Tax for oil and gas subcontractors in Mozambique

Two regimes: the concessionaire’s and yours

The petroleum tax regime (Law 27/2014, republished by Law 14/2017) applies to holders of concession contracts: a petroleum production tax, corporate income tax ring-fenced per concession, specific cost recovery and depreciation rules, and customs and VAT facilities for approved projects. A supplier or subcontractor is not a concessionaire. The general tax system normally applies to it, subject to any special legal or contractual regime or benefit covering that supplier. For Area 1 and Area 4, the analysis includes the concession contracts and the applicable subsequent instruments, as explained below.

For the Area 1 and Area 4 projects, the tax assessment should start with the applicable concession contract and its supplementary agreements. Article 39 of Law 27/2014 preserves the framework of contracts signed under earlier legislation, unless the concessionaire elected to apply the new law within the period it set. Article 11.4(e) of both original concession contracts provides for 10% withholding on payments for work or services supplied to the concessionaire by its foreign non-resident subcontractors within the contract’s scope, and article 11.4(f) excludes other taxes or withholdings on those payments. This contractual basis should be distinguished from the statutory rate in article 28 of Law 27/2014 and assessed together with the contract’s definition of subcontractor (article 2: a person contracted by the concessionaire), any extension to project entities under later agreements, the services involved and the entity contracting and paying for them.

First question: do you have a taxable presence?

Since 1 January 2026, article 3 of the Corporate Income Tax Code (IRPC Code), as amended by Law 12/2025, has included two specific permanent establishment tests relevant to suppliers: a construction, installation or assembly site lasting more than 90 days; and services, including consultancy and professional services, that continue within Mozambican territory for more than 90 days in aggregate in any twelve-month period. For services, the statutory wording includes situations without physical presence and excludes digital services. Invoicing from abroad or working remotely does not, by itself, resolve the assessment. The interaction between the absence of physical presence and the requirement for services to continue within Mozambican territory calls for an assessment of the actual service model. Remote and mixed arrangements require a permanent establishment risk assessment; use of the services by a Mozambican project should not, by itself, be taken as sufficient to meet the territorial requirement. Any applicable treaty must also be considered. As of 19 October 2026, we could not confirm the regulatory text or administrative guidance clarifying this interaction. These thresholds are not a general safe harbour: a fixed place of business or another case under article 3 may apply sooner, and any applicable tax treaty must also be considered. Once a permanent establishment exists, the profits attributable to it are taxed at 32%, with the relevant filing obligations. Registering the appropriate structure in advance can avoid the cost of regularising it later.

The rates that apply to suppliers

Withholding on offshore invoices: when it arises and who bears it

A common pattern in audits: a foreign group wins a contract, performs part of it from abroad and invoices the Mozambican client or its own subsidiary from the parent. The payer does not withhold, or withholds late. Years later the tax authority assesses the Mozambican payer for the tax, interest and penalties on the gross amount, and the foreign recipient has usually left.

• The obligation to withhold arises at the earliest of the recognition of the cost, the payment, the maturity (even if presumed), the placing at the recipient’s disposal, the settlement or the quantification of the amount (art. 67 no. 5, as amended by Law 12/2025). Accruing an offshore invoice can trigger it before any money moves.
• Decide at contract stage who bears the withholding and write it into the price. A gross-up clause is common and has its own tax consequences.
• Check whether a double tax treaty applies. Mozambique has treaties in force with South Africa, Portugal, the United Arab Emirates, India, Italy, Mauritius, Vietnam and Macau; the Botswana treaty was ratified in 2011 but its entry into force is not confirmed. Relief is not automatic: under Ministerial Diploma 113/2006 the form certified by the residence country must be in place before the taxable event, otherwise the full tax is withheld and refunded on request within two years.
• Where work is performed in Mozambique, compare invoicing through a local entity: the 20% final withholding on the gross no longer applies, VAT is charged, resident withholding rules apply to the categories in art. 67, and the margin is taxed at 32% on a net basis. It is a different position, not an exemption.
• For outward payments for services, the bank checks evidence of compliance with the tax obligations relating to the transaction (Notice 3/GBM/2024, art. 37). Depending on the transaction and the bank’s procedure, a tax clearance certificate (certidão de quitação) and additional documents, including evidence of the applicable withholding or tax payment, may be required.

VAT: exemptions exist, but they are narrow

VAT and customs relief depends on the project’s legal and contractual framework, the entity and the transaction. Article 11.2 of the original Area 1 and Area 4 concession contracts provides benefits for the concessionaire and qualifying subcontractors, including specified imports, temporary imports and re-exports for petroleum operations, with the corresponding VAT exemption; article 11.7 keeps customs procedures and formalities in place. Eligibility requires confirmation of the contractual position, authorisations and applicable customs formalities; it is not determined solely by main-EPC status or the number of tiers in the supply chain. Where no relief applies, plan for duties and VAT at import, then recover input VAT through monthly returns, or structure the import through the entity that holds the exemption with a clear contractual chain. Refund claims succeed when invoices, customs declarations and payment proofs are complete; under article 21 no. 10 of the VAT Code, refunds, where due, must be made within 150 days of the application being submitted, and no. 13 allows declared credits to be suspended for 60 days from notification where verification is prevented for reasons attributable to the taxpayer (Law 10/2025).

Transfer pricing: the second audit topic

Decree 70/2017 applies the arm’s length principle to transactions between related parties and to the other situations it expressly covers (arts. 3 to 6). Taxpayers with such transactions must keep a documentation file; those whose net sales and other income did not reach MZN 2.5 million in the previous year are exempt from that file (art. 21 no. 4), though the pricing rules still apply. For a supplier group the typical exposures are the technical assistance fee from the parent, equipment leases from a group company, management charges and intra-group financing. Each needs a contract, a benchmark and evidence that the service was actually rendered. If the taxpayer cannot substantiate that the service was provided, that it delivered a benefit, or that the fee was appropriately priced, the tax authority may adjust or disallow the deduction. Withholding tax is a separate issue.

The compliance calendar at a glance