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The Cabinet of Ministers approved the transfer pricing rules, which regulates the prices and conditions applied in transactions concluded between related entities, as well as their corresponding reporting obligations.
Application Scope: IRPC and IRPS Tax payer, resident or domiciled in Mozambique, who carry out transactions with related entities (resident or not, in Mozambican territory).
What does involve? The transactions established between related entities shall have similar terms and conditions to those that would be agreed, accepted and practiced between independent entities in similar transactions.
Which methods are accepted?
The following methods may be used for the calculation of the transfer pricing:
1. Traditional transactional methods
a) Comparable market price
b) Reduced resale price
c) Cost-plus method
2. Profit-based methods
a) Profit sharing
b) Operation net margin
3. Analysis of commodity transactions
a) Obligation to apply the comparable market price method
What will change in terms of ancillary obligations?
Max payer, who in the previous year have achieved an annual net profit and other incomes of 2,500,000 MT (around 42 500USD) or more, are obligated to prepare their transfer pricing documentation. In addition, in their Annual Accounting and Tax Information Statement (M/20) shall include information about the existence of the transactions in question in the related fiscal year, identifying the counterparties, the amounts and nature of the transactions, the methods used in their analyzes, as well as the possible existence of adjustments in transfer prices.
Which information should be included in the transfer pricing documentation?
The documentation to be prepared by the tax payer must be able to prove the market parity of the terms and conditions accepted and practiced in transactions between related entities. The approved system is very detailed concerning the information that should be included in the documentation, as an example:
a) Description and characterization of special relationship
b) Characterization of the activity carried out by the tax payer and related entities
c) Nomination of the transactions values in question registered by the tax payer in the last five years.
d) Detailed identification of goods, rights or services subject of the related operations
e) Description of the functions performed, the used assets and assumed risks by the tax payer and his related entities.
f) Technical studies related to the business areas.
g) Business contract as a support, among others.
The transfer pricing documentation must be prepared in Portuguese language, as well as the supporting documents, which must be translated whenever requested by the Tax Administration.
Applied penalties
The approved law does not predict specific penalties in Transfer Pricing, and therefore, the penalties approved by the General Tax Infringement Regime should be applied. In this sense, and depending on the infringement in question (eg, lack of documentation, omissions or inaccuracies in declarations or relevant documentation), the fines may vary between [MT 3,000 MT (around 52USD) and MT 350,000,000(around 6 000 000USD)].
