Market Entry and Establishing Your Business in Mozambique. PricewaterhouseCoopers Mozambique

Transcription

1 Market Entry and Establishing Your Business in Mozambique Robert Walker João Martins Senior Partner Tax Partner Mozambique

2 What s the Problem? Napoleon Codified Roman Law William the Conqueror Common Law 2

3 Presentation Topics CPI Business Vehicles Operating Licences Mozambican Land Law Labour Legal Requirements Exchange Control Accounting Law and Audit Requirements Taxation VAT New Legislation Get ready 3

4 Centro de Promoção de Investimentos (CPI) The Investment Promotion Centre (CPI) is a Government body to promote and assist investors The minimum direct investment (investor's own capital investment) is USD 50,000 for foreign investors. Foreign investors who comply with the minimum amount of direct investment will be allowed to remit profits out of the country. 4

5 Centro de Promoção de Investimentos (CPI) Guarantees Security and legal protection on property rights and other rights in connection with investments Full remittance of profits, royalties, loans and interest as well as capital invested in the case of total or partial sale or liquidation Fair and equitable compensation in the event of expropriation Mozambique is a member of MIGA and OPIC (insurers against noncommercial risks) and offers recourse to arbitration through ICSID and the International Chamber of Commerce. Tax incentives In addition to the guarantees the CPI also grants certain tax and customs incentives to foreign investors. 5

6 Business Vehicles Apart from in some specific sectors there are no restrictions on foreign individuals or entities wishing to set up businesses in Mozambique. There are two main forms of limited liability entity available under Mozambican Commercial Law: a branch or a limited company. Registering a branch Branches have to be registered with Ministry of Commerce and Industry. The objective of a branch is usually to execute a specific contract and the activities permitted under the licence granted are restricted to the contract (s). The licence is valid for three years, renewable. A branch is more appropriate for short duration ventures. 6

7 Business Vehicles Incorporation of limited liability companies The most commonly used limited liability Mozambican business vehicles are Sociedade por Quotas (Limitada = private companies) and Sociedade Anónima de Responsabilidade Limitada (SA = public companies) The main differences between the two types of companies are: Founding members(minimum) 2 for private and 3 for public companies Public companies have to issue share certificates, and these are more easy to transfer Public companies also have to have a Fiscal Council 7

8 Operating Licences All companies require a operating license ( Alvará ), and this is normally not complicated. The following business sectors have more complex licensing processes because of specific requirements (e.g. financial capacity; minimum technical staff; minimum share capital): Mining Oil and Gas Civil Construction Healthcare and Laboratories Educational Media and telecoms Banking & Insurance 8

9 Mozambican Land Law General principles Land is the sole property of the Mozambican State and, therefore, it cannot be sold, transferred, leased and/or given as mortgage or pledge. Land concessions Individual and corporate entities are entitled to apply to the State for the concession of the right to use land for a maximum period of 50 years, renewable for an equal period. The land concession is a right that is not transferable. The Authorities initially issue a provisional land concession certificate, valid for a period of 5 years for a Mozambican entity, or 2 years for a foreign entity. This is awarded on the basis of a development plan. On termination of the provisional authorization the Authorities will issue a final land concession certificate, but only if they are satisfied that the development plan has been complied with. 9

10 Rights of foreigners to land concessions Foreign entities are entitled to apply for land concessions provided they have an investment project authorised by the CPI and, if individuals, they have been resident in Mozambique for 5 years or, if companies, they are incorporated or registered in Mozambique. Companies incorporated in Mozambique but more than 50% owned by foreigners are regarded by the land legislation as foreign companies. These rules only apply to land concessions and not to disposals of buildings 10

11 Buildings Disposal of buildings Land concessionaires have full ownership rights over any constructions erected on the land and they are able to mortgage, rent or transfer ownership of them. In urban areas transfer of a building includes the underlying right to use the land on which the it is erected and the grounds that serve it. In effect the concession for that land can be transferred. The transfer of buildings in rural areas does not imply the transfer of the right to use the land on which they are erected. 11

12 Labour Law Principal labour obligations include inter alia : Communication of start of activities Nominal employees list Annual leave plan Work insurance Workmen s Compensation Work contracts Types of work contracts - Permanent contracts Fixed-term contracts Training contract 12

13 Labour Law Employment of foreign staff General regime establishes a quota system a) Companies with more than 100 employees 5% b) Companies with 10 to 100 employees 8% c) Companies with up to10 employees 10% Investment projects approved by CPI are not required to have working permits for their expatriate staff if projected in the investment approval. A mere communication should be addressed to authorities, up to 15 days after arrival. This has not been tested, as the new law is very recent. Residence permit 13 Once the foreign individual is duly authorised to work in Mozambique, either through a work permit or work permission, he should apply for a residence permit.

14 Exchange Control Exchange Control Regulations apply to all contracts which imply payments to a foreign entities. These contracts must be registered with the Central Bank of Mozambique which is responsible for supervision of all banking, financial and monetary activities in Mozambique Furthermore all services agreements that imply payments by a resident company to a non-resident company have to be previously authorised by the Ministry of Finance and then registered at the Central Bank. 14

15 Exchange Control Special requirements for foreign investment Proof of direct foreign investment should be registered with the Central Bank Proof of investment is required to allow repatriation of - (a) capital invested (shareholders loans, etc), and, (b) any profits arising from the activity from the approved investment project. Failure to register investments could result in the non recognition of the right to repatriate funds. Payables not recorded in the companies books (PGC) are also not remittable. 15

16 Accounting legislation and audit requirements Accounting Legislation - Statutory Accounts Annual Statutory Accounts must be prepared on the Annual Reporting Forms provided for the purpose by the Fiscal Authorities Taxable income is based on the profits shown the local statutory accounts (Forms M/20 and M/22) prepared under the accounting principles contained in the PGC. 16

17 Accounting Law the PGC Mozambican Accounting Law (the Plano Geral de Contabilidade, "PGC ) codifies Mozambican Accounting principles and rules for record keeping. The PGC has the following overriding provisions relating to the accounting books and records of all Mozambican entities. The records must be kept in: Mozambique, available for inspection by the authorities the local currency (Meticais) Portuguese. Financial Sector (Banks) must apply IFRS from

18 Accounting Principles The accounting principles codified in the PGC differ in many ways from IFRS. The following examples are mentioned because they can cause fiscal problems : Unprovided expenses from prior periods are classified as extraordinary items and are not normally fiscally deductible Unrealised exchange losses on medium and long term debts are carried forward Provisions for inventory and debtors are limited to fixed %s 18

19 Accounting records The ledgers must comply in format with the account codes and layout stipulated in the PGC Transactions must be recorded according to the accounting rules laid down in the PGC All supporting documentation must be fiscally acceptable and kept in Mozambique available for inspection Legal books, summarising the ledgers, must be completed in the correct format NB rules apply to the ledgers and records, not just to reporting 19

20 Audit Requirements Public Companies (SA) are required by law to be audited. Private Companies (Lda) do not automatically require an audit. Any companies which have a CPI approval also require an audit. In practice, this covers most foriegn investment in Mozambique. Certain other categories (e.g.finance institutions) require audit. Note; there is no detailed audit legislation or auditing standards in Mozambique. Granting of licences to audit is done by the Ministry of Finance. Licences have been granted to the international audit firms operating in the country, who apply International Auditing Standards in their work. We are working with the Government and the World Bank to set up an Accountancy Institute. 20

21 Taxation Direct taxes These consist of (A) Individual Income Tax (Imposto sobre o Rendimento de Pessoas Singulares - IRPS),and (B) Corporate Income Tax (Imposto sobre o Rendimento de Pessoas Colectivas - IRPC). Other taxes Indirect Taxes - e.g. Value Added Tax (IVA) Municipality Taxes e.g. Personal Municipal Tax 21

22 Taxation Taxable Period Rule: Calendar year, but non-residents with branches may be granted a different period. Approval is discretionary and applications are not always successful. The new period must be maintained for five years. Double Taxation Treaty A DTT between Mozambique and South Africa has been signed but not yet ratified by the two parliaments. This will have significant effects on investors choice of the optimum investment structure. 22

23 Value Added Tax Main aspects of Mozambique VAT VAT is levied on the supply of goods or services, carried out in the national territory by a taxpayer acting as such and, in any case, on the importation of goods Mozambique s VAT rate is 17% VAT incurred should not be a cost for VAT registered entities, except in a limited number of cases, prescribed by law, in which VAT is not deductible (e.g. banking and insurance) 23

24 Value Added Tax Exemptions The Mozambican VAT code establishes two types of exemptions: Single exemptions In this case the taxpayer, when carrying out operations does not charge VAT to the purchaser. This taxpayer is also not allowed to deduct input VAT. Complete exemptions (zero-rated) In this case the taxpayer, when carrying out operations, does not charge VAT to the purchaser but is allowed to deduct input VAT. The exports (like transactions and international transport) benefit from a complete exemption. 24

25 New legislation get ready... Several amendments Corporate and Personal Income Taxes VAT New Municipality Tax System Regulations of the new Labor Law Regulations of the New Social Security System New Judiciary Organization Regional appeal courts and reduction of interruption periods 25

26 Mozambique ANY QUESTIONS? 26