The recent tax reform implemented in Mozambique has generated a wave of concern and, in some cases, indignation, as it affects taxpayers across the board. Changes to the rules may have major implications for all economic agents, but they also represent a unique opportunity for those who adapt best to gain a decisive competitive advantage over their rivals and turn the game in their favour.
Almost a year after the new Government took office in Mozambique, the long-awaited tax reform has finally been carried out. On 29 December 2025, six laws were published introducing significant changes to Corporate Income Tax (IRPC), Personal Income Tax (IRPS), Value Added Tax (VAT), Simplified Tax for Small Taxpayers (ISPC), Excise Tax (ICE), the Customs Tariff and the respective preliminary instructions. Decree-Law No. 52/2025 also amends the Regulation on VAT Refunds.
After analysing the legislative changes and focusing on their three main pillars — IRPC, IRPS and VAT — which will most broadly affect the majority of taxpayers in Mozambique, it becomes clear that the amendments to IRPC and IRPS aim to respond to the need to increase tax revenues. Meanwhile, the changes to VAT transform it (at least now explicitly) into a clear temporary source of financing for public accounts, through a significant gap between payment deadlines and refund timelines for taxpayers. In brief:
In terms of IRPC
There is an attempt to increase the volume of income obtained by non-resident entities that is taxable in Mozambique under the general taxation rules, rather than through withholding tax. This is achieved by tightening the requirements that trigger the creation of a Permanent Establishment in Mozambique by (i) reducing by about half (from six months to 90 days) the minimum duration of construction works or activities carried out in Mozambique in the case of a construction, installation or assembly site, and also (ii) extending the scope of the Permanent Establishment regime to the provision of services, including consultancy services and professional services or other activities regardless of physical presence — excluding digital services — when such services remain within Mozambican territory for a period or periods exceeding, in aggregate, 90 days in any 12-month period beginning or ending in the relevant fiscal year. At the same time, a system of autonomous taxation of capital gains is introduced, clearly intended to capture tax revenue from these “non-core” corporate operations, removing the possibility of including them in the entity’s taxable result and using tax credits against such gains.
“Those who overcome the ‘shock’ more quickly, and have the courage and wisdom to think about taxation strategically, will be the first to turn this climate of uncertainty to their advantage.”
In terms of IRPS
There is also an attempt to increase the volume of income taxable in Mozambique, particularly by increasing the number of workers from abroad who qualify as tax residents in the country. The rules determining when a worker is considered a tax resident in Mozambique have been significantly tightened and, therefore, subject to taxation based on worldwide income. The length of stay or even the remuneration received for work performed in the country no longer appears to be decisive criteria for this qualification. It now seems sufficient for a worker to carry out their main professional activity or have the centre of their economic interests in Mozambique to be considered a tax resident in the country. It should also be noted that the existing provision in the IRPS Code extending the concept of residence in Mozambican territory to other members of the same household remains unchanged, provided that any of the persons responsible for directing the household is considered a resident in Mozambique, without any additional requirement allowing this effect to be avoided.
In terms of VAT
There is a clear intention to formally position VAT as a temporary source of financing for public accounts, namely through (i) the repeal of the special VAT adjustment regime for companies operating in the mining and petroleum sectors, combined with (ii) the end of the neutral effect of VAT self-assessment in transactions with non-resident entities — since it is now necessary to make an autonomous payment of the VAT assessed, which may later be carried forward and deducted (if the requirements for deduction are met) in periodic VAT returns, creating a time gap between payment and deduction — and (iii) the extension to 150 days of the deadline for the Tax Authority to communicate its decision regarding VAT refunds, in contrast with the much shorter general deadlines for VAT payments imposed on taxpayers.
VAT already functioned as a source of financing for public accounts due to the well-known delays in the payment of refunds by the Mozambican State, although there had been promises to speed up those payments. Now this time gap is formally introduced, effectively ensuring the continuation of that financing feature.
In conclusion
In conclusion, while the tax reform is expected to increase tax revenue in the short term and support the financing of public accounts, if economic agents fail to adapt effectively to the new rules of the game, the sustainability of several projects may be jeopardised — particularly smaller ones that may have less capacity to deal with increased tax pressure and cash-flow demands. In the medium term, this environment could lead to a loss of investor interest in the country, slowing the desired progress and economic development.
In fact, these changes, combined with substantial amendments to ISPC and the taxation of digital services, affect taxpayers across Mozambique: from individuals to companies, from nationals to foreigners, from those with greater or lesser financial capacity, regardless of sector of activity. It is therefore understandable that a widespread wave of concern — and sometimes indignation — has emerged.
However, this change in the rules also represents a unique opportunity for those who adapt best to gain a decisive competitive advantage over their competitors and turn the situation to their benefit, at a time when the resumption of gas megaprojects is expected to stimulate the Mozambican economy.
Looking at companies, those that overcome the “shock” more quickly and have the courage and wisdom to think about taxation strategically will be the first to turn this climate of uncertainty to their advantage. At a time when a general increase in tax burdens related to IRPC, IRPS, VAT or ISPC is expected, along with greater pressure on company cash flow due to the earlier payment of some of these taxes, those that manage to optimise their position and reduce exposure to these effects will be in a privileged position, improving their financial health, gaining greater flexibility in defining their strategy and strengthening their negotiating power.
Although historically, in the Mozambican context, economic agents tend to approach taxation strictly from a compliance perspective, this reform should serve as a challenge to managers of companies operating in the country to “invest” in taxation as a strategic, differentiating and innovative tool capable of generating value and competitive advantage.
