On The Post Industry Events: Mozambique government moves to announce and ratify some major changes to its resource tax framework

The gap in funding to support large infrastructure requirements in Mozambique’s resources industry is about to get smaller as the Mozambique government moves to announce and ratify some major changes to its resource tax framework. Two new pieces of legislation have been put before parliament in the form of a Mozambique Mining Tax Law and a Gas and Petroleum Tax Law both are expected to be signed into law in the last quarter of 2014 under the current cabinet. Additionally a windfall profit tax announcement coming out of Mozambique is imminent.

Although Mozambique´s economy is currently monopolized by coal exports the Gas and specifically LNG market for Mozambique will propel Mozambique into the top 5 Gas producers in the world by 2020.

“Mozambique has probably made the biggest gas discovery in the world in the past 10 years,” says Standard Bank’s head of oil, gas & renewables, Simon Ashby-Rudd. “Mozambique will probably be the next Qatar.”

Mozambique is rich in energy sources, with an abundance of gas, coal and hydro. The Mozambique government is moving quickly in balancing the need of multinationals investing in the countries resource sector, the international donor community and the population of Mozambique. In order to monetize the coal and gas finds massive investment in infrastructure is needed, pipelines, power capacity, railway and port facilities, with the biggest investment in key gas infrastructure estimated at about, $40 billion split between the upstream and mid-stream sector.

The new tax laws will usher in some major changes to the hydrocarbon and minerals sectors as the Government of Mozambique takes strategic steps to ensure the infrastructure master plans are realized sooner rather than later.

Major changes in the tax regime will include, new rules for tax offsetting, Capital Gains Tax changes both in the tax application and charge, new rules in the depreciation of assets, new rules for non-tax deductible activities including the exclusion of failed projects and CSR activities, new windfall profit tax, changes that will affect existing contracts and an overall reduction in available tax benefits.

The tax changes will require major changes to foreign and local firms in the hydrocarbon and mineral sector in Mozambique’s tax planning and will affect 2015 planning.

Market Intelligence leaders AIE have organized a 1 day market briefing will take place in Johannesburg on the 22 October 2014, the market briefing will provide much needed insight into the new Tax Framework for the resource sector, further details on participating in the market briefing can be accessed via http://www.africaninfex.com or call: 081 777 0028
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