Mozambique Announces Economic Acceleration Program – Economic Analysis

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The President of the Republic of Mozambique, Filipe Nyusi, launched in August 2022 the Package of Economic Acceleration Measures (Pacote de Medidas de Aceleração Econômica – PAE), containing several changes that contribute to the economic development of the country. With these measures, the government aims to diversify its economic activities, increase its opportunities for economic expansion and ensure the realization of Mozambique’s untapped potential.

Thus, the 20 measures put in place can be divided into four groups: (i) tax incentives; (ii) debureaucratization; (iii) economic valuation; and (iv) liability. It is expected that all respective legal instruments and regulations dealing with each measure will be published in the coming weeks.

Tax incentives

1 – Reduction of the Value Added Tax (IVA) rate from 17% to 16%;

2 – Exemption from VAT for the import of agricultural and electrical energy factors;

3 – Reduction of the corporate tax rate (IRPC) from 32% to 10%, in agriculture, aquaculture and urban transport;

4 – Acceleration of the amortization of the capital released at half of the duration fixed by the tax code, for the investments made in the installations and equipment of the company which lead to the creation of at least 20 additional permanent jobs;

5 – Simplification of the capital repatriation procedure;

6 – Reinforcement of the supervision of natural resource exports;

7 – Redirect the mission of the Housing Development Fund towards the development of land infrastructure for citizens and investors, as well as the revitalization of the construction materials sectors;

8 – Allocation of 10% of tax revenues from natural resources to the development of the provinces where this extraction occurs, exclusively for the financing of infrastructure projects and development programs;

Debureaucratization:

11 – Improve the performance of airports, ports and logistics models;

12 – Encouragement of the national industrialization of goods acquired in bulk by the State;

13 – Exemption of visas for nationals of countries with low risk of migration and granting of investment visas of longer duration;

14 – Adjustment and revision of labor and investment laws;

15 – Simplify administrative procedures between the State, companies and citizens;

16 – Reform the administration of justice;

17 – Simplification of public administration improving its efficiency and the quality of services offered to citizens;

Economic improvement:

19 – Creation and establishment of the Sovereign Fund of Mozambique with a regulatory framework to ensure the use of oil revenues in a transparent manner and to protect the economy against external shocks.

9 – Creation of a borrowers’ guarantee fund to support small and medium-sized Mozambican enterprises;

10 – Obligation to mix imported fuels with biofuels.

Responsibility:

17 – Supervision of social security funds, including the INSS, by the Insurance Supervision Institute (ISS);

20 – Reform the State’s internal audit subsystem to reduce corruption and embezzlement of public funds.

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This article by Mayer Brown provides information and commentary on interesting legal issues and developments. The foregoing is not a complete treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action regarding the matters discussed here.

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