Law No. 3/93 of June 24 - Investment Law

Law No. 3/93 of June 24

Conscious of the need to adopt a legal framework guiding the process of implementing, on Mozambican territory, enterprises involving private national and foreign investments, which are capable of contributing to the progress and social well-being of the country, Law No. 4/84 of August 18 was approved in 1984, and through Decree No. 8/87 of January 30, the Regulation of Foreign Direct Investment.

Subsequently, in 1987, Law No. 5/87 of January 19 was issued, establishing the tax and customs incentives applicable to private national investments.

The profound transformations that have been occurring in the world in general, and in the country in particular, especially those resulting from the implementation process of the measures of the Economic Rehabilitation Program and the entry into force of the new Constitution of the Republic, associated with the pertinent requirement to adopt a more open, objective economic policy that prioritizes greater participation, complementarity, and equal treatment of national and foreign investors, determine the need to revise the existing legislation on this matter.

In this context, with a view to adapting and improving the legal regulatory framework regarding private investment in the country, the National Assembly, under the provisions of paragraph 1 of Article 135 of the Constitution, determines:

CHAPTER I General Provisions

ARTICLE 1 Definitions

1. For the purposes of this law, the following are considered:

a) Economic activity – the production and commercialization of goods or provision of services, regardless of their nature, carried out in any sector of the national economy;

b) Foreign capital – the contribution susceptible to monetary valuation made available in the forms of investment provided for in Article 9 and in accordance with the regulatory provisions of this law approved by the Council of Ministers, originating from abroad and destined for the implementation of investment projects on Mozambican territory;

c) Invested Capital – the capital effectively realized and applied in a direct investment project, national or foreign, as defined in letters m) and n) of this article;

d) National capital – the sum of the contribution assessable in monetary terms and corresponding to the different forms of participation in investment through own capital, supplies, and movable and immovable goods and rights incorporated or to be incorporated into an investment project, in accordance with the regulatory provisions of this law;

e) Own Capital – the part or component of direct investment realized through financial availability or goods and rights, duly evaluated and certified by a reputable entity, belonging to the investor, national or foreign, and employed to realize their respective participation in the share capital of the company constituted or to be constituted, through which the implementation and exploitation of an investment project will be carried out;

f) Re-exportable Invested Capital – goods and rights comprising foreign direct investment as defined in letter m) of this article, in accordance with the values resulting from liquidation, in case of termination of the enterprise, or from the proceeds of alienation or compensation, total or partial, relating to said goods or rights, after payment of due taxes and loans and fulfillment of other obligations that may exist or be provided for, under the terms of the authorization granted for the implementation of the respective investment project;

g) Enterprise – an activity of an economic nature in which foreign and/or national capital has been invested and for whose implementation and exploitation the necessary authorization has been granted;

h) Company – an entity that exercises an economic activity in an organized and continuous manner, responsible for implementing the investment project and for the subsequent exploitation of its respective activity;

i) "Franchising" (or Franchise) – a type of commercial contract through which the holder (franchisor or licensor) of a given know-how, brand, name, or commercial symbol cedes it, in whole or in part, to another party on an exclusive basis, with or without guarantee of respective technical assistance and mandatory marketing services, obliging the "franchisee" (or licensee) to make the necessary investments, pay periodic remuneration, and accept the control of the "franchisor" over its commercial activity;

j) Foreign Investor – an individual or legal entity that has brought from abroad, to Mozambique, its own capital and resources or under its own account and risk, with a view to realizing some foreign direct investment, under the terms of letter m) of this article, in a project previously authorized by the competent entity under this law;

l) National Investor – an individual or legal entity that has made available its own capital and resources or under its own account and risk, destined for the realization of some national investment, under the terms provided for in letter n) of this article, in a project previously authorized by the competent entity, in accordance with this law;

m) Foreign Direct Investment – any of the forms of foreign capital contribution susceptible to monetary valuation, which constitutes capital or own resources or under the account and risk of the foreign investor, originating from abroad and destined for incorporation into investment for the realization of an economic activity project, through a company registered in Mozambique and operating from Mozambican territory;

n) National Direct Investment – any of the forms of national capital contribution susceptible to monetary valuation, which constitutes capital or own resources or under the account and risk of the national investor, destined for the realization of authorized investment projects with a view to exploiting the respective economic activity, through a company registered in Mozambique and operating with its base on Mozambican territory;

o) Indirect Investment – any mode of investment whose remuneration and/or reimbursement does not consist exclusively of the direct participation of its contributors in the distribution of final profits resulting from the exploitation of activities of projects in which specific forms of investment realization, provided for in Article 10, have been applied;

p) Exportable Profits – the part of profits or dividends, net of all operating expenses, resulting from the activity of a project involving foreign direct investment, eligible for profit export under the terms of the regulation of this law, to be approved by the Council of Ministers, the remittance of which to abroad the investor may effect at their free initiative, once payment of taxes and other obligations due to the State and legal deductions related to the constitution or replenishment of reserve funds, as well as repayment of loans and respective interest and other obligations that may exist with third parties, has been provided;

q) Foreign Person – any individual whose nationality is not Mozambican, or, in the case of a legal entity, any corporate activity originally constituted under legislation other than Mozambican legislation, or which, having been constituted in the Republic of Mozambique under Mozambican legislation, has its share capital held by more than 50% (fifty percent) by foreign persons, under the terms of paragraph 2 of this article;

r) Mozambican Person – any citizen of Mozambican nationality, or any society constituted and registered under Mozambican legislation, with headquarters in the Republic of Mozambique, in which its share capital belongs to at least 50% (fifty percent) to national citizens, or Mozambican private or public societies or institutions;

s) Project – An enterprise of economic activity in which foreign or national capital is intended to be invested or has been invested, or a combination of foreign and national capital, regarding which the necessary authorization has been granted by the competent entity;

t) Reinvestment of Foreign Direct Investment – the total or partial application of non-exportable profits resulting from the exploitation of the activity of some project, whether this application occurs in the enterprise that produced them or in other enterprises realized in the country;

u) Income – any amounts generated in a given period of exercise and exploitation of the activity of an investment project, such as profits, dividends, "royalties" and other eventual forms of remuneration associated with the cession of rights of access and use of technologies and registered trademarks, as well as interest and other forms of return on direct and indirect investments based on the results of exploitation of the activity of the respective project;

x) Industrial Free Zone – an area or unit or series of units of industrial activity, geographically delimited and regulated by a specific customs regime on the basis of which the goods found or circulating therein, destined exclusively for the production of articles for exploitation as well as the resulting export articles, are exempt from all customs, fiscal, and labor impositions, especially constituted and appropriate to the nature and efficient functioning of the enterprises operating therein, particularly in their relationship and fulfillment of their commercial and financial obligations with the exterior, ensuring, in return, the promotion of regional development and the generation of economic benefits in general and, in particular, the increase of productive, commercial, tax, and job generation capacity and foreign currency for the country;

z) Special Commercial Zone – An area of general economic activity, geographically delimited and governed by a special customs regime on the basis of which all goods that enter, are found, circulate, are industrially transformed, or leave the national territory are totally exempt from related customs, fiscal, and para-fiscal impositions, additionally enjoying a free exchange regime and "off-shore" operations and a specifically instituted fiscal, labor, and migration regime adequate to the rapid entry and efficient functioning of enterprises and investors who intend to or are already operating or residing therein, particularly in their relationship and fulfillment of their commercial and financial obligations with the exterior, ensuring, in return, the promotion of regional development and generation of economic benefits in general and, in particular, the increase of productive, commercial, tax, and job generation capacity and foreign exchange for the Republic of Mozambique.

2. For the computation of the percentage of participation in share capital, for the purposes of determining the nationality of the investor, in accordance with letters q) and r) of the previous paragraph, the origin of the capitals shall be considered, adding respectively the participations of foreign and Mozambican persons.

ARTICLE 2 Objectives of the Law

1. This law aims to define the basic and uniform legal framework in the process of implementing, in the Republic of Mozambique, national and foreign investments eligible for the guarantees and incentives provided herein.

2. Enterprises whose investments have been or are being implemented without observance of the provisions of this law and its respective regulation will not benefit from the guarantees and incentives advocated herein.

ARTICLE 3 Application of the Law

1. This law applies to investments of an economic nature that are realized on Mozambican territory and seek to benefit from the guarantees and incentives enshrined herein, as well as to investments carried out in industrial free zones and special commercial zones, whose processes obey the provisions of the instruments regularly provided for under the terms of Article 29, regardless of the nationality or nature of the respective investors.

2. This law does not apply to investments realized or to be realized in areas of exploration, research, and production of petroleum, gas, and extractive industry of mineral resources.

3. Investments publicly financed by funds from the General State Budget, as well as investments of an exclusively social character, are not covered by this law.

ARTICLE 4 Equal Treatment

1. In the exercise of their activities, foreign investors, employers, and workers shall enjoy, like nationals, the same rights and shall be subject to the same duties and obligations enshrined in the legislation in force in the Republic of Mozambique.

2. The provisions of the previous paragraph are excepted in cases of projects or activities of nationals that, by their nature and by the dimension of their respective investments and enterprises, may deserve special support and treatment from the State.

ARTICLE 5 Assumption of International Agreements

The provisions of this law do not restrict any eventual guarantees, advantages, and special obligations contemplated in international agreements or treaties of which the Republic of Mozambique is a signatory.

ARTICLE 6 Basic and Guiding Principle of Investments

Investments covered by this law, regardless of the form they take, must contribute to the sustainable economic development of the country, subordinate themselves to the principles and objectives of national economic policy and to the provisions of this law and its regulation and other applicable legislation in force in the country.

ARTICLE 7 Objectives of Investments

The realization of investments covered by this law should aim, notably, at the following objectives:

a) the implementation, rehabilitation, expansion, or modernization of economic infrastructures destined for the exploitation of productive activity or provision of services indispensable for supporting productive economic activity and the promotion of the country's development;

b) the expansion and improvement of national productive capacity or provision of services supporting productive activity;

c) the contribution to the formation, multiplication, and development of Mozambican entrepreneurship and business partners;

d) the creation of employment positions for national workers and the elevation of the professional quality of Mozambican labor;

e) the promotion of technological development and the elevation of productivity and business efficiency;

f) the increase and diversification of exports;

g) the provision of productive services and services generating foreign exchange;

h) the reduction and substitution of imports;

i) the contribution to the improvement of internal market supply and the satisfaction of the priority and indispensable needs of the population;

j) the direct or indirect contribution to the improvement of the balance of payments and to the public treasury.

ARTICLE 8 Forms of National Direct Investment

National direct investment may, individually or cumulatively, assume any of the following forms, provided they are susceptible to monetary valuation:

a) cash;

b) infrastructures, equipment and respective accessories, materials, and other goods;

c) cession of exploitation rights over concessions, licenses, and other rights of an economic, commercial, or technological nature;

d) cession, in specific cases and under terms agreed upon and sanctioned by competent entities, of the rights to use land, patented technologies, and registered trademarks, whose remuneration is limited to participation in the distribution of the company's profits resulting from the activities in which such technologies or marks have been or will be applied.

ARTICLE 9 Forms of Foreign Direct Investment

Foreign direct investment may assume, individually or cumulatively, any of the following forms, provided they are susceptible to monetary valuation:

a) freely convertible foreign currency;

b) equipment and respective accessories, materials, and other imported goods;

c) cession, in specific cases and under terms agreed upon and sanctioned by competent entities, of the rights to use patented technologies and registered trademarks, whose remuneration is limited to participation in the distribution of the company's profits resulting from the activities in which such technologies or marks have been or will be applied.

ARTICLE 10 Forms of Indirect Investment

Without prejudice to the provisions in letters b) and c) of Articles 8 and 9, respectively, and in paragraph 2 of Article 17, indirect investment, national or foreign, comprises, individually or cumulatively, forms of loans, supplies, additional capital contributions, patented technology, technical processes, industrial secrets and models, franchising, registered trademarks, technical assistance, and other forms of access to use, whether on an exclusive basis or restricted licensing by geographic zones or domains of industrial and/or commercial activity.

ARTICLE 11 Areas for Free Private Initiative Investment

All economic activities that are not expressly reserved for exclusive ownership or exploitation by the State or for initiative investments of the public sector constitute areas open to the free initiative of private investments.

ARTICLE 12 Areas Reserved for Public Sector Initiatives

The Council of Ministers shall define the areas of economic activity reserved for public sector initiative for the realization of investments, with or without involvement of private sector participation, also defining the percentages of private investment participation, national or foreign.

CHAPTER II Guarantees and Fiscal Incentives

ARTICLE 13 Protection of Property Rights

1. The State guarantees the security and legal protection of property over goods and rights, including industrial property rights, included within the scope of investments authorized and implemented in accordance with this law and its respective regulation.

2. Based on weighty reasons and national interests, public health, and public order, the nationalization or expropriation of goods and rights constituting an investment authorized and implemented under this law will be subject to fair and equitable compensation.

3. After more than ninety days have passed without the eventual claims submitted by the respective investors, under terms to be regulated by the Council of Ministers, being resolved, and when financial losses resulting from the immobilization of invested capital have occurred due to this fact, the said investors shall have the right to fair and equitable remuneration for the losses incurred due to the explicit responsibility of State institutions.

4. The evaluation of nationalized or expropriated goods or rights, as well as financial losses suffered by investors due to the explicit responsibility of State institutions, for the purpose of determining the value of compensation or remuneration provided for in paragraphs 1 and 2 of this article, shall be carried out within a period of ninety days by a commission specially constituted for this purpose or by an audit firm of recognized integrity and competence.

5. The payment of compensation or remuneration referred to in the previous paragraphs shall take place within a period of ninety days counted from the date of acceptance, by the competent State body, of the evaluation carried out under the terms of the previous paragraph. The time for review for the purpose of making a decision on the evaluation carried out and presenting it to the competent State body shall not exceed forty-five days counted from the date of delivery and receipt of the evaluation dossier.

ARTICLE 14 Transfer of Funds Abroad

1. The State guarantees, in accordance with the conditions fixed in the respective authorization or other pertinent legal instruments for the investment, the transfer abroad of:

a) exportable profits resulting from investments eligible for profit export under the terms of the regulation of this law;

b) royalties or other income from remuneration of indirect investments associated with the cession or transfer of technology;

c) amortizations and interest on loans contracted in the international financial market and applied to investment projects realized in the country;

d) proceeds of compensation under the terms of paragraph 2 of the previous article;

e) foreign capital invested and re-exportable, regardless of the eligibility or not of the respective investment project for profit export, under the terms of the regulation of this law.

2. The execution of the transfers referred to in the previous paragraph shall observe the formalities fixed in the following article.

ARTICLE 15 Formalities for Transfer Abroad

1. In harmony with the definition contained in letter p) of paragraph 1 of Article 1, having satisfied the applicable fiscal obligations, foreign investors who have realized investments authorized under this law and its respective regulation may, upon observance of the applicable exchange formalities, transfer abroad up to the total of the profits allocated to them in each economic exercise.

2. The discharge document proving the realization of the investment and the fulfillment of fiscal obligations, for the purposes of profit transfer, shall be issued by the Ministry of Finance within a period of thirty days counted from the date of presentation of the respective request.

3. The transfers of re-exportable capital or the proceeds of compensation or remuneration provided for under the terms of the preceding article shall be effected in staggered installments over a period not exceeding five years, in order to avoid disturbances in the balance of payments.

4. The transfers of exportable profits, as well as invested re-exportable capital, shall be processed in the convertible currency of the investor's choice, in accordance with the provisions of this law and its respective regulation and in the authorization document of each specific project.

5. With observance of the provisions of the following paragraph, the transfers provided for under the terms of the stipulated in this law and its regulation shall be effected as soon as the following have been carried out:

a) the constitution or replenishment of legal reserve funds;

b) the settlement of due taxes;

c) the taking of necessary measures for the current payment of capital and interest installments related to loans contracted for the realization of the enterprise;

d) the adequate provision to guarantee the fulfillment of capital and interest installments due before the occurrence of new funds sufficient to cover such responsibilities.

6. The transfer of exportable profits in each economic exercise shall be promptly ensured whenever a positive foreign exchange balance produced by the enterprise or by the set of enterprises carried out by the same investor or group of associated foreign investors allows for the necessary coverage.

7. If the foreign exchange fund is insufficient to cover profits to be exported in a given economic exercise by a project that does not produce a positive balance in foreign currency, the remainder shall carry over to the...