Mozambique: VAT collection extended to private schools and clinics – Carta

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Mozambique: VAT collection extended to private schools and clinics – Carta

5:31 CAT | 09 Jan 2023

FILE - For illustration purposes only. [File photo: O País]

The new VAT Code, approved by Law nº 22/2022 of December 28th and already in force since January 1st, 2023, extends Value Added Tax (VAT) to private schools and clinics.

The measure was severely criticised by the private sector when the government made it public in September on the grounds that it contradicts the objectives of the Economic Acceleration Measures Package (PAE) announced last August.

Alongside lowering the VAT rate from 17% to 16% and granting VAT exemption to the transmission and/or commercialization of essential food products and some fuels, among other goods and services, the government extended the payment of VAT to schools and private clinics, but at a reduced rate of 5%. Although criticised, it was approved by the Assembly of the Republic on December 7, 2022.

In order to extend the tax collection for the sectors in question, the new VAT Code includes the addition of article 17-A, which reads that “the transfer of goods and services indicated below are subject to the reduced rate of 5%:

“a) the provision of medical and health services and the operations closely connected thereto, carried out by private hospitals, clinics, dispensaries and the like;

“b) the provision of services whose object is education, as well as the transmission of goods and related services, when carried out by private establishments integrated in the National Education System and recognized by the Ministry that oversees the area of Education;

“c) the provision of services whose purpose is professional training, as well as the transfer of goods and related services, such as the provision of accommodation, food and teaching material, carried out by private entities;

“d) provision of services consisting of lessons given on a personal basis on matters of school or higher education”.

The measure appears to have made school fees more expensive already this year. Anyone previously paying 15,000 meticais per month now also pays 750 meticais in VAT, totalling 15,750 Meticais. The same logic applies to invoices issued by private clinics.

The extension of VAT collection to these two sectors is widely criticised by the private business sector, which considers it as running contrary to the aims of the PAE announced on 9 August by President of the Republic, Filipe Nyusi, with the objective (among others ) of alleviating the cost of living for economic agents and citizens.

For these and other reasons, the members of the Confederation of Economic Associations of Mozambique (CTA), gathered in an ordinary session in early December, expressed dissatisfaction with the final content of the reform package, since, in their opinion, “it runs contrary to the spirit of stimulating the economy”.

By Evaristo Chilingue

Source: Carta de Moçambique