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Mozambique’s Fiscal Year-End: A Guide to Avoiding Late Filing Penalties

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As the fiscal year-end approaches in Mozambique, taxpayers must ensure timely filing of their tax returns to avoid penalties. The corporate income tax return is due on May 31st, while individual taxpayers have until June 30th to file their returns.

Cross-Border Payments and Transfer Pricing

Mozambican taxpayers with international transactions must comply with transfer pricing regulations, which apply to transactions with related parties or entities in low-tax jurisdictions. The arm’s length principle is applied to ensure that prices are reasonable and not inflated. Five internationally recognized methods are used to establish transfer prices:

  • Comparable market price method
  • Low resale price method
  • Cost plus method
  • Split-profit method
  • Net operating margin method

Withholding Tax on Passive Income

Mozambican taxpayers making payments to non-residents for interest, rents, royalties, dividends, management or administration fees, and trust income distributions are subject to withholding tax at a rate of 20%. However, this rate may be reduced to as low as 5% under applicable double-tax treaties.

International Agreements

Mozambique has signed several international agreements, including:

  • The OECD’s Multilateral Convention on Mutual Administrative Assistance in Tax Matters
  • Bilateral tax agreements with Portugal and South Africa

VAT Refund

Taxpayers can request a VAT refund if they have accumulated credits exceeding 500,000 MZN. If credits persist for more than 12 months, taxpayers must request at least 50% of the accumulated credit be refunded.

Excise Tax (ICE)

The Excise Tax selectively taxes consumption of certain goods, including:

  • Alcoholic beverages
  • Tobacco
  • Boats
  • Helicopters

Rates range from 5% to 75%, with some goods subject to minimum tax per unit.

Customs Duties

Customs duties are levied on the value of imported or exported goods. Import rates vary depending on the type of good, while exports are generally duty-free.

Municipal Taxes

Mozambique has 65 municipalities, each with its own set of taxes, including:

  • Property taxes
  • Vehicle taxes
  • Economic activity fees

Land Use Fee

The Mozambican state grants land for use and charges a land use fee, which varies depending on the type of investor, location, and purpose of use.

As the fiscal year-end approaches, taxpayers must ensure timely filing of their tax returns to avoid penalties. Compliance with transfer pricing regulations, withholding tax obligations, and other tax requirements is crucial to avoid potential issues with the Mozambican Revenue Authority.