foreigners. Where the State is a shareholder whether directly or indirectly, the SA may be formed with the State as the sole shareholder.
Share capital is represented by nominative or bearer shares and the nominative shares may be book-entry or registered. There are few restrictions on transfers, with transfers effected through the simple delivery of the certificates to the transferee; in the case of registered nominative shares, the transfer takes effect by means of a declaration of assignment in the nominative share register book or in any instrument that may replace it; in the case of nominative dematerialised shares, the transfer takes place by the depositary bank recording the transaction in its books or records to the debit of the transferor’s share account and to the credit of the transferee’s share account.
The governance structure of the SA includes the general meeting (deliberative), board of directors (management body) and supervisory board or statutory auditor (supervisory body).
If the share capital of the company does not exceed MZN 500 000, the company may appoint a sole director.
Supervision is done by an audit committee with 3 or 5 members or by a sole auditor that must be a registered auditor or audit company.
Accounting / auditing requirements
SAs are required by law to be audited.
3.Capital and industry company
Investment capital requirements
No minimum capital requirements.
There are two types of shareholders for such companies:
Industry shareholders may have a seat on the management only if they post a bond, which is stipulated in advance in the articles of association, and the amount of which equals the amount of the share capital subscribed by the capitalist shareholders, unless otherwise provided by the articles of association.
When deciding to set up in Mozambique, it is preferable to use a local firm or agent to represent the company and manage the administrative process. Given incorporation is a lengthy and bureaucratic process, it is advisable to get help from an agent with a good understanding and connections within the public offices and various administrations.
Step 1: Obtain certification of uniqueness name (certidão de reserva de nome) at the Conservatória do Registo das Entidades Legais (Legal Entities Registrar)
Firstly, the entrepreneur needs to obtain approval of the name of the company and company type to be adopted.
Agency: Legal Entities Registrar of Maputo
Time: 1 day
Cost: MZN 75
Step 2: Sign the Articles of Association before the notary
The company’s Articles of Association must be signed by all partners before a notary public. This can be done at the notary, the one-stop-shop and the public registry (Conservatoria do Registo das Entidades Legais).
Agency: Balcão de Atendimento Único
Step 3: Open a provisional bank account and pay registration fees
Step 4: Register with the Legal Entities Registrar of Maputo (Conservatória do Registo das Entidades Legais); request a commercial registry certificate; publish company statutes in the official gazette (Bolhetim da República)
The entrepreneur is required to register with the Legal Entities Registrar, execute the deed of incorporation and request a commercial registry certificate. Once registration is completed, the Commercial Registrar coordinates the publication of the company statutes in the Official Gazette.
Agency: Balcão de Atendimento Único
Time: Publication time ranges from 3 days to 1 week.
Cost: The registration fees vary according to share capital: amounts up to MZN 5 million are taxable at a .2% rate, and amounts over MZN 5 million are taxable at a .1% rate.
Publication consists of a fixed fee of MZN 900 per 25 page, with every subsequent line charged MZN 36.
Step 5: Register for taxes and obtain NUIT from Repartição de Finanças
The company needs to register at the tax department (Repartição de Finanças) and obtain a single tax identification number (Número Único de Identi cação Fiscal – NUIT).
Agency: Repartição de Finanças
Time: 2 -5 days
Cost: No charge
Step 6: Apply for a simplified operating license at the One-Stop-Shop of Maputo
In the places, where the one-stop- Balcão de Atendimento Ùnico (BAUs) is not available, the simplified license can be issued at the Municipality or District Administration offices.
The steps for obtaining a license are:
Agency: Balcão de Atendimento Único
Time: 1 day
Cost: MZN 1,501
Step 7: Declare the beginning of activity at the tax department (Repartição de Finanças)
The company must submit a notification of the beginning of business activity 15 days before commencement of business operations for income tax and VAT purposes. This notification must be submitted to the tax department of the appropriate fiscal district the form Modelo 6. In addition, this process requires the filing of Modelo 5 (in triplicate) and an authenticated copy of the operating license. The company is assigned unique taxpayer number (número único de identificação tributária) in 15 days, and an individual file for all taxes is opened.
Agency: Repartição de Finanças
Time: 7 days
Cost: No charge
Step 8: Declare the beginning of activity and register job candidates at the provincial employment center
To register employees at the provincial employment center, the employer must request work cards within 30 days of the start of employment agreements, submit a schedule of work hours, and declare the employment of national workers in 30 days of the start of their respective employment agreement.
An employer with more than 10 employees must open a file (processo individual) and prepare four copies of a specific form for each worker, listing the name, position, skills, sex, date of birth, identity card number, date of entry, date of last promotion, wage or salary, and number of hours worked each month. These four copies are presented to the Employment Center, which after stamping them keeps three copies and returns one to the employer for public posting. This chart must be updated and approved annually by the Ministry of Labor. Together with this form, the employer must submit the company’s annual holiday’s plan (plano de férias) and each employee’s work card (MZN 5,000 each), which includes identity information and the employee’s signature. Upon stamping, the Employment Center returns them to the company, which distributes them to each worker as an employee identification card.
Agency: Provincial Directorate of Labor
Time: Between 1-2 days
Cist: Each copy of the chart costs 5 MZNs, assuming 10 workers
Step 9: Register workers with the social security system
The employer must register the company within 15 days of the start of business activity and register employees within 30 days of the start of their employment agreements. A special form (boletim de identificação de beneficiaries) must be filled out for each employee and submitted to the Instituto Nacional de Segurança Social within 15 days of signing the labor contract, accompanied by an authenticated copy of that employee’s identity card, an authenticated copy of the operational license, and the company’s número único de identificação tributária (nuit). A special form (ficha da empresa) must be filed for each company.
Agency: Balcão de Atendimento Único
Time: 1 day
Cost: No charge
Step 10: Subscribe a workmen’s compensation insurance coverage
By Law, companies have to provide their workers with life insurance for risks not covered by social security system.
Agency: Insurance company
Time: 1 day
Cost: No charge
Foreign corporations operating in Mozambique can operate as a branch office without the need to incorporate. However, it is generally advisable to incorporate rather than set up a branch office in Mozambique, given the numerous drawbacks associated with having a branch office.
Branches are usually set up to execute a specific project. Accordingly, the branch’s permitted activities is limited to the activities permitted under its operating license. The license is valid for 3 years, making branches only suitable for short-term ventures.
A branch is deemed to be a permanent establishment of the company. As such, it does not have legal autonomy and is considered to be a part of the parent company.
To set up a branch or any other form of commercial representation, applications must be made to the Ministério da Indústria e do Comércio for the licencing of their branches, subsidiaries, delegations, agencies or other forms of representation that are legally established in Mozambique.
Whether to incorporate in Mozambique, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.
If the company intends to have staff in Mozambique, they must also decide whether they will administer that employment internally or use a Global Employment Organisation to handle payroll and employment responsibilities. A GEO Employer of Record solution is an attractive alternative where
The complexity of employment regulations in Mozambique makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.
Shield GEO provides a comprehensive service in Mozambique allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in Mozambique.
Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Mozambique. Read more about outsourced employment through Shield GEO.