doing business in africa · doing business in africa focus on ... prosperity of the african people...

Doing Business in Africa

Focus on Mozambique

March 2016

www.pwc.com

PwC 2March 2016Doing Business in Mozambique

Agenda

Why this seminar?

PwC Africa Desk

Doing business in Mozambique

PwC

Why this seminar?

3March 2016Doing Business in Mozambique


The interest in investingin Africa continues togrow rapidly

Need for general as wellas specific hands-oninformation and ability todiscuss developmentsremains valuable

PwC

PwC Africa Desk


PwC

Ways the Africa Desk may support you


Algeria

Tunisia

Egypt

Sudan

South

Sudan

Mauritania Niger

Chad Eritrea

Ethiopia

CentralAfrican Republic

Kenya

UgandaDemocraticRepublic

of Congo

Cameroon

NigeriaBenin

TogoGhana

Côte

d’Ivoire

Burkina

Faso

Liberia

Sierra Leone

Guinea

SenegalGambia

Guinea Bissau

Gabon

Congo

Angola

Zambia

Malawi

ZimbabweNamibia

Botswana

South

Africa

Lesotho

Swaziland

Mauritius

Comoros

Seychelles

Mayotte

Cape Verde

Morocco

Mali

Somalia

Djibouti

Rwanda

Burundi

Tanzania

Libya

For services in these territoriesplease contact a neighbouring territory

Reunion

Equatorial Guinea

São Tomé and Príncipe

PwC offices

One-stopservice

Because of helicopterview, identification

of other cross-country alternatives Thought leadership

through AfriTaxnewsletter, One

page tax summariesper African

country, countryseminars, etc.

Quick and coordinatedresponses on generaland specific questions

Proactivelyinforms

relevant partieson new

developments

PwC

Thought leadershipAfriTax newsletter



Nigeria

Seminars so far

Angola

Botswana

Ethiopia

Kenya

Mozambique

Namibia

Rwanda

South Africa

Tanzania

Zambia

Mauritius

Seychelles

PwC

The PwC presence in Africa


In Africa…

• Member firms in 33 countries with over8,500 professional staff.

• We have the largest footprint ofprofessional services on the Africancontinent.

• All our African firms are locally-owned.

• Provide a range of professional businessadvisory services to the public and privatesectors throughout the continent.

• Committed to the development andprosperity of the African people andeconomies.

Algeria

Tunisia

Egypt

Sudan

South

Sudan

Mauritania Niger

Chad Eritrea

Ethiopia

CentralAfrican Republic

Kenya

UgandaDemocratic

Republic

of Congo

Cameroon

NigeriaBenin

TogoGhana

Côte

d’Ivoire

Burkina

Faso

Liberia

Sierra Leone

Guinea

SenegalGambia

Guinea Bissau

Gabon

Congo

Angola

Zambia

Malawi

Zimbabwe

Namibia

Botswana

South

Africa

Lesotho

Swaziland

Mauritius

Comoros

Seychelles

Mayotte

Cape Verde

Morocco

Mali

Somalia

Djibouti

Rwanda

Burundi

Tanzania

Libya

For services in these territoriesplease contact a neighbouring territory

Reunion

Equatorial Guinea

São Tomé and Príncipe

PwC offices

PwC

Fun fact about Mozambique


• Spelt out in Scrabble tiles, Mozambiquewould score more than any otherone-word country.

• It scores 34 points. Kazakhstan andKyrgyzstan share second place on 30.

Doing business inMozambique


Agenda

Country context

Business vehicles

Legal framework

Labour framework

Tax framework

Key issues

Structuring

Country context

PwC

Country context

1.1 General

1.2 Living and working in Moz

1.3 Political

1.4 Socio-economic

1.5 Risk factors


PwC

Country contextGeneral

• Mozambique is on Africa’s south eastern coast,with a coastline of about 2,500km. It sharesborders with South Africa, Swaziland,Tanzania, Zambia and Zimbabwe.

• Known as “The Pearl of the Indian Ocean”, thecountry is a fusion of cultures, resulting in itsattraction as a tourist destination.

• Mozambique’s Indian Ocean coastline isdotted with popular beaches like Tofo, as wellas offshore marine parks.

• In the Quirimbas Archipelago, a 250km stretchof coral islands, mangrove-covered Ibo Islandhas colonial-era ruins.

• It is also a diving and snorkelling destination,as is Bazaruto Archipelago farther south, withreefs protecting rare marine life includingdugongs.


PwC

Country contextHistory

• Mozambique was a Portuguese colony.

• Interestingly, Mozambique name is a derivative of the Arab Sheikhnamed Musa bin Ba’ik.

• Mozambique became an independent country in 1975. The strugglefor independence was followed by a civil war that ended in 1992.

• Mozambique is a constitutional republic, holding elections every 5years. The last election was won by the Frente de LibertaçaoMoçambicana (FRELIMO), which has been in power since the endof the civil war.

• There are 11 provinces in Mozambique, with the capital beingMaputo, located in the south of the country.

• The current president of Mozambique is Filipe Jacinto Nyusi.


PwC

Country context

1.1 General


1.3 Political

1.4 Socio-economical

1.5 Risk factors


PwC

Country contextLiving and working in Mozambique

• Mozambique has a total area of approximately801,590 km², and a population of almost 26million people.

• Most companies have their offices in the capitalMaputo, which is also the country’s largest city.

• The next largest economically stable cities areBeira, in the center of the country; Tete in thenorth-west, where most of the coal mining takesplace, and which is close to the Cahora BassaDam; and Nacala in the North, which had anew port that was completed in 2015.

• Mozambique has a warm tropical climate, witha rainy season that runs from October to April,and a dry season from June to September.


PwC

Country context

1.1 General


1.3 Political

1.4 Socio-economical

1.5 Risk factors


PwC

Country contextPolitical

• Presidential system

• Last general elections were in October 2014 which was wonby Partido FRELIMO - in power since independence - andcurrent president Filipe Jacinto Nyusi

• Other two parties represented in the Parliament -

• Former rebel movement Renamo; and

• MDM - new party formed by Renamo dissidents

• MDM is controlling four cities after the municipal elections

• Renamo have been boycotting municipal elections

• Renamo contested last general elections results, leading topolitical and localised military tension

• Current efforts to resume negotiations


PwC

Country context

1.1 General


1.3 Political

1.4 Socio-economic

1.5 Risk factors


PwC

Country contextSocio-economic • GDP of USD 12.8 billion

• Expanding oil and gas industry

• Established industries include agri-business, banking, tourism andinfrastructure/construction

• Top exports include raw aluminium, refinedpetroleum, coke, sugar, wood, raw tobacco,and crustaceans

• Emerging industries with favourableinvestment opportunities include retail,consumer goods, tourism and agri-business

• Large emerging middle class, with moreeducated work-force

• GDP Composition: agriculture: 28.7%;industry: 24.9%; services: 46.4% (2013figures)


PwC

Country contextSocio-economic

Mozambique’s Gross DomesticProduct (GDP) growth reached6.1% in 2015, supported bytrade, manufacturing,extractive industries, transportand communication, andelectricity production.


PwC

Socio-economicAgriculture

• Climatic conditions allow for avariety of crops to be produced

• Geographical positioning allowsfor premium exporting positionto Eastern markets

• Internal investment in ports,railways, roads and airportsallow for ease in transportation

• Low labour costs

• Established farms for maize,wheat, rice, cassava, fruits andvegetables as well as livestock


PwC

Socio-economicIndustry

• Established market for refined petroleum, petroleum gas,aluminium ore and bars, coke, titanium ore, coal, and crudepetroleum

• Growing workforce with specific technical skills

• LNG production is still a growing attraction for multi-nationals,regardless of delays and falling oil prices


PwC

Socio-economicServices

• Most important services include:finance, tourism, transport,communication, and retail

• Retail is traditionally done in theinformal sector, although that ischanging

• Financial services has experienced aboom, with the increasing middleclass, and the large number offoreign investors entering thecountry

• Investments in transport andcommunications infrastructure hasaided the ease of provision ofservices


PwC

Country context

1.1 General


1.3 Political

1.4 Socio-economic

1.5 Risk factors


PwC

Good opportunities, but what are the risk factors?Internal and external

• Poor power supply nationwide

• Weak infrastructure across manysectors

• The impact of changes in internationaloil and gas prices

• Difficulty in overcoming security /political challenges

• Government bureaucracy

• Repatriating capital and foreignexchange


Business vehicles

PwC

Business vehicles

2.1 Types of companies

2.2 Company vs Branch

2.3 SA vs Lda.


PwC

Business vehiclesTypes of entitiesBusiness may be conducted in a variety of forms in Mozambique:

31March 2016Doing Business in Mozambique March 2016Doing Business in Mozambique

31

Branch Public orprivatecompany

Soleproprietorship

Partner/jointventure

PwC

Business vehicles



2.3 SA vs Lda.


PwC

Business VehiclesCompany vs. Branch

Item Distinction factors Company Branch

1 Legal personality Yes No

2 Tax personality Yes Yes

3 Liability Limited to theamount of thecompany’s sharecapital

Head office is fullyresponsible for branch’sliabilities

4 No. of shareholders Minimum of 2 or 3 Not applicable

5 Incorporation/Registration costs

Lower Higher

6 Stakeholder’s perception Long-term presence Short-term presence


PwC

Business VehiclesCompany vs. Branch (cont.)

Item Distinction factors Company Branch

7 Audited accounts Not mandatory(exceptions apply)

Mandatory

8 Import license Straightforward toobtain

Obtained under specificconditions

9 Duration Unlimited Limited (max 5 yearsrenewable)

10 Taxation of dividends 20% WHT on dividendsdistribution

No taxation on remittanceof profits from branch tohead office

11 Eligibility forlicenses/concessions

Suitable for all Limitation (e.g. mining,construction)

12 Liquidation/closure Complex and long Less complex and short


PwC

Business vehicles



2.3 SA’s vs Lda.


PwC

Business vehiclesPublic Limited Liability (SA) vs. Private Limited Liability (Lda.)

Item Distinction factors SA Lda

1 Number of shareholders At least three At least two

2 Limit of liability Up to the value of theshares subscribed by eachmember

Jointly for all capitalcontributions

3 Share capital Represented by shares Represented by quotas

4 Minimum value pershare/quotas

No limit specified MZN 250

5 Corporate bodies General Assembly Boardof Directors AuditCommittee

General AssemblyBoard of Directors


PwC

Legal framework

3.1 Legal system at a glance

3.2 Exchange control


PwC

Legal frameworkLegal system at a glanceOverview

• Inherited from the Portuguese

• German based with several regulations being

inserted in specific codes

• Codification of the laws applies to commercial

laws, civil laws, tax laws, procedural law, etc

• Very formal system, with lengthy procedures

all required to be in a certain format

• Separation of powers is warranted by the

Constitution of the Republic

• Judiciary comprises general courts, appeal

courts and a supreme court

• There are also specialized courts, such as tax,

customs and labour courts


PwC

Legal frameworkLegal system at a glance

Latest developments

• New Regulations for licensing of commercial and industrial activity

• New Regulations on the legal framework for oil and gas and mining

operations, containing some specific local content rules for this sector of

activity

• Published new tax and fiscal benefits regimes for mining and oil and gas

operations

• Local content legislation cross-sectors under discussion

• New Regulation for the licensing of contractors (construction activity) as

well as introduction of a specific regulation for licensing of consulting in

the construction area


PwC


Public and Private Partnership (PPP) Law and Regulations

• Applicable to mega-projects and business concession (prospecting,exploration, extraction and/or production of natural and other nationalassets)

• Published in December 2013 a separate PPP regulation for small projects(investment less than MZN 5,000,000)

• Established share of benefits with financial and socio-economic benefits

Land Rights

• Land is the property of the State and cannot be sold, mortgaged orotherwise encumbered

• Individuals and entities are allowed to apply for concession for the rightto use and exploit land (DUAT) for a specified period of time


PwC


Investment guarantees

• These are available for foreign direct investment (FDI) equivalent toMZN 2,500,000 (approximately USD 50,000)

• FDI may be in the form of share capital, equipment, trade rights andsupplementary payments of capital

• FDI eligible to tax benefits and custom duties incentives

• Shareholders’ loans and external loans are considered foreign indirectinvestment (FII)


PwC

Legal framework

3.1 Legal system at a glance

3.2 Exchange control


PwC

Legal frameworkExchange control regulations

• Exchange control rules applicable to capital transactions

• Current transactions (e.g. payment for services and goods abroad)are subject to registration with the local commercial banks

• Non-compliance with the exchange control regulations results in:

The payment of fines that can vary between MZN 10,000 andMZN 1,000,000 and to be under a exchange controlcontravention process; and

Not being authorised to export profits abroad or re-export theinvested capital at the end of the project in Mozambique.


PwC

Labour framework

4.1 Labour overview

4.2 Immigration


PwC

Labour overview

• High unemployment rate

• Shortage of skilled labour

• Contract should state particulars of the employer and theemployee, the position and job description/functions, terms andconditions of the contract, probation period, hours of work,remuneration, holiday and holiday pay, etc.

• Written contracts mandatory for labour period > 90 days

• Social security contributions


PwC

Labour overviewMinimum wage


ZAR 1 is approximately MZN 3.4

PwC

Labour overviewSocial security

• Compulsory social security costs include pension, socialinsurance, maternity leave, sick leave and death benefits.

• Expatriates are not required to join the pension scheme if anexemption may be applied

• Monthly contributions are due at the following rates for theemployee and employer respectively:

4% on grossremuneration by

employer

3% on grossremunerationby employee


PwC

Labour framework

4.1 Labour overview

4.2 Immigration


PwC

Immigration

Limited employment of foreign staff throughthe following regimes:

o Short term work (90/180 days)

o Quota:

5% (> 100 employees)

8% (>10 and ≤ 100 employees)

10% (≤ 10 employees)

Regardless of the number of localemployees, small companies areentitled to hire 1 foreign employee

o Work authorisation (subject todiscretionary decision)

o Contracts approved by government/investment projects (as established inthe contract)


Tax framework

PwC

Tax framework

5.1 Tax overview

5.2 Fiscal incentives

5.3 Double taxation agreements


PwC

Tax regimeComparing total tax rate

49

Source: PwC Paying Taxes 2016


PwC

Tax regimeTime to comply



PwC

Tax regimeNumber of payments




Tax regimeQuick observations from the PwC’s Paying Taxes 2016

Reduced tax burden byallowing more

deductible expenses

Enhancement toelectronic compliance

system saved 13 hours inTime to Comply

Moved up 3 places to No. 120in 2016 (out of 189

economies) re Ease of PayingTaxes

PwC

Tax regimeGeneral

• Taxed on worldwide income forresidents and source based fornon residents

• Fiscal year = calendar year,however exceptions are possible

• Resident for tax purposes if:

- Incorporated under laws ofMozambique;

- Place of effectivemanagement.


PwC

Tax frameworkTax overview

Tax Rate

Corporate Income Tax 32%

Dividends, interest, royalties, services 20% WHT

Capital gains Residents & non-residents: 32%

Individual Income Tax 10% - 32% final tax

Value-Added Tax (VAT) 17%

Custom and Excise Duties Fixed rates or ad valorem

Property Transfer Tax 2% / 10%

Social Security 4% (employer) | 3% (employee)

Stamp Duty 0,2% - 50% | MT 200 – MT 2.500

Municipal taxes Various


PwC

Tax framework

5.1 Tax overview


5.3 Double taxation agreements


PwC

Tax frameworkFiscal incentives - General

• Dependent on approval of investment project/contract

• Scope of incentives vary depending on type of activity and project location

• General incentives, include:

- Customs duties and VAT exemptions on import of goods (mainly Class“K” of the Customs Tariff Schedule);

- Corporate tax incentives consist mainly of tax credits varying from 5 to10%; and

- Accelerated depreciation.

• Specific incentives for certain industries (e.g. agriculture)

• Specific incentives for certain locations, include Rapid DevelopmentZones, Industrial Free Zones, and Special Economic Zones

• Mining and the Oil and Gas sectors are excluded from the above and havespecific tax incentive regimes


PwC

Tax frameworkFiscal incentives – Oil & Gas

• Incentives under existing EPCs include,

(1) exemption from VAT and custom

duties on importation of equipment, (2)

personal income tax exemption for non-

residents, (3) withholding tax on

services reduced to 10%;

• Short term work permits extended to

180 days;

• Exchange controls relaxations (only in

LNG space);

• Local content rules; and

• Concession contracts still to be

approved for LNG activities.


PwC

Tax framework

5.1 Tax overview


5.3 Double taxation

agreements


PwC

Tax frameworkTax structuring - Double tax treaties

Recipient Dividends (%) Interest (%) Royalties (%)

Managementand

consultancy fees(%)

Standard rate (domestic law) 20 20 20 20

Botswana 0 or 12* 10 10 0***

India 7.5 10 10 0***

Italy 15 10 10 0***

Macau 10 10 10 10

Mauritius 8 or 10 or 15* 8 5 0***

Portugal 10 10 10 0***

South Africa 8 or 15* 8 5 0***

United Arab Emirates 0* 0** 5 0***

Vietnam 10 10 10 0***

* The applicable rate of WHT depends on the beneficial shareholding of the recipient.** Country of residence of the recipient of an income has the taxing right except that in some cases the source state could also subject suchincome to tax.***In practice, though, the Mozambican Tax Authorities tend to tax management and consultancy fees as royalties.


Key issues

PwC

Key issues


PwC

Key issues

Recent developments

• Further simplified licensing of economic activities

• Local content

• Competition law

• Transfer Pricing


PwC

Key issues

Main takeaways

VAT: Self assessment (or reverse charge) requirements on import of services intoMozambique

VAT: Exemption on services acquired by Oil and Gas taxpayers in their explorationphase

VAT: Contractors and local subcontractors are subject to VAT and are required toincur input VAT and apply for refunds later

Tax treaties : Practical Implementation of Tax Treaties

Tax treaties: Interpretations adopted by Tax Authorities

Branch / PE: Practicalities regarding early remittance of branch profits fromMozambique


PwC

Key issues

Main takeaways

Exchange control: Prior approval and registration of foreign investment inMozambique

Legal: Local content legislation

Individuals: Monthly WHTs for tax residents and non-residents

Individuals: To obtain taxpayer number (NUIT) for individuals

Individuals: Lengthy procedures for work/residency permits in case of exhaustedquota or if out of short term communication of 90 days

Individuals: Updates to immigration rules


PwC

Key issues

Main takeaways

General: Lack of experience and knowledge of Tax Authorities i.r.o. industryspecific issues

Accounting: Electronic invoicing and bookkeeping require prior approval ofsoftware by the MTA

Compliance: Ensure all tax compliance are correctly performed


PwC

Structuring


PwC

StructuringStructuring considerations

Repatriation ofFunds (incl.

forex)

ExitStrategy

Where tolocate your

holdingcompany


PwC

Structuring considerationsMozambique

Double tax treaty networks are limited

Exit strategy regarding capital gains taxation

Use of the South Africa headquarter company regime

Tax efficient financing

Branch vs subsidiary

Exchange control compliance


PwC

Contacts


PwC

ContactsMozambique

João Martins

Country Senior Partner

T: +258 (82) 314 7820

E: [email protected]

Ana Borges Coelho Gois

Senior Legal Manager

T: +258 (82) 308 0713


Driaan Rupping

Senior Tax Manager

T: +258 (82) 328 3870


Mafalda Albuquerque Carvalho

Tax Manager

T: +258 82 310 9590



PwC

ContactsAfrica Desk - Cape Town


Charl du Toit

T: +27 21 529 2367


Asif Joosub

T: +27 21 529 2305


PwC

ContactsAfrica Desk - Johannesburg


Alan Seccombe

T: +27 11 797 4110


Fabio Henriquez

T: +27 11 797 5900


Ibikunle Olatunji

T: +27 11 797 5317


PwC

Q & A


PwC

We are here to help you prosper inAfrica!

Thank you!Obrigado!Baie dankieKhanimambo!

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice.You should not act upon the information contained in this publication without obtaining specific professional advice. Norepresentation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in thispublication, and, to the extent permitted by law, PwC, its members, employees and agents do not accept or assume any liability,responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the informationcontained in this publication or for any decision based on it.

© 2016 PricewaterhouseCoopers (“PwC”), the Mozambican firm. All rights reserved. In this document, “PwC” refers toPricewaterhouseCoopers in Mozambique, which is a member firm of PricewaterhouseCoopers International Limited (PwCIL),each member firm of which is a separate legal entity and does not act as an agent of PwCIL.


doing business in africa · doing business in africa focus on ... prosperity of the african people...

Documents