Assembly exempts sugar, oils and soap from VAT

Maputo, 14 May (AIM) – The Mozambican parliament, the Assembly of the Republic, on Wednesday voted unanimously to exempt sugar, soap and vegetable oils from Value Added Tax (VAT).

The exemption is to last until 31 December and covers all raw materials and equipment used in the production of sugar, oils and soap.

Introducing the government bill, Finance Minister Carla Louveira said the exemptions are intended to stimulate the growth of the national economy, reduce costs and increase citizens’ purchasing power. By cutting VAT on these products from the standard rate of 16 per cent to zero, the government is foregoing more than two billion meticais (about 30 million US dollars) in tax revenue this year.

For anyone who has followed Mozambican tax issues this bill sounds very familiar. For the Assembly passed a nearly identical bill in May 2020. By then these goods had been exempted from VAT for more than a decade, but the exemption expired on 31 December 2019. As from January 2020, VAT at what was then the standard rate of 17 per cent was slapped onto sugar, oil and soap, and the imported materials, equipment and spare parts used by the Mozambican industries making these goods.
This exemption as to last until 31 December 2020, justified on the grounds that it would reduce the economic and social impact on households caused by the Covid-19 pandemic.

The exemption was renewed in December 2020, with expiry postponed to 31 December 2023. VAT was indeed reimposed on sugar, oils and soap in January 2024, despite protests by the Mozambican sugar industry.

The government of the time, under the then President Filipe Nyusi, insisted that there would be no more VAT exemptions for these products. Indeed, the elimination of the exemptions was one of the conditions for support for Mozambique from the International Monetary Fund (IMF).

But now, with a new government, the exemptions are back.

Basic foods are, and always have been, exempt from VAT, including maize and maize flour, rice, wheat, bread, iodated salt, powdered milk for infants, tomatoes, potatoes, and onions.
(AIM)
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