On 12 September 2017, the Council of Ministers approved the Mozambican transfer pricing legislation, which was published in the Official Gazette on 6 December 2017. The provisions of the transfer pricing legislation thereafter came into effect from 1 January 2018. These provisions were enacted into law to ensure that taxpayers transact on arm’s length terms and conditions with related parties, as they would with independent parties. Where a related party transaction is not arm’s length, the tax authority in Mozambique (MTA) could adjust the taxable profit of the taxpayer, as if the transaction was in fact arm’s length.
These provisions apply to resident taxpayers (individuals and companies) that enter into both domestic and cross-border transactions with related parties. In addition, it also applies to permanent establishments in Mozambique that enter into cross-border transactions with non-resident related parties, including permanent establishments of these entities outside of Mozambique, and resident entities or permanent establishments in Mozambique that enter into related party transactions with entities subject to a more favourable tax regime.
Resident taxpayers and permanent establishments in Mozambique, that enter into related party transactions, and have an annual net turnover and other income of equal to or greater than MZN 2.5 million (approximately USD 41 000) in the preceding fiscal year, are required to prepare and maintain transfer pricing documentation, annually. However, there is no obligation to submit the transfer pricing documentation to the MTA. Having said this, with having the obligation to maintain such documentation annually, the MTA would expect the documentation to be readily available upon request.
There are no specific penalties in place for non-compliance with the transfer pricing legislation. However, the general penalty provisions currently in place do apply in cases where the transfer pricing legislation have not been complied with and are as follows:
- For not maintaining transfer pricing documentation, a penalty can be levied from MZN 6 000 to MZN 600 000 (approximately USD 100 to USD 10 000); and
- For omissions or inaccuracies with transfer pricing disclosure, a penalty can be levied from MZN 13 000 to MZN 700 000 (approximately USD 210 to USD 11 400).
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