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Incentives for foreign investment and opportunities in Mozambique – August 2013

Incentives for foreign investment and opportunities in Mozambique – August 2013

Mozambique is presently experiencing unprecedented levels of economic activity, overseas investment and infrastructure development. A lot of this has to do with the discovery of rich resource deposits. We are frequently approached for advice on ‘what its like to do business in Mozambique? What are the key guiding provisions as to what can and can’t be done?

We hope this brief summary by Faizal Jusob, a partner of LEX Africa’s Mozambican member, CGA, proves helpful to anyone planning to do business in our region.

The Republic of Mozambique has established a specific framework for the realization of ventures that involve national or foreign private investments. Foreign undertakings can be undertaken nationwide and in all economic sectors, except in those reserved for the State.

The Mozambique State recognizes and guarantees the right to property. Expropriation may only occur due to public necessity, utility or interest, defined in terms of the law and for which fair compensation must be paid.

The Investment Law contemplates the following possible arbitration mechanisms:

  1. Arbitration through the International Centre for the Settlement of Investment Disputes (“ICSID”) under the Washington Convention of 15 March 1965 relating to the Settlement of Investment Disputes;
  2. ICSID arbitration under the ICSID Additional Facility Rules to the extent that the investor is a national of a state that is not a signatory to the ICSID Convention; and
  3. Rules of International Chamber of Commerce arbitration.

Applicable legislation:

  1. Law nr. 3/93 of the 24th of June (Law on Investment – LI);
  2. Decree nr. 43/2009 of the 21st of October (Regulation of the Investment Law – RIL);
  3. Law nr. 4/2009, of 12th January (Code of Fiscal Benefits for Investments – CFBI); and
  4. Decree nr. 56/2009 of 7th October (Regulation of CFBI).

In order to qualify for an Investment Authorization the company must receive a minimum foreign investment of approximately USD 100,000 (one hundred thousand US Dollars) in:

  1. freely convertible currency;
  2. equipment and relevant spare parts, materials and other imported goods;
  3. the transfer (in specific cases and subject to terms agreed upon and approved by the relevant authorities) of land usage rights, patented technologies or registered trademarks. This contribution is limited to the participation in the distribution of profits resulting from the activity in which such rights, technologies or trademarks have been or will be used.

The main benefits granted by the LI, RIL and CFBI are:

  • guarantees of the security and legal protection of goods and rights, including intellectual property rights, forming part of the approved investments carried out in accordance with the Investment Law and its Regulation;
  • the government of Mozambique, in accordance with the conditions set out in the authorization of investment and other relevant legislation, guarantees the remittance of funds abroad in connection with:
    • exportable profits resulting from investments eligible for export of profits under the provisions of the Regulation under the Investment Law;
    • royalties or other payments for remuneration of indirect investments associated with the transfer of technology;
    • amortization of loans and payment of interest on loans contracted in international financial markets and applied in investment projects in the country;
    • proceeds of any compensation by the government; and
    • invested and re-exportable foreign capital, irrespective of the eligibility of the investment project to export profits under the Regulations under the Investment Law.

Fiscal benefits

There are important exemptions from import duties and Value Added Tax (“VAT”) over equipment and goods imported and classified in class “K” of the Customs Tariff Table, under certain circumstances and subject to certain conditions.

There is a tax credit for Investment for the period of 5 tax years calculated from the beginning of the investment on an amount equal to 5% of the total investment. This tax credit will be deductible from the amount of the assessment of the company’s corporate income tax up to the total amount of the relevant tax assessment. Depending on the Province in which the investment is made, the tax credit ranges between 10% and 15%.

The tax credit is not available when the investment in corporeal assets results from:

  • construction, acquisition, reparation and extension of any buildings;
  • non–commercial vehicles;
  • furniture and articles of comfort or decoration;
  • “social” equipment and specialized equipment considered to be “state of the art” technology (see below); and
  • other assets or equipment that is not directly related and associated with the productive activity of the investment project.

Accelerated depreciation is permitted for new immovable assets used to further undertakings authorized under the terms of the Investment Law. Accelerated depreciation (at twice the normal rate set by law for the calculation of depreciation) is treated as a deduction and also permitted to rehabilitate immovable, assets, machinery and equipment used in industrial and agro–industrial activities.

Modernization and introduction of new technology

The amount invested in specialized equipment that is considered by the competent authority to be “state of the art” technology will, during the first 5 (five) years from the commencement of activity, benefit from a deduction from taxable income for the purpose of calculation of corporate income tax up to a maximum amount of 10% (ten per cent) of taxable income.

Investment expenditure for professional training of Mozambican workers is deductible up to a maximum of 10% (five per cent).

The regime established under the Investment Law and Regulations does not apply to petroleum operations, and a specific fiscal incentives package has been developed for projects in the oil and gas sector including exemptions from import duties, value added tax and specific consumption tax (i.e. excise duties) during the first 5 years from the date of approval of the development plan under the petroleum concession contract in respect of:

(i)             equipment and goods imported and classified in class “K” of the Customs Tariff Table; and

(ii)            explosives, detonators, tracers or similar, machinery or equipment for detonation of explosives, as well as equipment for topographic work and geological work in land or at sea relating to petroleum operations.


Opportunities for foreign investment abound in Mozambique. It is a country on the move –a few examples are:

  • a massive infrastructure shortage in Mozambique is creating a bottleneck in the production and export of coal, which has the potential to be the pillar of economic growth. For instance, at least 50 billion US Dollars of infrastructure development is needed to support the coal and gas sectors in Mozambique;
  • agribusiness is an untapped investment opportunity: 57% of land is arable in Mozambique, yet the country still relies on importation of fresh products and no significant international players are active in the sector;
  • while resource projects have substantially boosted GDP, they generally have limited benefits for local communities and do not hire or train local workers. Tougher local content requirements are being implemented; and
  • The recent discovery of 100 trillion cubic feet (possibly up to 300 trillion cubic feet) of gas reserves, combined with a proposed Liquefied Natural Gas (LNG) plant with capacity of 10MT per annum, could transform the country’s economy.

We welcome any enquiries for more information on doing business in Mozambique and also refer readers to LEX Africa’s ‘Guide to Doing Business’

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