Mozambique expands permanent establishment rules for cross-border services
It should be noted that recent amendments to Mozambique’s tax legislation, published in late 2025, may have implications for the determination of a permanent establishment (PE) for certain entities receiving services from foreign related parties.
The Mozambican PE rules are primarily codified in Article 5 of the Corporate Income Tax (CIT) Code (Law No. 34/2007, as amended). The concept of a PE determines when a non-resident entity has a sufficient taxable presence in Mozambique for the country to tax the profits attributable to that presence at the standard corporate income tax rate of 32%.
Law No. 12/2025, effective from 1 January 2026, introduced the most significant amendments to the PE definition since the CIT Code was enacted, materially expanding the circumstances in which a PE can arise for non-resident service providers.
The amended Article 5 of the CIT Code provides that a non-resident entity is deemed to have a PE in Mozambique where:
The provision of services, including consultancy and other professional services, irrespective of physical presence, except in the case of digital services, when such services are carried out within Mozambican territory for a period or aggregate periods exceeding 90 days within any 12-month period that begins or ends in the relevant fiscal year.
This provision represents a significant departure from the historical position under Mozambican tax law. Under the previous framework, the existence of a PE generally required some form of physical presence within Mozambique. By contrast, the amended provision is capable of applying even where services are rendered entirely remotely, no personnel of the foreign enterprise are physically present in Mozambique, and no office, branch or other fixed place of business exists in the country.
A further challenge arises from the fact that the legislation provides no guidance on how the 90-day threshold should be interpreted or applied in practice. The law does not define what constitutes a “day” for these purposes, nor does it establish any methodology for determining how the relevant period should be calculated, monitored or evidenced.
In particular, where a service agreement remains in force for more than 90 days, it would not be surprising for the Mozambique Tax Authority (MTA) to presume that the temporal requirement for the creation of a PE has been satisfied. This could effectively place the burden on the taxpayer to demonstrate that, despite the contractual duration, the services were rendered over a shorter period. In practice, this may result in lengthy administrative discussions and evidentiary challenges, with no certainty that the MTA will ultimately reverse its position.
It is also important to consider these changes in the context of the broader compliance measures recently introduced by the MTA. As part of the implementation of the new PE regime, amendments have been made to several reporting and compliance obligations, particularly in relation to Value Added Tax (VAT) declarations. Although these changes are not expressly linked to the PE provisions, they provide the MTA with significantly greater visibility over cross-border service arrangements and, in particular, the duration and continuity of services rendered by non-resident entities into Mozambique.
These developments indicate that the MTA is now far better positioned to identify, monitor and enforce arrangements it considers to fall within the scope of the new PE rules. Accordingly, under Mozambican domestic law, there is a risk that non-resident entities providing services to Mozambican entities could be regarded as having a PE in Mozambique.
In light of the expanded PE rules, taxpayers should review existing and proposed cross-border service arrangements involving Mozambican entities to determine whether the 90-day threshold could be met, particularly where service agreements remain in force for extended periods or services are provided on a recurring basis. Where a risk exists, proactive steps should be taken to obtain certainty and, where available, seek relief under the applicable mechanisms.