Mozambique: VAT exemption on sugar, soap, oil to be extended for three years

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Mozambique: VAT exemption on sugar, soap, oil to be extended for three years

1:18 CAT | 25 Nov 2020

File photo: Voa Portugues

Mozambique’s parliament on Wednesday approved in general and by consensus the extension of the exemption from Value Added Tax (VAT) on sugar, soap and cooking oil until December 2023, because of the impact of Covid-19.

The exemption had already been renewed in May of this year and was to expire on 31 December, as part of the measures to alleviate the social and economic impact caused by the Covid-19 pandemic.

Economy and finance minister Adriano Maleiane told parliament that the exemption also covered raw materials, intermediate parts and equipment used in the sugar, oil and soap production industries.

“The assumptions that dictated the granting of the VAT exemption, namely the need to reduce the impact on consumer prices and to make the domestic industry more robust,” Maleiane said.

The measure, he continued, will remove about 3.2 billion meticais (€36.3 million) from the state coffers over three years.

This tax shortfall is expected to be offset by the payment of corporate income tax (IRPS) and personal income tax (IRPS) by industries benefiting from the VAT rate exemption, he added.

Maleiane said that sugars, soaps and oils were added to other essential products that had been benefiting from an exemption from VAT in the country, particularly in the areas of agriculture, fishing, health and education.

Adriano Maleiane acknowledged that the VAT rate in force in Mozambique, which is 17%, is considered one of the highest in southern Africa and a study is underway to understand and correct the table.

“The study aims to eliminate the distortions that exemptions cause in the economy,” the minister said.

Mozambique had, by Tuesday November 24, 127 deaths because of Covid-19 and a total of 15,231 infections, with 88% recovered.

The covid-19 pandemic has caused at least 1,397,322 deaths as a result of over 59.2 million cases of infection worldwide, according to the French agency AFP.

Source: Lusa