Supporting the Policy Environment for Economic Development
SPEED+

VAT in the agriculture sector

Due to the importance of the agricultural sector in Mozambique the government has approved several policies to support the development of this sector including the VAT exemption for agricultural products. However, it seems that for the private sector is not clear how the fiscal system works in this sector including the VAT exemption. Moreover, the Mozambican Parliament has recently approved a bill that alter the Value Added Tax (VAT) code, exempting from VAT some imported commodities that constitute raw materials for the animal feed industry such as maize and soybean. For some segments of the society the impact of such an exemption on domestically produced maize and soybean can be negative. This study - which is a SPEED response to a CTA request - reveals what is the VAT regime for agricultural products in Mozambique and how it works in practice for small, medium and large enterprises. The study also presents the main implications of waiving the VAT on imported maize and soybean for the competitiveness of domestically produced maize and soybean and for the different sectors including animal feed and food industry. The study conclude that this exemption cannot be effective on an environment where most of the domestic farmers are not registered and consequently have no fiscal number (NUIT) and cannot produce a legal document to be presented to the Tax Authority. Also, 82% of maize and soybean farming is done by family producers which fall under the Simplified VAT Regime. Under this Regime there is no deduction of the VAT paid on inputs. Additionally, the reimbursement process is difficult and time consuming. Thus, under this environment VAT is most of the time a cost for the farmers and for the food and animal feed industry.

This is the Final Report based on the assessment done in Zambezia, Nampula, Sofala and Manica provinces and includes the comments & recommendations made during a seminar held in Maputo to discuss the Draft Report which was attended by all stakeholders, namely the Fiscal Authority (AT), Ministry of Agriculture, CTA, NGO’s, farmers and agro-processors.

At the request of CTA's Agribusiness Pelorou in 2015, SPEED  held an interactive explanatory  workshop  on how VAT works, led by a  senior tax expert from the Accounting and Auditing firm PWC. This workshop came  in wake of the Government's proposal to extend VAT exemptions to the commercialization, transaction and processing of all agricultural produce including inputs (goods and equipment)  used this process.

The session featured a brief overview of the VAT system in Mozambique, an overview of its current status of implementation ---including exempt goods and products and the types of exemptions in effect . The presenter noted that the VAT system in Mozambique has been particularly onerous, difficult to  mange and controversial due to errors contained within the actual legislation, the Government's failure to reimburse what is owed and an overall  sense of complexity felt by the private sector when submitting claims.  A copy of the presentation given is below.

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