Mozambique VAT Reform: Digital Goods and Services from 2026

Mozambique is on the cusp of a significant expansion of its Value Added Tax regime to expressly encompass digital goods and services supplied to consumers. The reforms, if enacted following parliamentary consideration, are expected to take effect in early 2026 and will mark a material shift in how the Mozambican tax system treats cross-border digital commerce. We are going to examine the proposed legislative framework, key compliance implications for suppliers, and operational considerations for indirect tax planning.

Policy Drivers Behind the Proposed Reforms

The Mozambican Government has recognised the rapid evolution of the digital economy and the corresponding need to modernise its indirect tax architecture. In its 2nd December 2025 session, the Council of Ministers approved a draft VAT law that seeks to broaden the tax base to capture digital economy transactions, including mobile wallet activity and platform-mediated services that currently escape effective taxation under existing rules. The draft legislation is currently before Parliament, with implementation anticipated upon promulgation later in the year.

The reforms align with broader fiscal policy objectives to:

• Level the playing field between traditional and digital economic activities,

• Curb erosion of the tax base as commerce shifts online, and

• Modernise compliance processes, particularly around electronic reporting and invoicing.

Scope: Digital Goods and Digital Services Defined

The draft VAT provisions propose a technology-neutral definition of digital supply that extends well beyond traditional electronically supplied services (ESS). Under the new framework, VAT at the standard rate of 16% will apply to digital goods and services supplied to consumers in Mozambique, regardless of the supplier’s location or permanent establishment status.

What is in scope?

• Digital goods: Intangible assets delivered or accessed electronically and capable of ownership or licensing, including digitised content, datasets, electronic publications, and virtual assets.

• Digital services: Intangible services supplied via digital infrastructure, platforms, software, or algorithms. This encompasses software-as-a-service (SaaS), cloud computing, streaming and media services, digital financial services, and online marketplaces.

The language of the draft legislation suggests that the definition is deliberately broad to accommodate both current and emerging forms of digital commercial activity.

The tax authority is also expected in the future to deploy major investments in digitisation, system interoperability, and advanced analytics, with a focus on using AI tools to automate and enhance tax operations. 

Place of Supply and Taxation Mechanism

Under the proposed changes, the place of supply for digital goods and services will be anchored to consumption within Mozambique. This means that supplies consumed by Mozambican residents, including individual end users (B2C), will attract VAT irrespective of where the seller is established.

Reverse Charge Mechanism for Non-Residents

For B2B supplies made by non-resident suppliers, the draft framework contemplates the continued use of a reverse charge mechanism: the recipient of the supply is responsible for accounting for the VAT due. This approach is consistent with Mozambique’s existing treatment of electronically supplied services, where non-resident suppliers do not register directly but instead rely on the customer to self-assess VAT.

While the draft does not yet detail the implementing regulations, the reverse charge mechanism in this context aims to:

• Reduce administrative burden on foreign digital suppliers,

• Ensure tax collection without requiring overseas entities to register for VAT locally, and

• Provide clarity on how cross-border digital supplies fit within Mozambique’s VAT regime.

Registration and Compliance Implications

VAT Registration

Under current law, non-resident taxable persons supplying ESS to Mozambican taxable persons must register for VAT and appoint a resident tax representative. In practice, registration by foreign suppliers has been limited due to administrative hurdles and interpretations by the Mozambique Tax Authority regarding permanent establishment risks.

As the 2026 reforms would explicitly capture B2C supplies, the question of whether non-resident digital suppliers will be required to register directly rather than relying on reverse charge arrangements will likely be a key point of guidance in the final regulations.

Invoicing and Reporting

Existing VAT practice in Mozambique requires the issuance of an invoice or equivalent document that evidences the VAT treatment of the supply. For non-resident suppliers acting through a representative, invoices may need to be bilingual or in Portuguese and compliant with any electronic invoicing standards that may be introduced.

The Ministry of Economy and Finance has signalled an ongoing digital transformation of VAT compliance processes, including enhanced electronic reporting mechanisms. This indicates a potential shift towards more structured and electronic VAT reporting obligations for all suppliers, including digital platforms.

Practical Considerations for Businesses

Non-Resident Suppliers

Digital platforms and overseas service providers should proactively assess:

• Whether they will need to register for VAT in Mozambique under the new regime,

• The operational impact of charging VAT on B2C supplies (pricing, billing systems, and customer communication),

• Systems readiness to support Mozambican VAT compliance, including data capture and reporting.

Given the draft law’s broad scope, entities supplying digital goods and services from subscription-based platforms to virtual asset providers must evaluate their exposure and plan for compliance well ahead of implementation.

Resident Entities and Consumers

Local businesses procuring digital services from non-resident providers should prepare for potential reverse charge liabilities and ensure that accounting systems are capable of recognizing and reporting VAT due under self-assessment mechanisms.

Consumers may also experience price re-characterisation where VAT is applied directly by overseas suppliers, particularly for subscription services, digital content, and online platforms.

Conclusion

Mozambique’s proposed reforms are part of a broader trend across Africa where jurisdictions are modernising VAT rules to address the digital economy. Countries such as Kenya, Nigeria, and South Africa have recently updated or are in the process of updating digital VAT rules, frequently focusing on nexus, place of supply, and compliance automation.

While each jurisdiction’s approach varies, the common policy objective remains clear: to ensure that digital commerce is integrated into the VAT base in a way that aligns consumption with tax liability and minimises loopholes.

Sources: PwC, 360 Mozambique