Mozambique: Business sector regrets that VAT has been lowered by only one percentage point

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Mozambique: Business sector regrets that VAT has been lowered by only one percentage point

4:53 CAT | 10 Aug 2022

The president of the Confederation of Economic Associations of Mozambique (CTA) regretted today that the Value Added Tax (VAT) was lowered by just one percent, as part of the economic stimulus package (PAE) announced on Tuesday by President Nyusi.

“We expected a reduction in Value Added Tax rate to around 14% or 15%,” Agostinho Vuma said in statements to the private daily, ‘O País’.

Vuma expressed the wish for a sharp reduction in the tax burden over the next two years, providing a greater stimulus to the economy.

“We are pleased that these measures are valid for two years, which means that the granting of a pilot [trial] period will be considered,” he said.

After this phase, Vuma continued, the executive must consider the possibility of further easing the tax burden.

On Tuesday, the Mozambican president announced a package of 20 measures to stimulate the economy, including a 22% reduction in the Corporate Income Tax (IRPC) rate and a one percent reduction in Value Added Tax (VAT).

The 20 measures are part of the PAE – Economic Acceleration Stimulus Package, which aims to respond to the country’s growth needs, the negative impact of the Russia-Ukraine war, armed violence in Cabo Delgado province and natural disasters.

The measures announced lower the IRPC from 32 percent to 10 percent in agriculture, aquaculture and public transport, and VAT from 17 percent to 16 percent and include a VAT exemption on imports for agriculture and electrification [ to boost renewable energy].

The Mozambican head of state also signalled the introduction of tax incentives for new investments over the next three years, but did not mention the rates of these incentives.

The PAE package increases the share of revenues from natural resources transferred to the provinces where they are extracted from 2.5% to 10%.

The package also foresees the establishment of a mutual loan guarantee fund worth US$250 million (€244.4 million) to help banks make credit available in the economy at more affordable interest rates.