Mozambique wants to reduce taxes on energy and fuels to boost agriculture

The Mozambican government has announced its intention to significantly reduce the tax burden on energy, water, and fuel tariffs for agricultural producers. This strategic move, articulated by the Minister of Agriculture, Roberto Albino, aims to stimulate investment and attract entrepreneurs to the vital agricultural sector. The proposed tax reductions are part of a broader government effort to enhance agricultural productivity, improve food security, and foster economic development by making agricultural operations more financially viable and competitive. Legal professionals should anticipate forthcoming legislative amendments to existing tax codes and regulatory instruments that will formalize these incentives.

Mozambique's agricultural sector, a cornerstone of its economy and a key driver for rural development, is poised for a significant boost following a recent government announcement. The Minister of Agriculture, Roberto Albino, declared the government's imminent plans to reduce the tax burden on essential inputs such as energy, water, and fuel for agricultural producers. This initiative is explicitly designed to attract both domestic and international entrepreneurs, thereby injecting much-needed investment and dynamism into the sector.

The Mozambican tax landscape currently features a Value Added Tax (VAT), governed by the Código do Imposto sobre o Valor Acrescentado (CIVA), approved by Lei n.º 32/2007, de 31 de Dezembro, which sets a standard rate of 16%. While a general rate applies, certain services like water supply and energy benefit from reduced VAT rates of 12.75% and 10.54% respectively. In addition to VAT, the Imposto sobre Consumos Específicos (ICE), or excise duties, are levied on specific goods, including fuels, under the framework of Lei n.º 19/2022, de 29 de Dezembro, which approved the new ICE Code. Customs duties are also applicable to imported goods, including various fuels.

Recognizing agriculture as a fundamental pillar for national development, as enshrined in its Constitution, Mozambique has historically sought to incentivize the sector through various policy instruments. These include the Strategic Plan for the Development of the Agrarian Sector (PEDSA) and the National Agricultural Investment Plan (PNISA). Existing fiscal incentives for agriculture already encompass a reduced corporate tax rate, lowered from 32% to 10% for agriculture and aquaculture, and VAT exemptions on the import of equipment, seeds, and fertilizers. Furthermore, the government has previously implemented measures to provide reduced electricity and diesel tariffs specifically for the agricultural sector, underscoring a consistent policy direction towards supporting agricultural growth.

The announced tax reductions will necessitate specific legislative and regulatory changes within Mozambique's existing fiscal framework. Implementation will likely involve amendments to the Código do Imposto sobre o Valor Acrescentado (CIVA) and the Código do Imposto sobre Consumos Específicos (ICE). For VAT, the government could introduce new zero-rated or exempt supplies for energy, water, and fuel when utilized in agricultural production, or further reduce the already existing preferential rates for these commodities. It is noteworthy that the VAT Code has undergone recent amendments through Lei n.º 10/2025, de 29 de Dezembro, which also included a limitation on the right of deduction of VAT for transactions with a reduced taxable base, such as the supply of energy and drinking water. Any new agricultural incentives would need to navigate or specifically carve out exceptions from such limitations.

Regarding fuel, amendments to the ICE Code would be required to reduce or exempt duties for agricultural use. The Lei n.º 19/2022, de 29 de Dezembro, which revised the ICE Code, already introduced new rules for fuel taxation, including provisions for rate reductions for certain activities. The current initiative could build upon these existing mechanisms. Beyond primary legislation, specific ministerial decrees or regulatory instruments, potentially issued by the Ministry of Economy and Finance or the Ministry of Agriculture, would be crucial for detailing the scope, eligibility criteria, and procedural aspects of these tax reductions, similar to the regulatory framework established by Decreto n.º 7/2008 for the VAT Code.

While the intent is clear, potential challenges and contradictions exist. Historically, the accessibility and effective implementation of existing agricultural incentives have faced bureaucratic hurdles and inconsistent application of taxes, as highlighted in various reports. Furthermore, past fuel subsidies in Mozambique have been criticized for being costly and often disproportionately benefiting wealthier segments of the population, raising concerns about the efficiency and targeting of such measures. The success of the new reductions will depend heavily on clear, simplified administrative processes and robust targeting mechanisms to ensure benefits reach the intended agricultural producers. This move aligns with a broader government fiscal reform agenda aimed at broadening the tax base and promoting investment, and responds to long-standing demands from peasant associations for incentives comparable to those offered in other regional countries.

For legal practitioners advising clients in Mozambique's agricultural sector, the announced tax reductions represent a significant development. It is imperative to closely monitor the forthcoming legislative and regulatory instruments that will formalize these changes. Understanding the precise scope of the reductions – which types of energy, water, and fuel will be affected, the specific agricultural activities or producers eligible, and any volume or usage limitations – will be critical for advising on compliance and maximizing the benefits for clients.

Practitioners should pay particular attention to amendments to the CIVA and ICE codes, as well as any new ministerial decrees or regulations that will detail the implementation mechanisms. The effectiveness of these incentives will hinge not only on the legal provisions themselves but also on the simplification of administrative procedures and the clarity of application. Legal professionals are encouraged to proactively engage with these developments to guide agricultural businesses in leveraging these new fiscal advantages, thereby contributing to the sector's growth and Mozambique's broader economic objectives.