Corporate income tax (CIT) in Mozambique is calculated by the company each year. The annual return starts with the figures in its accounting records and adjusts them in line with tax rules. The filing calendar also determines when advance payments fall due, so companies need to account for those payments when budgeting for the year.
Choosing a Tax Year
Most businesses follow the calendar year. A Mozambican permanent establishment (PE) of a foreign company may use the foreign company’s tax period. Resident taxpayers may apply to the Minister of Economy and Finance for permission to use a different period if their activities justify it or if their controlling entity already follows a different tax year. The chosen period must match the financial statements and be retained for at least five years.
Filing Returns and Paying Corporate Tax
Calendar-year taxpayers must file their annual return and settle the outstanding CIT by the last working day of May. For businesses using another year-end, the return is due on the final day of the fifth month after closing, and the final payment falls in that same month.
Mozambican companies and foreign companies with a local PE make three ordinary instalments, collectively based on 80% of the previous year’s CIT. These fall in May, July and September for calendar-year taxpayers, or in months five, seven and nine of an alternative tax year.
A separate schedule applies to special advances. The calculation uses 0.5% of the preceding year’s turnover, less advance payments made in previous years, and is subject to a minimum of MZN 30,000 and a maximum of MZN 100,000. These instalments fall in June, August and October, or in months six, eight and ten for companies following another tax year.
Audit Checks and Record Retention
The tax authority can inspect a business whenever it considers it necessary. A refund claim can trigger an inspection, and some businesses are selected at random. The limitation period is five years, while companies must retain their records for ten years.
Inspectors may reconcile monthly VAT declarations with the annual return and sales records to identify omitted revenue. They can also check whether supplier invoices support VAT deductions, whether the company accounted for self-assessed VAT and whether it obtained approval to issue electronic invoices. Other checks include whether the company added back expenses that are disallowed for CIT, withheld tax on payments to non-residents and complied with thin capitalisation rules. Companies should also have their mandatory accounting books available, including the journal, ledger, and inventory and balance book.
Rules for Cross-Border and Artificial Transactions
Mozambique applies the principle of substance over form and addresses avoidance through targeted provisions. Where parties simulate a transaction, tax follows the arrangement that actually took place. Treaty relief can be denied when a third party outside the treaty partner’s tax residence uses the benefit. Specific rules also cover thin capitalisation and controlled foreign companies, and can restrict deductions for expenses involving persons or entities in preferential tax jurisdictions.
Advance Binding Tax Rulings
A business can ask the Mozambique Tax Authority (MTA) to confirm the tax treatment of a proposed transaction. The ruling binds the authority if the applicant supplies accurate and complete information and carries out the arrangement as described, in both form and substance. A court decision can overturn it. In practice, some arrangements require a ruling, including cross-border transactions where a double tax treaty applies.
Tax Clearance Certificates
A tax clearance certificate confirms that a taxpayer has met its obligations as of the issue date. Businesses may need one for public tenders, certain private procurement processes, work or residence permits and renewals, payments to foreign parties, or applications for business permits.
The documents required depend on the purpose of the application. Where an exemption or treaty applies, the authority may require a binding ruling before issuing the certificate. The statutory issue period is 15 days from application, although delays are common. Once issued, the certificate is valid for 90 days.
Frequently Asked Questions
Can a company in Mozambique use a different tax year?
Yes. A local permanent establishment may follow its foreign parent’s tax period. Eligible resident taxpayers need ministerial approval. The chosen period must match the financial statements and be kept for at least five years.
When is the corporate income tax return due in Mozambique?
Calendar-year taxpayers must file by the last working day of May. If the company uses a different tax year, the deadline is the final day of the fifth month after its year-end.
How do ordinary and special tax instalments differ?
Ordinary advances are based on 80% of the previous year’s corporate income tax. Special advances start at 0.5% of the previous year’s turnover, with adjustments for prior advances and limits of MZN 30,000 and MZN 100,000. Each follows a separate three-instalment schedule.
What can trigger a tax audit in Mozambique?
A refund application can prompt an inspection, and the tax authority can also select businesses at random. Inspectors may compare reported sales with VAT returns and check whether supplier invoices support VAT deductions.
How long must companies keep their tax records?
Companies must keep their records for ten years. The tax limitation period is five years.
How does Mozambique handle artificial transactions and treaty abuse?
For a simulated transaction, tax follows what actually took place. Treaty relief can also be denied if the benefit is used by a third party who is outside the treaty partner’s tax residence.
When might a company need an advance binding tax ruling?
A company can seek a ruling to clarify how the Mozambique Tax Authority will treat a specific transaction. In practice, a ruling may be required for a cross-border transaction covered by a double tax treaty.
When does a business need a tax clearance certificate?
A certificate may be needed for public tenders, work or residence permits, certain payments to foreign suppliers, or business permit applications. It confirms the taxpayer’s compliance status as of the issue date.