Client Briefing

December 2010

Doing business in Mozambique

1. Introduction Contents
This memorandum sets out a summary of certain legal aspects which should be
taken into account when doing business in Mozambique. It is not intended to be 1. Introduction 1
exhaustive and is provided for information purposes only. If further information or
2. General information 1
legal advice is required, the readers are invited to contact one of the lawyers of
Clifford Chance LLP or Ferreira Rocha & Associados who are listed below. 3. Financial data 2

2. General information 4. The business environment 3

2.1 Political structure
Official name República de Moçambique 5. Investment procedure 4
Form of state Unitary republic
Legal system Based on Portuguese law 6. Investment incentives 5
National legislature 250-member Assembleia da República
(parliament) elected by direct, universal suffrage 7. Bilateral treaties and agreements 6
every five years
8. Companies 6
Legislative elections 28 October 2009 (legislative and presidential);
next national, provincial and presidential elections 9. Company registration process 7
are due in late 2014
Main political parties Frente de Libertação de Moçambique (Frelimo) is 10. Taxation 7
the ruling party; the main opposition party is
Resistência Nacional de Moçambique (Renamo) 11. Land use 7
President Armando Guebuza
Prime Minister Aires Bonifácio Ali 12. Visas 8

2.2 Basic data

Land area 799,390 sq km
Population 20.5 million (2007, census)
Main towns Population in '000
(2010, World Gazetteer)
Maputo (capital) 1,888*
Nampula 535 For more information about investing in
Mozambique please contact the following
Beira 440 persons:
Chimoio 259
Nacala 221 Pieter van Welzen, Advocaat
Clifford Chance LLP
Quelimane 205 Droogbak 1A
Tete 170 1013 GE AMSTERDAM
Pemba 161 The Netherlands
T: +31 20 711 9154
* Including Matola and Maputo province F: +31 20 710 0154
Language Portuguese (official) and three main African pieter.vanwelzen@cliffordchance.com
language groups: Makua-Lomwe, Tsonga and www.cliffordchance.com
Sena-Nyanja Rodrigo F. Rocha, Attorney
Currency The metical (MT). In 2009 the average exchange Ferreira Rocha & Associados –
was MT26.3:USD1 Sociedade de Advogados, LDA
Rua da Sé, 114, 1.º, sala 111
MAPUTO
Mozambique
T: +258 21 317 159
F: +258 21 010 475
rodrigo.rocha@fralaw.com
www.fralaw.com
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December 2010

3. Financial data
3.1 Annual data and forecast

2007 a 2008 a

Gross domestic product

Nominal GDP (USD bn) 8.0 9.8
Real GDP growth (%) 7.4 6.8

Income
GDP per head (USD at PPP) 788b 840b

Prices and financial indicators

Exchange rate MT:USD (end-period) 23.80 25.50
Consumer prices (end-period: % change) 10.3 6.2
Lending interest rate (av; %) 19.5 18.3

Current account (USD m)

Trade balance -399 -805
Goods: exports fob 2,412 2,653
Goods: imports fob -2,811 -3,458
Services balance -397 -394
Income balance -592 -631
Current transfers balance 602 854
Current-account balance -785 -975

International reserves (USD m)

Total international reserves 1,445 1,578
a
Actual. bEconomist Intelligence Unit estimates. Source: IMF, International Financial Statistics.

3.2 Main Export (2008)

Product value (USD mln) % of total

Aluminium 1,156.60 59.20

Electricity 184.20 9.43
Natural gas and bunkers 108.50 5.56
Prawns 38.20 1.96
Sugar 66.30 3.39
Tobacco 112.60 5.76
Cotton 36.20 1.85
Timber 20.90 1.07
Cashew nut and cashew nut kernel 21.10 1.08
Others 209.00 10.70

Total 1,953.60 100.00

Source: IPEX (Instituto para a Promoção de Exportações)

Main exports markets: the Netherlands, South Africa, Spain, Portugal, the United Kingdom, Zimbabwe, Kenya, Malawi and India.

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December 2010

3.3 Main Imports (2008)

Product value (USD mln) % of total

Alumina 528.70 21.39

Machinery 328.90 13.31
Fuels (gasoil and gasoline) 461.00 18.65
Automobiles 182.10 7.37
Cereals 129.40 5.24
Electrical power 83.30 3.37
Medicines 34.30 1.40
Others 723.70 29.27

Total 2,471.40 100.00

Source: IPEX

Main import markets: South Africa, the Netherlands, the United States of America, India, Portugal, China, the United Arab
Emirates, Japan, Taiwan and Pakistan.

4. The business environment

Areas of investment
The Government of Mozambique actively promotes private investment in the following areas:

 Agriculture
 Fisheries and aquaculture
 Industry
 Tourism and hotels
 Public infrastructures
 Mineral resources
 Energy

4.1 Agriculture
This sector offers opportunities for the production of cereals, fruits, flowers, vegetables, for the local market and for export.
The country has been exporting various products, notably baby-corn, flowers, citrus, cashew nuts, various fruits, peppers
and paprika, to markets in Europe.

4.2 Fisheries and aquaculture

This sector has been developing with the presence of local and foreign companies and has seen a strong growth and
strong presence in European and Asian markets with respect to prawns and various other sea products, the country has a
coast line of 2,700 km on the Indian Ocean, combined with natural conditions that are favourable for aquaculture.

4.3 Industry
One of the country's biggest challenges is adding value to its primary products. This sector offers investment opportunities
almost all over the country. The textile industry, agribusiness and the aluminium, iron and steel industries are some
examples of industries to take into consideration.

4.4 Tourism and hotels

This sector has been growing steadily in recent years given the public investments in infrastructure, allowing access to
previously inaccessible locations. The country offers investment opportunities in national parks and beach tourism.

4.5 Public infrastructure

The Government of Mozambique, in partnership with the private sector, has been investing in the development of public
infrastructure, such as roads, bridges, telecommunication and energy. Consequently, various business opportunities exist in
these sectors.

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December 2010

4.6 Mineral resources

There are major investment opportunities for the exploration, extraction, processing and utilization of various types of
resources. The most important are natural gas, coal, coal bed methane, gold, titanium, ilmenite, zircon, rutile, tantalite,
marble and precious stones.

4.7 Energy
Following the commercial extraction of natural gas, rehabilitation and construction of new hydroelectric dams and the start
of the exploitation and development of alternative and renewable energies such as solar, oleic, and bio-fuels (bio-ethanol,
biodiesel and biogas), the country has expanded its energy generation capacity potential to more than 16,000 mw. Taking
into account the liberalisation of the energy sector, this sector represents a major investment and growth opportunity.

5. Investment procedure
5.1 CPI – Centro de Promoção de Investimentos
The CPI is the investment promotion centre for Mozambique and offers a package of services to assist national and foreign
investors.

The mission of the CPI is (a) to promote national and foreign direct investment, (b) to provide institutional assistance to
investors in the approval and implementation of investment projects, (c) to assist with the concession of fiscal and customs
incentives to investors, (d) to promote between national and foreign companies, SME’s and large undertakings, (e) to
identify potential financial partners and/or technological partners for joint ventures, (f) to identify and disseminate investment
opportunities, and (g) more generally to support programmes that support and assist business development.

The activities of the CPI are conducted in accordance with the following legislation:
 Law n° 3/93 of 24 June 1993 (Investment Law) and the corresponding Regulation, approved by decree n° 14/93 of
21 July 1993 (as amended), which define the regulatory framework for national and foreign investments and eligibility to
guarantees and fiscal incentives.
 The Code of Fiscal Benefits, approved by Law 4/2009 of 12 January 2009, which establishes the framework of fiscal
incentives.

The minimum value of investment for accessing the investment incentives is approximately USD 100,000 for direct foreign
investment. As per a recent change in the law there is no minimum value of investment for accessing investment incentives
for national investment.

5.2 Project approval

The procedures for investment and obtaining incentives and guarantees are set out in Law n° 3/93 and ancillary legislation
and can be summarised as follows:
 The investor submits to the CPI three copies of a business plan and/or three copies of the CPI application form for
approval. The accompanying documents (such as copies of ID, articles of association of the company, maps, proofs of
technical and financial capability, investor and/or company profile) should be filed together with the application.
 The CPI coordinates the approval process, in conjunction with the authorities at local and central levels. As part of the
project's approval process the CPI will also negotiate the terms of authorisation with the investors.
 Upon agreement between CPI and the investors on the terms of authorisation, CPI submits the project for approval to
the relevant authority (the Provincial Governor, the Minister of Planning and Development or the Council of Ministers,
depending on the size of the project).

CPI further provides assistance to the investor for the implementation of the project, such as business licensing, obtaining
entrance visas, work and residence permits, customs exemption authorisations and licensing of land.

5.3 Investment guarantees

The Mozambican legislation on investment provides that investors have the following rights:
 Legal protection of property and rights, including industrial property rights
 No restrictions on borrowing or payment of interest abroad*
 No restrictions on the transfer of dividends abroad*
 Arbitration according to International Centre for Settlement of Investment Disputes or International Chamber of
Commerce rules for the resolutions of disputes in respect of investments.
* Approval of an investment project and subsequent foreign exchange control approval is mandatory.

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6. Investment incentives
As mentioned above, the Mozambican investment legislation provides a number of investment benefits, which are dependent
on the value, location and sector of activity of the projects.

The Mozambican code of fiscal benefits of 12 January 2009 (Law n° 4/2009) provides general and specific investment
incentives. The general incentives apply to investments that cannot benefit from specific incentives.

6.1 General incentives

The general incentives consist of the following.
 Exemptions from import duties and VAT for capital goods. This incentive is generally also available under the specific
incentives, and in some cases extended to other goods.
 If the project involves investment in new tangible fixed assets (subject to certain conditions), tax credits for corporate
income tax in respect of these investments will be available during five fiscal years. In the city of Maputo the tax credit
amounts to 5% and elsewhere to 10% of the total realised investment. The tax credit may be carried forward during the
first five fiscal years from the date on which the operations of the project commenced.
 Accelerated deprecation of new innovative assets and machinery and equipment used in industrial and/or agro-industrial
operation (normal depreciation rates increased by 50%).
 Income tax credit for investments in specialised equipment using new technologies during the first five years of
operation (tax credit of 10%).
 Income tax credit for investments in professional training of Mozambican employees during the first five years of
operation (credit of 5% or 10%).
 Expenditure considered to be costs for income tax purposes: allowance for 110% of the value of expenditure in the
construction of works with a public utility function located in Maputo and 120% for works located elsewhere.

6.2 Special incentives

6.2.1 Rapid Development Zones
Eligible projects in so-called "Rapid Development Zones" can, in addition to certain general incentives, also benefit
during the five fiscal years from a tax credit amounting to 20% of the total realised investment. The tax credit may be
carried forward and used during the first five fiscal years from the date on which the operations of the project
commenced. There is also an exemption from real estate transfer tax (SISA) for transfer of real estate by the
Mozambican state to the project if such real estate is used as infrastructure for the project.

The "Rapid Development Zones" include:

 the Zambezi River Valley (including all districts in Tete province, and certain districts in Zambezia Province, Sofala
Province and Manica provinces).
 Niassa Province
 Nacala District
 Ilha de Moçambique
 Ibo Island

6.2.2 Basic infrastructure

In addition to the general VAT and import duty exemptions, investments with an exclusive basic public infrastructure
purpose can benefit from the following corporate income tax reductions:
 80% during the first five fiscal years
 60% from fiscal year 6 until fiscal year 10
 25% from fiscal year 11 until fiscal year 15

6.2.3 Rural commerce and industry and manufacturing and assembly industries
Projects that involve the construction and/or rehabilitation of infrastructure to be used exclusively for the conduct of
commercial or industrial activities in rural areas and certain investments in the manufacturing and assembly industry
can benefit from additional exemptions from import duties and VAT.

6.2.4 Industrial free zones and special economic zones

Investments in industrial free zones and special economic zones can benefit from exemptions from import duties and
VAT as well as reductions in the tax rate for corporate income tax. Industrial free zones and special economic zones
are subject to specific regulations.

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6.2.5 Agriculture and fisheries

In addition to the general exemption for import duties and VAT and the deductions in connection with professional
training and infrastructure related expeditions, investments in the agriculture and fisheries area can benefit from a
reduction in the corporate income tax rate:
 80% until 31 December 2015
 50% from 2016 until 2025

6.2.6 Tourism
Certain investments in this sector can benefit from exemptions from import duties and VAT in relation to hotel and
tourism related equipment. In addition, they can benefit from the investment tax credit and the deduction for new
technology, professional training and infrastructure related expenditure. The depreciation of tangible fixed assets can
furthermore be increased by 50% of the normal rate.

6.2.7 Science and technology parks

Investments in the area of specific investigation, information and communication technology as well as research
development carried out in science and technology parks benefit from a corporate income tax exemption of 100% in
the first five fiscal years and a reduction of 50% in the tax rate from fiscal year 6 until fiscal year 10 and 25% from
fiscal year 11 until fiscal year 15.

7. Bilateral treaties & agreements

Mozambique has signed investment promotion and reciprocal investment protection agreements with the following countries:
South Africa, Germany, Algeria, Belgium, China, Cuba, Denmark, Egypt, the United States of America, Finland, France,
Indonesia, Italy, Mauritius, the Netherlands, Portugal, Sweden, the United Kingdom, Vietnam, India, Switzerland and Zimbabwe.

Mozambique has taxation treaties with the following countries: Portugal, Mauritius, the United Arab Emirates, the Autonomous
and Special Administrative Region of Macau, Italy and South Africa.

8. Companies
The two most often used company types for investment in Mozambiquie are the public limited company (sociedade anónima:
"SA") and the private limited liability company (sociedade por quotas; "SQ").

8.1 Sociedade anónima

An SA has a capital divided into shares and must have at least three shareholders. The SA must have a minimum capital
that is commensurate with its objectives. Mozambican company law does, however, not prescribe a precise amount of
minimum capital that the company is required to have. The shares can be in bearer, book-entry or registered form. Upon
incorporation, at least 25% of the SA's share capital should be paid up. The shares can be paid up in cash or in kind. The
transfer of shares is in principle not subject to restrictions, although the articles of association can for example prescribe
pre-emption rights for the other shareholders upon a transfer of shares. The transfer formalities depend on the type of
shares held by the shareholder.

The organs of the SA are the general meeting of shareholders (assembleia geral), the board of management (conselho de
administração) and the supervisory board (conselho fiscal) or a single supervisor (fiscal único). The general meeting of
shareholders is the main corporate body and has, inter alia, the right to appoint and dismiss the members of the
management board and the supervisory board (or the single supervisor).

The management is responsible for the management of the company and represents the company. The board should have
an odd numbers of members. Small companies may have a single member board. Legal entities that are board members
should designate a representative who will act as board member. The supervisory board must consist of three or five
members and is responsible for supervising the activities of the company. The SA may also opt, instead of appointing a
supervisory board, to appoint a single supervisor, which must be an accountant or a firm of accountants.

8.2 Sociedade por quotas

An SQ has a capital divided into quotas. The minimum capital is MT 20,000. The capital must be sufficient for the
objectives of the company. The amount and number of quotas is determined by the members. The minimum amount of a
quota is MT 500. An SQ must have at least two but cannot have more than 30 members. It is possible for an SQ to have
one member, but then the term “unipessoal” must be added to its name. The quotas are in registered form and can be

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paid up in cash or in kind. A transfer of quotas must be effected in writing. The company or, if the company does not
exercise this right, the other members have a right of pre-emption in connection with a transfer of quotas, unless the
articles of association provide otherwise.

The organs of the SQ are the general meeting of shareholders (assembleia geral), the board of management
(administração) and, if the members so decide, the supervisory board (conselho fiscal) or a single supervisor (fiscal único).
The board of management can consist of one or more members.

9. Company registration process

The procedure for company registration in Mozambique has recently been simplified and comprises the following steps:
 Registration of the company name with the company register (Conservador do Registo das Entidades Legais).
 Agreement on the wording of the company's articles of association by the shareholders.
 Opening of a bank account for the purpose of depositing the share capital. The necessary documents are: a certified copy
of the company's name reservation certificate, a draft of the company's articles of association and a certified copy of the
shareholders' identification documents.
 Registration of the company with the company register. The documents to be submitted are a copy of the company's name
reservation certificate, a draft of the articles of association of the company, proof of the bank deposit and a certified copy of
the shareholders' identification documents.

After the completion of these procedures the company is legally registered and the articles of association of the company will
be published in the official gazette (Boletim da República) by the Conservatory of Legal Entities Registration.

After the registration has been concluded, the company must arrange for its tax registration and obtain a tax registration
number (NUIT) at the fiscal office of the area where it has its business operation. Operations licenses from the authorities that
are responsible for the sector of the company's business activities are also required.

10. Taxation
10.1Taxes
The Mozambican tax system integrates national and municipal taxes. There are corporate and personal direct and indirect
taxes, namely direct taxation on income and wealth and indirect taxation on expenditure (VAT, ICE and customs duties)
 Corporate income tax (IRPC) is charged in respect of income generated, during the taxation period at a rate of 32%.
 Personal income tax (IRPC) is charged in respect of the global annual value of income, is paid by individuals who are
residents in Mozambique and by those not residing in the country but receiving income from it. The tax is charged
progressively and the maximum rate is 32%.
 Value added tax (IVA) is taxable on the sale of goods and provision of services in Mozambique, as well as in connection
with the import of goods. The applicable rate is 17%.
 Specific consumption tax (ICE) is charged in connection with certain locally produced or imported goods at:
 2.5% for raw materials
 5% for capital goods
 7.5% for intermediary goods
 20% for consumption goods

As a result of the Southern Africa Development Community ("SADC") trade protocol, various products from the SADC
region countries benefit from exemptions from custom duties. Other taxes are, for example, seal tax, tax on successions
and donations, real property transfer tax (SISA), tax on gambling, national reconstruction tax and vehicle tax.

10.2 Social security

It is mandatory to register employees and their respective employers with the National Social Security System. The fee for
social security is 7% of the gross salary, being 4% paid by the employer and 3% by the employee.

11. Land use

According to the Constitution of the Republic of Mozambique, land is property of the State and can be used on a lease basis.
The use of land and the leases are regulated by Law n° 19/97, of 1 October 1997 (Land Law) and by Decree n° 66/98, of
8 December 1998 (Land Law Regulation). The maximum period of a land lease is 50 years. The lease can, upon request, be
renewed for a further 50-year period. The lessee can in principle use the land for construction, subject to prior authorisation by
the competent authorities. The lessee will have full ownership rights of the constructions erected on the land.

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 8 Doing business in Mozambique
December 2010

The land lease itself is in principle not transferable. However, the lessee can transfer the construction built on the land and
mortgage or rent the constructions.

Foreign persons may become holders of land use rights provided they have approved investment projects and observe the
following conditions:
 For an individual, residence in Mozambique for at least five years is required.
 For a legal entity, incorporation and registration in Mozambique is required.

The authorities may issue a provisional lease based on a development plan. The provisional lease is valid for a period of five
years for a Mozambican entity and two years for a foreign entity.

12. Visas
There are, broadly, three types of visas for entry into Mozambique:
 Transit visa, costing approximately USD 80, granted for individuals travelling to Mozambique for short periods (maximum
24 hours) and having as final destination a third country;
 Single entry visa, costing approximately USD 80 for individuals staying in Mozambique for periods between one to thirty days
and approximately USD 160 for individuals staying in the country for periods not exceeding sixty days;
 Multiple entry visa, costing approximately USD 320, for multiple entries within a period of three months; approximately
USD 640, for multiple entries within a period of six months; and approximately USD 1,270 for multiple entries within a period
of twelve months. 

© Clifford Chance LLP, December 2010. This publication does not necessarily deal with every important topic nor cover every
aspect of the topics with which it deals. It is not designed to provide legal or other
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