As one of Africa's emerging economies, Mozambique offers abundant opportunities for domestic and foreign investors alike. In a bid to enhance a conducive environment for investment to continue fostering economic growth and development, Mozambique recently has updated its investment legislation and implemented Law No. 8/2023 of 9 June 2023, effective since September 2023, and Decree No. 8/2024 of 7 March, which regulates the Investment Law.
The Investment Law and Investment Regulations apply to all projects of an economic nature that are executed in Mozambique and are eligible to benefit from the significant fiscal and non-fiscal incentives and guarantees provided under the Investment Law.
- Key aspects of the Investment Law and Investment Regulations
- Scope and application
Domestic and foreign investments, as well as public-private partnership ventures, large-scale projects and business concessions, are subject to the provisions of the Investment Law and Investment Regulations.
Qualifying investment operations are widely defined and include both:
- direct investments in the form of cash; infrastructure, equipment and materials; the assignment of patented technologies and registered trademarks; and assignment of rights over concessions, licences, and other rights of an economic, commercial or technological nature; and
- indirect investments in the form of loans; additional capital contributions; supplies; patented technology; technical processes; industrial secrets and models; franchises; registered trademarks; and technical assistance and other forms of specified access to the use or transfer of technology and registered trademarks.
Investments in prospecting, research and production in the oil, gas and extractives sectors, as well as public investments financed by funds from the state budget and those of an exclusively social or non-profit nature are excluded from the scope of the Investment Law.
In terms of the Investment Regulations, the minimum amount of foreign direct investment for the purpose of transferring profits and exporting the invested capital abroad is MZN6.5-million. Foreign direct investment requires registration under exchange control legislation in force and the export of profits and invested capital requires proof of registration.
- Guarantees and incentives available to approved projects
Guarantees under the Investment Law include:
- fair and non-discriminatory treatment of national and foreign investors, employers and employees;
- the legal protection of property rights and other rights of patrimonial content, including intellectual and industrial property rights, as well as the legal protection of the right to use and benefit from the land; and
- transfers of funds abroad.
Incentives include tax and customs incentives defined in the Code of Tax Benefits for investments made in accordance with the Investment Law and Investment Regulations.
- Approval process
The Investment Regulations introduced various amendments to the approval process for investment projects to benefit from the guarantees and incentives under the Investment Law. Investment projects are subject to either the “registration-only” regime or the authorisation scheme.
The registration-only regime applies to investment projects up to the value of MZN32-billion and consists of the submission of an investment proposal for purposes of registration and allocation of the applicable incentives.
Applications under the registration-only regime are approved by the:
- Provincial Governor: for projects up to MZN3.5-billion (approximately USD54-million);
- Managing Director of APIEX: for projects up to MZN6.5-billion (approximately USD100-million); and
- Minister of Economy and Finance: for projects up to MZN32-billion (approximately USD500-million).
Once a project has been registered, an investment certificate is issued, which must be presented for the purpose of enjoying guarantees and incentives.
The authorisation scheme applies to investment projects which exceed MZN32 billion in one of the following categories:
- large-scale investment projects as well as those involving economic activities with foreseeable economic, environmental, safety or public health implications;
- public-private partnerships and business concessions;
- investment projects that require an extension of land with an area equal to or greater than 10 000 hectares;
- investment projects that require a forest concession of an area greater than 100 000 hectares; and
- investment projects having as their object the industrial processing of mining and/or petroleum products.
It involves the presentation of a technical, economic and financial feasibility study in a specified format to demonstrate the sustainability of the project and its investment and financing plans. The Investment Authorization is approved by Resolution of the Council of Ministers or Dispatch of the Minister of Economy and Finance, as follows:
- Minister of Economy and Finance: for projects relating to the industrial processing of mining and/or petroleum products, and projects with foreseeable economic, social, safety and/or public health implications;
- Council of Ministers: for
public-private partnership ventures and business concessions;
- projects that require land extension with an area equal to or greater than 10 000 ha; and
- projects that require a forest concession with an area greater than 100 000 ha.
- Compliance requirements and penalties
Among others, investors and promotors of approved projects are required to submit bi-annual returns reporting on the progress with implementing the project.
The following penalties shall be imposed for any specified non-compliance with the Investment Law, taking into account the seriousness of the offence, the economic circumstances of the investor, and the economic benefit derived by the investor from committing the offence:
- written warning against the investor, setting a time limit for remedying the offence;
- loss of entitlement to tax incentives and other facilities granted to the project; and
- revocation of an authorisation or cancellation of an investment registration.
While the Investment Law and Investment Regulations offer various guarantees and incentives, they also impose several duties and responsibilities on investors in order to derive such benefits under the legislation. As recommended by Malaika Ribeiro, Managing Partner, MXR Advogados & Associados: “In order to ensure the harmonisation of the fulfilment of the above responsibilities, investors should liaise in advance with local entities and sectoral supervisory bodies.”
*With appreciation for the contribution of MXR Advogados & Associados to this ENSight.
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