Expat Taxation in Mozambique

Expat Taxation in Mozambique: A Guide to Residency, Income, and Social Security

Understanding the tax landscape in Mozambique is crucial for expatriates, as the system features distinct rules based on residency status, specific withholding taxes, and mandatory social security contributions. The Mozambican tax system utilizes a Personal Income Tax (IRPS - Imposto sobre o Rendimento das Pessoas Singulares) which is very comprehensive, taxing all conceivable forms of income.

Expatriates moving to Mozambique should seek professional advice, as the local tax laws and regulations can differ significantly from those in their home country.

1. Determining Tax Residency

An individual's tax status determines whether they are taxed solely on Mozambican income or on their worldwide income.

An individual is considered a tax resident in Mozambique if they meet any of the following criteria in the year the income relates to:

• Physical Presence Test: Residing in Mozambique for more than 180 days (continuously or intermittently). This 180-day threshold is critical for compliance and planning.
• Permanent Home Test: Having a permanent residence in Mozambique that is occupied under circumstances indicating an intent to continue occupancy on a permanent basis, even if the stay is less than 180 days.
• Household Rule: Being part of a household whose head resides in Mozambican territory.

Tax Liability Implications based on Residency:

• Residents are taxed on their worldwide income (total income earned, including income obtained outside Mozambique). Foreign tax relief is available for taxes paid on foreign-source income to avoid or reduce double taxation.
• Non-Residents are taxed only on income arising from sources located in Mozambique (territorial taxation).

2. Personal Income Tax (IRPS) Rates

Personal Income Tax (IRPS) is levied on the aggregate income obtained throughout the year. Income subject to IRPS includes employment income, capital gains, investment income, independent work, rental income, and commissions.

A. Resident Tax Rates (Progressive)

Employment remuneration for residents is subject to progressive IRPS withholdings, which consider the taxpayer's personal situation (marital status, dependants). The rates range from 0% to 32%.

Annual Income (MZN) Rate (%) -> Deduction (MZN)
0 to 42,000 -> 10% 
42,000 to 168,000 -> 15% 
168,000 to 504,000 -> 20% 
504,000 to 1,512,000 -> 25% 
Above 1,512,000 -> 32% 

B. Non-Resident Tax Rates (Flat Rate)

For non-Mozambican residents, earned employment income is generally withheld by the employer or payer at a definitive flat rate of 20%. This withholding tax is final when the income is earned by non-residents without a permanent establishment in Mozambique.

Other types of income earned by non-residents are typically subject to a 20% flat withholding tax, including self-employment income, intellectual property income, real estate income, and other capital income (e.g., dividends). Interest on time deposits is taxed at a flat rate of 10%.

There are no additional tax rebates or tax credits for individuals in Mozambique.

3. Social Security Contributions (INSS)

Mozambique operates a compulsory social security system through the Instituto Nacional de Segurança Social (INSS).

• Employee Contribution: 3% of the contribution base.
• Employer Contribution: 4% of the contribution base.

Exemption for Expats: Foreign workers are required to register for Social Security if they are resident in Mozambique. However, non-resident employees can be exempt from the registration obligation if they can prove they are covered by a comparable foreign social security scheme. To be exempted, a formal request must be made to the INSS, providing sufficient proof of contribution to social security in the home country.

Filing and Payment: Employers must register workers, withhold the employee share, and declare/pay contributions monthly. Payment must be made between the 20th of the reference month and the 10th of the following month using the INSS e-platform. Late payments accrue interest.

4. Other Applicable Taxes

Expatriates may be subject to several other taxes, especially related to property and local services:

• Local Municipality Tax (IPA): Mozambique levies a local head-tax called the Imposto Pessoal Autárquico (IPA), or Personal Municipal Tax. This is a fixed annual amount owed to the municipality where the person resides, serving as a minimum contribution to local public expenses. In Maputo City, the tax amount was MZN 510 for the year 2024.
• Value Added Tax (VAT): The standard VAT rate in Mozambique is 17%. VAT is charged on the sale of most goods and services, as well as on imports. Private schools and clinics are included in the scope of extended VAT collection.
• Property Transfer Tax (SISA): Tax charged on the transfer of real estate (excluding the land, which is state-owned). The general rate is 2% of the selling price. However, if the recipient (beneficiary) resides in a country with a privileged tax regime (tax haven), the applicable rate is 10%.
• Rental Income Tax: Rental income generated from property is subject to tax of up to 32% of the gross rental income after deductions.

5. Double Taxation Treaties (DTTs) and Relief

Mozambique has entered into several Double Tax Treaties (DTTs) to eliminate or reduce the incidence of double taxation.

A. Treaty List

Mozambique has tax treaties in force with the following jurisdictions:

• South Africa
• Portugal
• Mauritius
• United Arab Emirates (UAE)
• Italy
• India
• Botswana
• Vietnam
• Macau
• Ethiopia

B. Avoidance of Double Taxation

If a resident of Mozambique derives income that may also be taxed in the treaty partner country (e.g., South Africa), Mozambique generally allows a deduction from the Mozambican tax equal to the foreign tax paid. This deduction, however, cannot exceed the part of the Mozambican tax that is attributable to the foreign-taxed income.

For example, the Convention between Mozambique and South Africa covers the personal income tax (IRPS) in Mozambique and the normal tax and secondary tax on companies in South Africa.

C. Treaty Shopping and Risk

Mozambique's tax treaty network has faced scrutiny because low withholding tax (WHT) rates stipulated in treaties, particularly with countries like Mauritius and the UAE (often considered tax havens), pose a significant risk of tax avoidance through treaty shopping.

• The statutory withholding tax rate for dividends and interest is typically 20%.
• Treaties often reduce this rate significantly. For instance, the treaty with the UAE sets WHT on dividends and interest at 0%. Similarly, the treaty with Mauritius can reduce dividend WHT to as low as 8%.
• It has been estimated that Mozambique lost over $300 million in 2021 due to tax arrangements with Mauritius and the UAE.

6. Tax Administration and Compliance

The tax year in Mozambique is the calendar year (January to December).

• Taxpayer ID (NUIT): All tax residents must register with the Autoridade Tributária de Moçambique (AT) and obtain a NUIT (Número Único de Identificação Tributária). This nine-digit number is mandatory for all tax filings, banking activities, and business transactions.
• Filing: Tax returns for individual income must be submitted from January to April of the year following the tax year.
• WHT for Employees: For employees whose only source of income is subject to definitive Mozambican WHT, they are not required to file an annual income tax return.
• Tax Payment: Employers withhold earned income tax on a monthly basis. The income tax withheld by the employer must be delivered to the Mozambican Tax Authority (MTA) up to the 20th day of the following month.