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TABLE OF CONTENTS

• EXTENSION OFTAXATION OFCAPITAL GAINS

• Corporate Income Tax(“CIT”)

• Personal Income TaxCode

MOZAMBIQUE – TAXNewsletter Oct.2013

Vitor Marques da Cruz

"Vitor is the foundingpartner of MC&A,graduated at the Schoolof Law of the University ofLisbon, where heperformed functions asassistant professorhaving taught classes inPublic Finances. He isalso post­graduated inEuropean Law at theSchool of Law of thePortuguese CatholicUniversity. With extensive and varied

EXTENSION OF TAXATION OF CAPITAL GAINS

Mozambique recently approved significant changes to both theCorporate and Personal Income Tax Codes. We would like to draw your attention to the main amendments made tosuch statutes since they may have an impact on restructuringoperations being planned, which include assets located inMozambique, as well as on the tax obligations to be fulfilled bycompanies with employees working in the country.

Corporate Income Tax (“CIT”)

1. Taxation of capital gains obtained by non­resident entities Sales of local assets performed by foreign companies operating inMozambique will, starting from next year, be taxed at a fixed rate of32%.

Law no. 19/2013, dated September 23rd 2013, extends the CIT taxablebasis to include all capital gains resulting from the transfer, direct orindirect, gratuitous or onerous, of shares and other participative rightsbetween non­resident entities, regardless of where such transfer takesplace, as long as those shares or participative interests or rights haveany connection with assets located in Mozambican territory.

2. Transfer Pricing – definition of special relations Although not clarifying which specific situations may fall under thedefinition of special relations, the Corporate Income Tax Code will,from January 1st 2014, foresee that two entities will be deemed tohave special relations, for purposes of application of the transferpricing regime, if one of these entities has the power to, directly orindirectly, significantly influence the other entity’s managementdecisions.

Personal Income Tax Code

Law no. 20/2013, dated September 23rd 2013, foresees, among othersamendments, that, from 2014 onwards, income arising fromemployment contracts shall be subject to a final withholding tax to beperformed by employers, on the moment they pay or make availableincome to employees.This means, employees who only receive income from employment

business law experienceincluding large scaleM&A and corporatetransactions. He hasspecialized experience inBanking and CapitalMarkets, in Portugueseand Angolan law."

vmc@legalmca.com

PORTUGAL

Av. da Liberdade, 262­4 Esq.

1250­149 LISBOA

T 351 213 569 930

F 351 213 569 939

ANGOLA

R. Rainha Ginga, 187

Ed. Rainha Ginga, Piso Int.

P.O. Box 6262

LUANDA

T 244 222 908/917

F 244 222 310 428

MOZAMBIQUE

Av. Kenneth Kaunda, 433

Bairro Sommerschield

MAPUTO

T 258 846 238 293

(in association)

contracts will no longer be required to present an annual tax returnsince the tax due by them will be exclusively withheld by therespective employers. However, this mechanism will not be applicableto income paid to independent service providers.The applicable withholding tax rates may vary between 10% and 32%,depending on the amounts received monthly by the employees.Nonetheless, the following types of income are excluded from this finalwithholding tax obligation:a) Residence allowances or the use of a property made available bythe employer if such property is located outside the employer’sfacilities, provided this allowance cannot be considered a fixed andregular amount;b) Personal use of a specific vehicle owned by the employer whichgenerates costs for the same, provided there is a written agreementbetween the employer and the employee regarding the use of thatvehicle and this allowance cannot be considered a fixed and regularamount.c) Pensions and death allowances;d) Bonuses connected with the performance of the employment or asa result of the said performance when paid by entities and/or personsother than the employer;The amendments made to both the Corporate and Personal IncomeTax Codes will enter into force in January 1st, 2014 and be applicableto income obtained in 2014 and onwards.

____________________

This publication is intended for selected

distribution, among MC&A’s clients.

Therefore, it should not be perceived as a

means of publicity and its copy and/or

distribution is forbidden.

This publication contains general

information only and does not replace

adequate legal counsel.

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