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Tax on Property

The tax rules applicable to the property sector are analyzed from the perspective of the owner of the building or property (seller or tenant), which is a legal entity, subject to corporate income tax – referred to here by its initials “IRPC”, and also VAT. These tax rules are contained in a number of pieces of legislation on VAT, IRPC, municipal taxes and stamp duty.

In the case of the sale and purchase of property, on the seller’s side, the determination of the taxes applicable to this type of transaction and the method of calculating them depend on the situation of the taxable person in relation to the transaction and the tax charge that the event itself generates.

The determination of the taxes will also depend on some other specific issues inherent to the transaction itself, which we will address below.

The tax rules applicable to residential tenancy agreements and commercial leases (referred as “rental agreements”) currently in force in Mozambique contain specific provisions applicable to the tenancy or lease that depend on the type of agreement in question and the location of the property. This means that it is necessary to establish whether:

  • The property is being rented for commercial or residential purposes;
  • The property is located in a rural or an urban area;
  • The landlord and the tenant:

(1) Are a legal entity and an individual, respectively, and vice-versa; or

(2) Are both individuals; or

(3) are Both legal entities.

Mozambican legislation does not contain specific provisions on the definition of renting for “residential” and “commercial” purposes. However, according to academic doctrine and the accepted meaning of the provisions of article 1086 of the Civil Code, read together with the principles established in article 4(1) and (2) and article 72 (1) of Decree 43 525 of 1961, it is understood that residential letting is when the purposes is to provide accommodation for a household and commercial letting is when the purpose is directly related to some form of economic activity.

The concept of “Assignment of Operation of a Commercial Establishment” (Cessão de Exploração de Estabelecimento Comercial), is defined by doctrine as “an agreement by which a commercial establishment as a whole, including all the material and non-material components which make up the business organization (movable and immovable assets, clientele, patents, licenses, permits, etc.) is assigned against payment on a temporary basis”.

Under this definition, the income earned from the assignment of the operation is deemed to be “rent”, and will be subject to the same tax treatment as income earned from letting.

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