Amendments to Mozambique's Value Added Tax (VAT) Code
03 Mar 2023
On 01 January 2023, Law no. 22/2022 of 28 December came into force, approving the new Value Added Tax (VAT) Code, as part of the Mozambican Economic Acceleration Stimulus Package (PAE).
Among the main alterations of the new legal diploma is the reduction of the VAT tax rate from 17% to 16%.
In general, the new VAT Code Law amends eight articles of the previous law, namely articles 9, 10, 12, 15, 17, 19, 20 and 21.
According to this law, the following operations are exempt from the payment of VAT:
- Transmission and/or commercialization of corn, corn flour, rice, bread, iodized salt, powdered milk for infants up to one year, wheat, wheat flour, fresh or refrigerated tomatoes, potatoes, onions, frozen horse mackerel, lighting oil, domestic gas-GPL, jet fuel, condoms, common and iron bicycles up to 4 speeds and insecticides;
- Rental operations of real estate for residential purposes;
- Banking and financial transactions, subject to stamp duty;
- Insurance and reinsurance operations, as well as related services rendered by insurance brokers and other insurance intermediaries, subject to stamp duty;
- Among other exemptions foreseen in the Law.
We also highlight the use of the reduced rate of 5% for:
- The provision of medical and sanitary services and the operations closely related thereto, carried out by private hospital establishments, clinics, dispensaries and similar;
- Services provided for teaching purposes, as well as the transfer of goods and related services, when provided by private establishments integrated in the National Education System and recognised by the Ministry that oversees the Education area;
- The supply of services which have as object vocational training, as well as the transfer of goods and related services, such as the supply of accommodation, food and educational material, when these are carried out by private entities;
- Services consisting in personal lessons on school or higher education subjects.
Elimination of the VAT exemption in the following transactions:
- Rental of real estate in rural areas for commercial, industrial and service provision purposes;
- The provision of funeral and cremation services and in the transfer of goods accessory to the same services when carried out by private entities;
- Introduction of new exemptions namely in respect of the following transactions:
- Transmission of iron bicycles up to 4 speeds
- Provision of rubbish removal services when carried out by public entities contracted by public entities;
- Transmissions of production factors of solar panels for rural electrification, listed in the Customs Tariff and detailed in Annex IV, which is an integral part of the VAT Code, until 31 December 2025.
Extends to 31 December 2023 the exemptions relating to:
- Transmission of sugar,
- Transmission of raw materials, intermediate products, parts, equipment and components, made by the domestic sugar industry,
- Transmission of edible oils and soaps
- Transmission of goods resulting from the industrial activity of production of edible oil and soaps carried out by the respective factories
- Transmission of goods to be used as raw materials in the oil and soap industry, listed in Annex II of the VAT Code (however, the present Law eliminates Annex II), and
- Transmission of goods and services carried out within the agricultural activity of sugarcane production and intended for industry.
- Clarification, for the purposes of Article 9 of the VAT Code, of the concept of public entities and non-profit entities.
- In addition to changes impacting on tax assessment, two changes have been introduced with regard to VAT refunds, namely:
- The subject may request a refund when the monthly VAT credit in the amount exceeding 500,000.00 Meticais must consider sequentially the credits in the current year;
And a new rule was introduced requiring the submission of a refund request, of at least 50%, when a credit persists for more than 12 months.
For more information please consult the decree here.
For more information please consult the decree here.