In Mozambique, there is mixed legal system of Portuguese civil law, and customary law. In rural, predominately Muslim villages with no formal legal system, Islamic law may be applied.
Filipe Nyusi (since 15 January 2015)
Aluminum, petroleum products, chemicals (fertilizer, soap, paints), textiles, cement, glass, asbestos, tobacco, food, beverages
Makhuwa 26.1%, Portuguese (Official) 16.6%, Tsonga 8.6%, Nyanja 8.1, Sena 7.1%, Lomwe 7.1%, Chuwabo 4.7%, Ndau 3.8%, Tswa 3.8%, Other Mozambican Languages 11.8%, Other 0.5%, Unspecified 1.8%
Christians 62% - comprising Evangelic and Pentecostal Christians 33%, Catholics 27%, Anglicans 2%, Muslim 19%, Jewish, Hindu, and Baha’I and representing less than 5%, and 14% of the population with no religious affiliation
- Capital markets
The Maputo Stock Exchange (the “Bolsa de Valores de Moçambique”) is the official stock exchange of Mozambique and has been active since 1999, the year in which the first series was launched. Currently the Maputo Stock Exchange trades securities representing shares, bonds and commercial paper. The capital market in Mozambique comprises a primary market (market where new securities are issued) and a secondary market (market for trading securities previously issued).
The backbone of the legal framework applicable to capital markets in Mozambique is the Securities Market Code, approved by Decree-Law no. 4/2009, of 23 August (as amended), which has the purpose of establishing the fundamental principles and provisions governing the organisation and operation of securities markets, as well as the transactions carried out therein, as well as the activities of all market players. The provisions of the Securities Market Code shall apply to all securities issued, traded or marketed in the Mozambican territory.
Capital markets are further regulated, inter alia, by the orders / notices, regulations and instructions issued by the Bank of Mozambique, in its capacity as the market supervisory authority.
Current number of listed companies
Regulatory body or bodies
The Central Bank of Mozambique is the main regulatory and supervisory entity.
The Maputo Stock Exchange has recently been subject to an amendment in its legal status, by the enactment of Decree no. 18/2023, of 28 April, and has shifted from a public institution into a state owned commercial company (Bolsa de Valores de Moçambique, S.A.), an entity that is responsible to organise and manage the secondary securities market, with a view of boosting transactions in this market, as well as to respond efficiently and effectively to its demands and, ultimately, strengthening the financial system, enable the capitalisation process, and provide liquidity for securities.
- Securities Market Code (Decree-Law no. 4/2009, of 23 August, as amended by Decree-Law no. 1/2022, of 25 May);
- Creation of Bolsa de Valores de Moçambique, S.A. (Decree no. 18/2023, of 28 April); and
- Bank of Mozambique’s orders / notices, regulations and instructions.
- Competition regulation
Regulatory and supervisory authority
The Mozambican Competition Regulatory Authority (Autoridade Reguladora da Concorrência or “ARC”) is the competition regulatory and supervisory authority for the Mozambican market. ARC has been originally created in 2013, upon the enactment of the Competition Law (Law no. 10/2013, of 10 July), with its organic statutes being published by Decree no. 37/2014. However, ARC remained dormant for a few years, and only came into operation in 2021, by the time of the publication of Decree 96/2021, of 31 December, which approved the new organic statutes of ARC.
Since then, ARC has established its presence in the market and has been actively supervising the activities of its players, having registered the application of two fines, in two different cases, and issuing a warning to a business association for noncompliance with the provisions of the competition legal framework.
IMPACT OF REGULATORY REGIME ON BUSINESS
According to the Competition Law and the Regulations of the Competition Law (Decree no. 97/2014, of 31 December, as amended), ARC is responsible to monitor, supervise and prevent (i) anti-competitive practices and (ii) market concentration (merger) operations.
Among the anti-competitive practices prohibited by law, we highlight (i) the so-called "horizontal" agreements and practices, which consist in agreements, decisions of associations and / or concerted practices between competing companies, the most palpable example being the price control cartels, (ii) the “vertical" agreements, which consist in agreements between companies and their suppliers or customers with the purpose of, or which have the effect of, restricting the competition in the national market, as well as (iii) the abusive conduct of companies in a dominant position vis-à-vis other company – including, but not limited to, denying access to essential infrastructures and the unjustified termination of a commercial relationship –, and the abuse of economic dependence, by one or more companies, in which their suppliers or customers find themselves.
MERGERS AND TAKEOVERS
Any merger involving firms with or resulting in a substantial market share, business volume or annual turnover will be subject to notification. The threshold of a substantial market share, business volume or annual turnover and the method of calculation will be determined by the minister responsible.
The firms engaging in a merger are responsible for filing the notification with ARC within seven days of the conclusion of the agreement to merge. Parties who fail to notify will be subject to penalties. Mergers subject to the notification requirement cannot be implemented until a final competition clearance is obtained.
- The Mozambican legal framework applicable to competition matters includes the following legal statutes:the Competition Law (Law no. 10/2013, of 10 July);
- Regulations of the Competition Law (Decree no. 97/2014, of 31 December, as amended);
- Organic Statutes of ARC (Decree 96/2021, of 31 December);
Competition Policy (Resolution no. 31/2007, of 12 November).
There are four main types of entry visas to Mozambique concerning personal, professional or business activities:
- Residence Visa - required for foreigners who wish to live in Mozambique. This is available for a single entry for a period of 30 days and is extendable to 60 days. A foreigner who intends to remain in Mozambique for more than the stipulated time frame is required to obtain a resident permit.
- Visitor Visa - allows entry for foreigners when a Settlement Visa is not justified. The visa is valid for 15 days and extendable to 90 days.
- Work Visa - allows entry for foreigners who intend to be employed in Mozambique and allows its holder to enter and stay for a period of up to one year, extendable for an equal period, in accordance with the employment contract.
- Investment Visa - allows the entry of foreign investors, representatives, attorneys or directors of the investing company, and is intended for the purpose of implementing investment projects with a value equal to or higher than USD 500,000.00 that have been previously approved by the private investment regulatory authority. The visa allows its holder multiple entries and is valid for two or five years, in the case of investment projects with a value equal or higher than USD 500,000.00 or equal or higher than USD 50,000,000.00, respectively, extendable for the same period, for the duration of the investment project.
Please note that further to Decree no. 10/2023, of 31 March, national citizens of twenty-nine countries, as listed therein, holding ordinary passports are exempt from obtaining and presenting a visa to enter into the country where such travels are for tourism and business purposes. Among the countries listed in the statute are: (i) United Araba Emirates, (ii) Saudi Arabia, (iii) China, (iv) Japan, (v) Ghana, (vi) Senegal, (vi) United Kingdom of Great Britain and Northern Ireland, and (viii) European countries, such as Portugal, Spain, Italy, France or the Netherlands.
Main forms of business enterprise structure
Pursuant to Decree-Law no. 1/2022, of 25 May, which approved the Mozambican Commercial Code, foreign and domestic investors can choose any of the following six ways to set up their business:
- general partnership (sociedade em nome colectivo);
- limited partnership (sociedade por quotas);
- capital and industry companies (sociedade anónima);
- simplified public companies controlled by shares (sociedade anónima simplificada); and
- sole shareholder company (sociedade unipessoal) which may take the form of any of the types identified in paragraphs 2. to 4. above; or
- registration of a branch or a representation office of the parent company.
The forms most commonly used by investors are private companies limited by quotas and public companies controlled by shares. Otherwise, investors may also consider the possibility of registering a branch to conduct their business in the country.
(A) Private Company Limited by Quotas
Private companies limited by quotas (sociedade por quotas) are limited liability companies regulated under articles 283 to 330 of the Commercial Code. They must be owned by two or more shareholders who assume secondary joint liability for the total share capital.
Rules apply about how these companies may be named. The name must be followed by the mandatory addition of Limitada (Limited), which may be abbreviated to Lda.
Other special characteristics
- The shareholders must be adults with legal capacity or minors duly represented by their legal representative.
- A company must have a minimum of two and a maximum of thirty shareholders. However, the law provides for an exception: the sole shareholder companies. These companies are entirely held by a single shareholder, an individual or another company.
- The liability of shareholders is limited to the value of share capital they have subscribed to and the company's liability towards its creditors is limited to its assets.
- There is no minimum capital required. Therefore, a shareholder may set the capital at a level that is appropriate to carry on the company's activities.
- The shares (quotas) are always nominative - the names of their holders must appear expressly in the articles of association, in the commercial registration certificate, and in any subsequent agreement or resolution by which the quotas are transferred or the share capital is altered.
- Decisions by corporate bodies are made by either a general meeting of shareholders or the board of directors. All shareholders have the right to take part in general meetings, and decisions are taken by a simple majority of the votes cast by the shareholders present at the meeting.
- Companies are managed by one or more directors who may be individuals appointed from outside the company.
(B) Public Company Controlled by Shares
Public companies controlled by shares (sociedade anónima) are governed by articles 320 to 440 of the Mozambican Commercial Code. Typically, this type of company is adopted by investors who require a more complex investment structure and include a number of advantages. Among them we highlight the flexibility when it comes to the lack of special procedures for the transfer of shares.
Characteristics of the Public Company Controlled by Shares
Liability - The liability of shareholders towards third parties is limited to the value of their shareholding.
Number of Shareholders - A company must have at least two shareholders. However, it is possible to set up sole shareholder companies by shares.
Share Capital - There is no minimum capital requirement. However, the share capital must always be appropriate for achieving the corporate object and always be expressed in Metical (Mozambican currency).
Internal Structure - Besides the general assembly and the board of directors, these companies also have a supervisory body in the form of (i) a supervisory board – or a sole supervisor, in specific cases, or (ii) an audit committee, that is integrated in the board of directors, and an external auditor.
Supervision - A company must be supervised by either:
- a supervisory board of 3 or 5 members;
- a sole supervisor, who must be an auditor or auditing firm; or
- an independent auditing firm; or
- the audit committee and external auditor.
The General Meeting - A general meeting is where the shareholders elect the persons or bodies to manage the company and supervise the acts of the directors.
The law requires a qualified majority for certain resolutions, such as those related to the amendment of the articles, mergers, splits, transformation or dissolution of the company.
Board of Directors - The board of directors is responsible for company management and has exclusive powers to represent the company. The board of directors must be composed of an odd number of members, who do not need to be company shareholders.
(C) Branch offices and representation offices
Representative offices and branch offices are non-autonomous legal entities that are considered to be an extension of the parent company. The parent company of a branch office, even if it is incorporated and operating in another country, is fully liable, without limitation, for any obligations undertaken or attributable to the branch office or any other type of local establishment emanating from the corporate body domiciled abroad.
The general principles and legal rules applicable to individual and collective subordinate employment relationships, in respect of remunerated work done by hired employees, are defined on the Employment Law (Law no. 13/2023, of 25 August). The Employment Law has been enacted on 25 August 2023, but shall only enter into force on 21 February 2024.
The Employment Law sets the rules applicable to employment of foreign workers by Mozambican employers or employers established in Mozambique.
Work performed by foreigners under employment contracts in Mozambique is governed by the principle of equality. However, when there are substantial grounds to do so, the Mozambican state may still reserve the performance of certain activities for Mozambican citizens.
The hiring of foreign workers is regulated by specific legislation, namely by the Regulations for the Hiring of Expats (Decree no. 37/2016 of 28 November, as amended) and Regulations for the Hiring of Expats for Civil Service (Decree-Law no.2/2011 of 19 October 2011).
Under the Employment Law and the above regulations, Mozambique has four different schemes for hiring foreign workers:
- the quota scheme;
- the employment authorisation scheme (outside the quota);
- investment projects approved by the Government (allows a percentage of foreign workers that is higher than the quota scheme); and
- the short-term employment scheme.
Corruption Perception Index score for 2022
Corruption Perception Index rank worldwide for 2022
Signatories to the African Union Convention on Preventing and Combating Corruption?
Signed on 15 December 2003
Yes - Ratified on 2 August 2006
Signatories to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions?
Signatories to United Nations Convention against Corruption (UNAC)?
Signed on 25 May 2004
Yes - Ratified on 26 December 2006
The legal framework governing arbitration is set out in the Arbitration, Conciliation and Mediation Law (Law no. 11/99, of 12 July - ACML) which is primarily based on the UNCITRAL model of arbitration.
If disputes cannot be resolved amicably or by negotiation, they can be resolved through extrajudicial means of conflict resolution, at national or international level, namely mediation, conciliation and arbitration, provided that by special law or agreement they are not exclusively subject to the competent national courts, to necessary arbitration or to another specific means of dispute resolution.
In Mozambique, there are specialist institutions for the resolution of disputes by arbitration, such as:
- the Arbitration, Conciliation and Mediation Centre (CACM) for legal and commercial issues in general; and
- the Commission for Employment Mediation and Arbitration (COMAL) for issues of employment law.
Enforcement of arbitral awards
Mozambique is a signatory to the 1958 New York Convention on the Recognition of Foreign Arbitral Awards.
Enforcement of foreign judgments
Any foreign judgment can be recognised and enforced by a Mozambican court, provided that the following requirements are met:
- the foreign judgment must be legible and genuine;
- the foreign judgment must be final and non-appealable;
- the Mozambican courts must have no jurisdiction to hear the dispute, and the foreign court which rendered the judgment must have such jurisdiction;
- the foreign proceedings were conducted properly in accordance with applicable procedures;
- there are no concurrent proceedings pending in a Mozambican court;
- the foreign judgment does not conflict with a prior Mozambican or foreign judgement in the same matter; and
- the foreign judgment is not contrary to the public policy of Mozambique.
Perception of the local courts
Many disputes among Mozambican parties are settled privately or go unresolved. The business community is still small. Damage to an organisation's reputation as a result of a commercial dispute or an accusation of illegal activity can seriously damage the organisation's overall business.
- Foreign investments
Save for specific sectors of the economy in which there may be applied some local content requirements, in general, there are no restrictions on equity participation or the control by foreign investors in companies incorporated in Mozanbique.
Entities intending to develop commercial or industrial activities are generally required to obtain a licence from the regulatory authority, depending on the specific activity that shall be performed in the country.
The new Private Investment Law (Law no. 8/2023, of 9 June) came into force in 7 September 2023 and while repealing the former private investment law (Law no. 3/93, of 24 June) and all pieces of legislation contrary to same. The new private investment law shall be supplemented by the regulations to be approved by the Council of Ministers, which shall, inter alia, update the procedures applicable for the approval of private investment projects foreseen in the Regulations of the Private Investment Law (Decree no. 43/2009, of 21 August, as amended).
The procedures to apply for a private investment project entail the submission of a set of documentation, which include, inter alia:
- the commercial registration certificate or reservation of the official name of the company implementing the project;
- a copy of the identification document of the proposed investor; and
- topographic plan or sketch of the location where the project is to be implemented.
It is also necessary to have the appropriate licence when the project is to be carried out by foreign commercial representation (representação comercial estrangeira).
Foreign companies are advised to use a local consultancy service to assist with submitting the relevant applications and proposals.
Under the Investment Law, tax and customs incentives as well as other benefits are afforded to private investors, such as the right to import capital, export profits and re-export invested capital.
The following investments do not benefit from the above incentives:
- public investments financed by funds from the general state budget;
- investments that are exclusively social in character; and
- investments made in the areas of prospecting, search and production of oil, gas, mineral resources and the extractive industry (where specific benefits and incentives are foreseen in a specific legal statute).
The private investment may be made in any of the following forms: cash, infrastructure, equipment and respective accessories, material and other goods, investment with own capital, assignment of rights and shareholder loans among others.
There is legal protection of property and rights, including industrial property rights.
There are no restrictions on borrowing, the payment of interest abroad or the transfer of dividends abroad.
In order to benefit from these incentives, specifically regarding the transfer abroad of invested capital and profits made, investment projects are subject to the application of one of the following regimes:
(a) authorisation regime, which applies to:
i. to large-scale investment projects as well as those which concern economic activities with foreseeable economic, environmental, safety or public health implications;
ii. public-private partnerships and business concessions;
iii. investment projects that require an area of land equal to or greater than 10,000 hectares;
iv. investment projects that require a forestry concession of more than 100 thousand hectares;
v. investment projects involving the industrial processing of mining and/or petroleum products; or
(b) the mere registration regime, applicable to projects not subject to the authorisation regime, which consists of simply submitting an investment proposal for the purposes of registration and awarding the applicable incentives.
Advertising is mainly governed by Decree no. 38/2016, of 31 August, which approves the Advertising Code.
Alcoholic beverages are mainly governed by Decree no. 54/2013, of 7 October, which approves the Regulations on the Control of the Production, Marketing and Consumption of Alcoholic Beverages, and Ministerial Diploma no. 64/2021, of 21 July, which approves the Regulations on the Sealing of Alcoholic Beverages and Manufactured Tobacco.
The productions, distribution and marketing of pharmaceuticals is mainly governed by Law no. 12/2017, of 8 September, which approves the Law on Medicines, Vaccines and Other Biological Products for Human Use.
The main statute applicable in this regard is Decree no. 11/2007, of 30 May, which approves the Regulations on the Consumption and Marketing of Tobacco (read the decree).
The capital allowances below are specific to certain industries. Fixed maximum rates of depreciation are deductible on a straight line basis.
- Industrial buildings - 4%
- Commercial buildings - 2%
- Office equipment - 10% to 14.28%
- Motor vehicles - 20% to 25%
- Plant and machinery - 5% to 25%
Capital Gains Tax
Capital gains or losses incurred as a result of the sale of assets are included in ordinary income and subject to income tax at the standard rate applicable to the taxpayer.
Corporate Income Tax 32% - A resident company is taxed on its worldwide income; non-resident companies are taxed in respect of its Mozambique sourced income.
Corporation Income Tax is levied on all income and gains. Expenses incurred in the generation of such income or gains are tax deductible.
20% (Withholding Tax) - This applies to both resident and non-resident companies.
There is an exemption from the above tax in respect of dividends paid by a resident, who is not exempt from income tax, to another tax resident parent that (i) holds at least 20% of the share capital of the subsidiary, and (ii) has held the participation for more than two years.
Special Tax on mining exploration 3% to 10% - There are three different types of taxes applicable in this regard, as follows:
- Mining Production Tax – ranging from 1,5% to 8%, depending on the nature of the mineral being mined;
- Surface Tax – depends on the type of mining title, its area, and year of activities; and
- Mining Resources Income Tax – 20%.
Special Tax on oil exploration - 10%
Special Tax on gas exploration - 6%
Mozambique applies an ordinary foreign tax credit as a unilateral method to avoid the double taxation of income obtained abroad. Unused credits may be carried forward for up to five years.
Mozambique has concluded tax treaties with the following jurisdictions:
- South Africa
20% (Withholding Tax) - This applies to both resident and non-resident companies.
Losses may be carried forward for 5 years.
Personal income tax
From 10% up to 32%, depending on income bracket - This is levied on income from employment, rendering services, capital gains, real estate and other income.
Residents are taxed on their worldwide income; non-residents are taxed only on their Mozambique-sourced income.
Real property tax
The holding of real estate is taxable at a rate of 0.4% or 0.7%, depending on whether the real estate is intended for residential purposes or if it shall be used for commercial, industrial or any other purposes, respectively
Property transfer is subject to a property transfer tax at a 2% rate.
20% (Withholding Tax) - Applies to both resident and non-resident companies.
0.4% - payable on a transfer of shares.
0.2% - payable on a transfer of buildings.
Tax Free special/industrial zones
Exemption - Operators and entities in these zones are exempt from income tax for the first ten years. Thereafter they benefit from a 50% reduction for year 11 to year 15 and then from a 25% reduction for the remaining years of the project.
Indebtedness is considered excessive when the amount of debt is more than twice the value of the concerned holding in the equity of the liable person. The rules are applied when the debt-to-equity ratio exceeds 2:1.
Transfer pricing legislation requires an arm's length consideration for transactions between related parties.
Value Added Tax
17% standard rate - The law allows for several exemptions, notably services connected to hospital and medical care, certain food products and exports in general.