Business Law in Mozambique
Business Law in Mozambique
Mozambique's legal framework for business is based on a combination of civil law and customary law, with significant influences from Portuguese colonial law. The country has made substantial progress in modernizing its legal and regulatory systems to attract both domestic and foreign investment. The government has focused on improving business infrastructure, simplifying procedures, and creating a more transparent legal environment. However, challenges remain, including bureaucratic inefficiencies, corruption, and an underdeveloped judicial system.
Key Aspects of Business Law in Mozambique
1. Legal Framework
The primary sources of business law in Mozambique include:
The Constitution of Mozambique (2004): Establishes the fundamental legal principles, including the protection of private property, freedom of enterprise, and equal treatment of nationals and foreigners. It also provides for the right to do business, including foreign investment.
Commercial Code: Mozambique’s Commercial Code governs commercial transactions, including contracts, corporate structures, and commercial operations. It establishes the legal rules for business relationships and contractual obligations in the private sector.
Company Law: The Companies Law (Law No. 1/2018) governs the creation and regulation of companies in Mozambique, including partnerships, limited liability companies (LLCs), and joint-stock companies. This law outlines the responsibilities of business owners and directors and the process of incorporating a company.
Investment Law: The Investment Law (Law No. 3/93) provides the legal framework for domestic and foreign investment, offering incentives, guarantees, and protections for investors, such as guarantees against nationalization and the ability to repatriate profits.
Labour Law: The Labour Law (Law No. 23/2007) regulates employment contracts, working conditions, rights, and obligations of both employers and employees. It aims to protect workers’ rights while promoting fair employment practices.
Tax Law: The Tax Code governs all tax matters in Mozambique, including corporate tax, VAT, and income tax, among others. It is administered by the Tax Authority (Autoridade Tributária de Moçambique).
Intellectual Property Law: Mozambique has intellectual property laws that are aligned with international conventions, such as the World Intellectual Property Organization (WIPO) agreements, and provides protection for trademarks, patents, industrial designs, and copyrights.
2. Types of Business Entities
Mozambique provides a range of business structures for both domestic and foreign entrepreneurs:
Société à Responsabilité Limitée (SARL) (Limited Liability Company): This is the most common type of company in Mozambique. It can have one or more shareholders, with the liability of shareholders limited to their capital contribution. The minimum capital requirement for an SARL is generally MZN 100,000.
Société Anonyme (SA) (Public Limited Company): A Joint Stock Company requires a minimum of two shareholders, and its shares can be publicly traded. The minimum capital for a public limited company is MZN 5 million, and the liability of shareholders is limited to the amount of their investment.
Branch of a Foreign Company: Foreign companies can establish a branch in Mozambique. The branch is considered part of the parent company and must comply with the same regulations as a domestic business. There are also specific regulations for Foreign Investment in Mozambique.
Partnerships and Sole Proprietorships: Mozambique also allows for partnerships and sole proprietorships, where the owner has unlimited liability for the debts and obligations of the business.
3. Business Registration and Licensing
The process of starting a business in Mozambique involves several key steps:
Company Name Registration: The company name must be registered with the National Institute of Industrial Property (INPI) to avoid conflicts with other registered trademarks and business names.
Incorporation: To incorporate a company, the articles of incorporation and other required documentation must be filed with the Commercial Registry (Conservatória do Registo Comercial). The process includes providing details about the business’s purpose, structure, shareholders, and management.
Tax Registration: Businesses must register with the Mozambique Tax Authority to obtain a Tax Identification Number (NIF), which is required for tax purposes, including VAT registration and corporate income tax.
Social Security Registration: Employers are required to register with the National Institute of Social Security (INSS) and contribute to the social security system on behalf of their employees.
Sector-Specific Licensing: Certain businesses, such as those in manufacturing, energy, health, food, or finance, may require additional licenses or approvals from the relevant regulatory authority. These licenses are usually obtained from sector-specific ministries or agencies.
4. Taxation in Mozambique
Mozambique’s tax system is designed to ensure the collection of revenue while encouraging investment. The key taxes affecting businesses include:
Corporate Income Tax (IRPC): The standard corporate tax rate is 32% for most companies, although smaller businesses with an annual turnover of less than MZN 8 million may qualify for a reduced rate. Businesses in the mining, oil, and gas sectors may be subject to different tax rates and additional royalties.
Value Added Tax (VAT): The standard VAT rate is 17%. Certain essential goods and services, such as food and medical services, are exempt or subject to reduced VAT rates.
Personal Income Tax: Employees in Mozambique are subject to a progressive income tax rate that ranges from 10% to 32%. Businesses are required to withhold income tax on behalf of their employees.
Withholding Taxes: Mozambique levies withholding taxes on dividends, interest, and royalties. The general withholding tax rate on dividends paid to non-residents is 20%, but this may be reduced under applicable tax treaties.
Property Tax: Companies that own real estate in Mozambique are subject to property taxes, which are assessed based on the value of the property.
Other Taxes: There are several other taxes that apply to specific business activities, such as customs duties, excise taxes, and environmental taxes.
5. Labour and Employment Law
The Labour Law in Mozambique aims to balance the rights of employees with the needs of businesses, promoting fair working conditions while encouraging employment. Key provisions include:
Employment Contracts: All employees must have written employment contracts that outline the terms of employment, including wages, working hours, and job responsibilities.
Minimum Wage: Mozambique has a national minimum wage, which varies by industry and sector. It is regularly updated by the government to reflect inflation and cost of living increases.
Working Hours: The standard workweek is 44 hours over a five or six-day period. Overtime work is compensated at a higher rate, typically 150% of the regular hourly rate.
Paid Leave: Employees are entitled to 22 days of paid annual leave, in addition to public holidays. They are also entitled to sick leave and maternity leave.
Social Security Contributions: Both employers and employees are required to contribute to the social security system, which provides benefits such as pensions, healthcare, and unemployment insurance.
Termination and Severance: The Labour Law outlines the procedures for terminating employment, including rules on severance pay, notice periods, and just cause for dismissal.
6. Foreign Investment
Mozambique actively encourages foreign investment in various sectors. The key provisions regarding foreign investment are:
Foreign Investment Law: The Investment Law (Law No. 3/93) and the Regulatory Decree (Decree No. 43/2009) offer a range of incentives to foreign investors, including guarantees of non-expropriation, access to currency exchange, and tax breaks for qualifying projects.
Investment Promotion Centre (CPI): The CPI is responsible for processing foreign investment applications and granting incentives, such as tax exemptions or customs duty relief for investments in sectors like agriculture, infrastructure, and manufacturing.
Free Zones: Mozambique has designated Special Economic Zones (SEZs), which provide additional incentives for businesses engaged in export-oriented activities, such as tax exemptions and customs duties reductions.
Foreign Ownership: Foreigners can generally own 100% of a business in Mozambique, except in certain strategic sectors such as defense, media, and some areas of natural resource extraction.
7. Intellectual Property
Mozambique’s Intellectual Property Law is aligned with international standards. The country is a member of the World Intellectual Property Organization (WIPO) and is party to key international treaties. Key features include:
Patents: Patents are granted for inventions that are novel, inventive, and industrially applicable. A patent lasts for 20 years from the filing date.
Trademarks: Trademarks can be registered for goods and services and are protected for 10 years, with the option of renewal.
Copyright: Mozambique protects authors' rights, and works are automatically protected upon creation. Copyright lasts for the life of the author plus 50 years.
8. Dispute Resolution
Mozambique's legal system provides several mechanisms for resolving business disputes:
Court System: Commercial disputes are generally handled by specialized commercial courts. However, the judicial system faces challenges, such as a backlog of cases and inefficiencies.
Arbitration: Arbitration is a preferred method of dispute resolution in international business transactions. Mozambique is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which facilitates the enforcement of arbitration decisions.
Mediation: Alternative dispute resolution methods, including mediation, are gaining popularity, especially for less complex disputes.
Conclusion
Mozambique is actively improving its legal and regulatory framework to make the business environment more attractive for both local and foreign investors. Despite some challenges, the country offers several incentives, a growing economy, and a range of opportunities in sectors such as mining, agriculture, energy, and infrastructure. With its strategic location and access to international markets, Mozambique is an emerging market that continues to attract business and investment.
RELATED Blog
0 comments