General Practice Law at Mozambique
Mozambique operates under a civil law system, largely influenced by Portuguese legal traditions, given its history. The legal framework is based on codified laws, with the Constitution as the supreme law.
Here's an overview of key areas in general practice law in Mozambique:
1. Corporate and Commercial Law:
Company Formation: The most common forms of business entities include:
Sociedade por Quotas (Lda - Limited Liability Company): This is the most popular choice for small and medium-sized businesses due to its flexibility and limited liability for shareholders. It requires at least two quotas holders (shareholders).
Sociedade Anónima (SA - Public Limited Company): Preferred for larger enterprises and those seeking to raise capital publicly. Requires a minimum of three shareholders.
Branch Office: Foreign companies can establish a branch office, which is an extension of the parent company and not a separate legal entity.
Representative Office: Generally used for promotional or liaison activities and cannot engage in commercial operations.
Foreign Investment: Mozambique actively encourages foreign direct investment (FDI) and has a dedicated Investment Law (Law No. 8/2023 of June 9, 2023). Key principles include:
Equal Treatment: Generally, no discrimination between national and foreign investors.
Guarantees: Respect for industrial and intellectual property rights, freedom of administration, and protection against expropriation without due compensation.
Incentives: The law offers various fiscal and non-fiscal incentives for investments, particularly those that contribute to job creation, economic sustainability, and local content development. These incentives can include tax exemptions or reductions for certain periods, especially for projects in designated Free Trade Zones or for those meeting specific investment objectives.
Transfer of Funds: The State guarantees the transfer abroad of exportable profits, royalties, and depreciation of capital, subject to foreign exchange legislation.
Contracts and Agreements: Lawyers assist with drafting, reviewing, and enforcing commercial contracts (e.g., sales, distribution, joint ventures, public-private partnerships, concessions).
Regulatory Compliance: Businesses must comply with a range of sector-specific regulations, particularly in major industries like mining, oil and gas, energy, and banking.
2. Real Estate Law:
State Ownership of Land (DUAT): This is a crucial distinction. In Mozambique, land cannot be privately owned, either by locals or foreigners. Instead, the State owns all land, and what individuals or entities acquire is a "Direito de Uso e Aproveitamento da Terra" (DUAT), which means the "Right to Use and Benefit from Land."
Acquiring DUAT:
By Occupation: For Mozambican citizens and communities who have historically used the land.
By Government Grant: This is the primary method for foreigners and commercial entities. It requires a formal application process and a detailed plan for the land's use, which must align with national development goals.
Duration: DUATs for foreigners and companies are typically granted for a period of up to 50 years, renewable for similar periods.
Property (Structures): While the land belongs to the State, any structures built on the land can be privately owned, bought, and sold. This means you can own a house or building, but the underlying land use right is separate.
Foreigners and DUAT: Foreign individuals generally need to have been resident in Mozambique for a minimum of 5 years to acquire DUAT for undeveloped land. However, foreign-owned companies do not have this residency restriction and can acquire DUAT as legal entities.
Purchase Process: Involves signing a preliminary contract ("promessa de compra e venda"), conducting due diligence (checking the DUAT, ensuring it's free of encumbrances), paying property transfer tax (SISA), and formalizing the transfer through a public deed.
Taxes:
SISA (Imposto sobre a Sisa): Property transfer tax, currently 2% of the sale price.
Annual Property Tax (Imposto Predial Autárquico - IPA): Levied by municipalities on the fiscal value of urban properties.
3. Immigration and Residency Law:
Visas: Various types of visas exist, including tourist, business, work, and residence visas.
Residence Visa: Required for those planning permanent residency.
Requirements: Generally include a valid passport (minimum 6 months validity), proof of sufficient financial means, recent passport-sized photos, a criminal record certificate (translated into Portuguese and authenticated), medical certificate, proof of accommodation, and in many cases, an employment contract or work authorization from the Ministry of Labour.
Investment-Based Residency: While Mozambique does not have a direct "residency-by-investment" program specifically linked to real estate purchase (as seen in some other countries), significant business investment and job creation can be a pathway to obtaining a work permit and subsequently a residence visa.
Work Permits: Essential for any foreign national intending to work in Mozambique. Employers typically need to demonstrate that no qualified Mozambican national is available for the role and adhere to foreign worker quotas (usually 5-10% of the total workforce, depending on company size).
4. Tax Law:
Corporate Income Tax (IRPC): The standard corporate tax rate is 32%. However, there are reduced rates for specific sectors (e.g., 10% for agricultural, livestock, aquaculture, and transport activities until December 31, 2025). Non-resident entities without a permanent establishment are subject to a 20% withholding tax on certain Mozambican-sourced income.
Personal Income Tax (IRPS): Applies to individuals' income, with progressive tax rates.
Value Added Tax (VAT): The standard VAT rate is 16% on supplies of goods and services and imports. Exemptions exist for essential products and certain raw materials until December 31, 2025.
Withholding Tax (WHT): Applies to various payments made to non-residents (e.g., dividends, interest, royalties, services), typically at rates of 10% or 20%.
Stamp Duty: Applies to various legal documents and transactions.
Transfer Pricing: Mozambique has transfer pricing regulations that apply to transactions between related parties, aiming to ensure they are conducted at arm's length.
5. Intellectual Property Law:
Framework: Mozambique has a comprehensive legal framework for IP, combining national laws and international treaties. Key laws include:
Industrial Property Code (Decree No. 47/2015): Governs patents, trademarks, industrial designs, utility models, and geographical indications.
Copyright Law (Law No. 22/2022): A newer law that comprehensively addresses digital content, software, and databases, while maintaining moral and economic rights.
Patents: Protection for 20 years from the filing date for novel, inventive, and industrially applicable inventions.
Trademarks: Registered with the Industrial Property Institute (IPI) for 10 years, renewable indefinitely.
Copyrights: Protected automatically for original creative works. Mozambique is a member of the Berne Convention.
Enforcement: Provides for civil remedies (injunctions, damages) and criminal penalties (fines, imprisonment) for infringement, with enhanced provisions for digital piracy.
6. Labor Law:
New Labour Law (Law No. 13/2023): This new law came into force in February 2024, repealing previous legislation. It aims to adjust to the country's socio-economic dynamics and new sectors like mining and oil.
Scope: Expanded to cover diplomatic and consular missions (for locally hired workers), international organizations, and other private entities.
Employment Contracts: Allows for fixed-term and open-ended contracts. Fixed-term contracts have specific justification requirements and maximum durations.
Working Hours: Standard workweek is 48 hours. Overtime is permitted but regulated and compensated at premium rates.
Minimum Wage: Varies by sector.
Leave: Employees are entitled to annual leave (e.g., 1 day per month in the first year, 30 days after one year), sick leave (15 days/year), maternity leave (60 consecutive days, increased to 90 days under the new law, fully paid), and paternity leave (1 day, increased to 7 days).
Termination: Specific legal procedures must be followed for termination, varying by reason (e.g., just cause, redundancy). Severance pay is typically required for dismissals without cause.
Harassment and Data Protection: The new law introduces provisions on harassment and strengthens workers' personality rights and data protection.
Foreign Workers: Companies can hire a limited percentage of foreign workers without special approval (typically 5-10%). Hiring beyond this quota requires specific work permits and justification.
7. Litigation and Dispute Resolution:
Judicial System: Headed by the Supreme Court, with various levels of courts handling civil, criminal, labor, and administrative matters.
Arbitration and Mediation: Increasingly utilized for commercial disputes, offering an alternative to traditional court proceedings. Mozambique is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
Navigating the Mozambican legal system, especially with the unique land ownership regime and recent legal reforms, requires expert local legal counsel. Foreign investors and individuals should always seek professional advice to ensure compliance and protect their interests.
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