Duties, royalties and taxesDuties, royalties and taxes payable by private parties
What duties, royalties and taxes are payable by private parties carrying on mining activities? Are these revenue-based or profit-based?
Mozambique’s Law on the Taxation of Mineral Operations (Law No. 28/2014, of 23 September 2014, as amended by Law No. 15/2017, of 28 December) and the relevant Regulations (approved by Decree 28/15, of 28 December 2015) introduced significant changes to the tax regime applicable to the mining industry. The special regimes governing production tax, corporate income tax and fiscal benefits for the mining sector, previously dispersed across several legal instruments, are now consolidated in this single instrument.
VAT and customs duties apply throughout the entire lifecycle of mining projects, but duties, royalties and taxes vary in accordance with the operational phase of the project. In this respect, Decree 78/2017, of 28 December, which approves the new VAT Refund Regulations, provides for a special regularisation regime applicable to the oil and mining sector. Under this regime, oil and mining companies - at the production stage - are allowed to settle their invoices without VAT provided that among other requirements their exports exceed 75 per cent of the annual turnover of the preceding year. A regularisation document will need to be issued in order to allow suppliers to correct the VAT initially charged.
Holders of prospecting and exploration licences, mining concessions and mining certificates are required to pay surface tax calculated in accordance with the fixed amount per hectare of land contained in the mining title.
Amount annually payable in meticais per hectare
Prospecting and exploration licences
Years 4 and 5
Years 7 and 8
Years 1 to 5
From year 6 onwards
Years 1 to 5
From year 6 onwards
Production tax (royalty)
Individuals or companies developing mining activities must pay a production tax (royalty) calculated based on the value of the mineral extracted, as follows:
- diamonds - 8 per cent;
- precious metals, precious and semi-precious stones and heavy sand - 6 per cent;
- sands and stone - 1.5 per cent; and
- base minerals, coal, ornamental rocks and other mineral products - 3 per cent.
This value is informed by the sale price of the previous consignment of the respective mineral or, if the mineral has never been sold, its market value. Production tax is to be paid at the end of the month during which the mineral was extracted. A 50 per cent reduction is foreseen in the law for mining products used in the development of local industry.
Windfall profits tax
Mining concessions or mining certificates with a pre-corporate income tax net return in excess of 18 per cent are subject to a windfall profits tax levied on the accumulated net cash flow. The statutory rate of the windfall profits tax is set at 20 per cent.
Corporate income tax
Corporate income tax - a profit-based tax - is payable at a rate of 32 per cent.Tax advantages and incentives
What tax advantages and incentives are available to private parties carrying on mining activities?
Mining projects are exempt (for a period of five years after the start of mining activities) from:
- customs duties payable on imported equipment (for both the prospecting and exploration, and mining or production phases) classified under Class K in the Customs Schedule;
- customs duties payable on imported equipment not expressly classified under Class K in the Customs Schedule, but which is considered equivalent to it (a comprehensive list of which can be found annexed to the Law on the Taxation of Mineral Operations); and
- mining companies - at the production stage - are allowed to settle their invoices without VAT provided that among other requirements their exports exceed 75 per cent of the annual turnover of the preceding year.
Does any legislation provide for tax stabilisation or are there tax stabilisation agreements in force?
A fiscal stabilisation regime may be negotiated between the government and the holders of mineral rights, as established in article 58 of the Law on the Taxation of Mineral Operations. This stabilisation period has a maximum duration of 10 years, which may be extended until the term of the concession in return for a 2 per cent annual increase in the production tax rate.Carried interest
Is the government entitled to a carried interest, or a free carried interest in mining projects?
The Mega-Projects Regulations establish that the Mozambican state reserves the right to negotiate a free participation of no less than 5 per cent during any phase of a mining project, as consideration for its awarding of exploitation rights over natural resources.Transfer taxes and capital gains
Are there any transfer taxes or capital gains imposed regarding the transfer of licences?
The transfer of mineral rights or licences is subject to a 32 per cent capital gains tax.
According to the Law on the Taxation of Mineral Operations, capital gains are due whenever the underlying transaction concerns mining assets or rights located in Mozambican territory, regardless of where the transaction actually takes place (ie, even if it is concluded at the (offshore) parent company level). In addition, Law No. 15/2017, which amended Mozambique’s Law on the Taxation of Mineral Operations, provides that the gains or losses resulting from the tax on transfers (either onerous or free of charge) of stakes in the mining sector are not deductible.Distinction between domestic parties and foreign parties
Is there any distinction between the duties, royalties and taxes payable by domestic parties and those payable by foreign parties?