Maputo, Aug. 8, 2025 (Lusa) - The Centre for Public Integrity (CIP), a Mozambican civil society organisation, considers the €162 million dispute between the Tax Authority (AT) and Portuguese oil company Galp to be a “test” of Mozambique’s economic sovereignty.
At issue is the “tax dispute” that followed the conclusion of the sale, last March of Galp's 10% stake in the United Arab Emirates state oil company (ADNOC) in Area 4 of the Rovuma Basin, in the north of the country, which produces natural gas. According to the CIP, this "tests Mozambique's economic sovereignty and the responsibility of one of the largest foreign investors in the country".
In an analysis of the dispute, the CIP recalls that the Mozambican tax authority “notified the oil company to pay a capital gains tax of €162 million, equivalent to 12 billion meticais”.
"This figure results from the application of the effective rate of 17.6%, provided for in the Mozambican oil tax regime, to a capital gain estimated by the tax authority at around €920 million. In stark contrast, Galp disputes the settlement, claiming a taxable capital gain of only €26 million, 35 times less than the amount calculated by the tax authority," reads the CIP report.
For CIP, a civil society organisation created in 2005 that monitors and promotes the integrity and transparency of public authorities and the State, Galp's position "is even more questionable when, in the same period, the company reported to its shareholders an accounting gain of €147 million from the same transaction, highlighting a glaring inconsistency between what it declares to the tax authorities and what it communicates to its investors".
It adds that Galp's decision "to resort to international arbitration at the ICSID [International Centre for Settlement of Investment Disputes] World Bank, presumably on the basis of a stabilisation clause in the 2007 Concession Agreement, represents a tactic known as “war of attrition”’.
"It aims to exploit the profound asymmetry of financial power between the company and the Mozambican state, forcing the country to accept an unfavourable agreement to avoid exorbitant legal costs, conservatively estimated at between US$6 million and US$8 million. These costs represent between 3.4% and 4.6% of the total amount of tax due," says the report in which CIP analyses the architecture of the transaction, the robustness of the Mozambican legal basis and Galp's "likely litigation strategy".
"It is concluded that Mozambique's position is legally sound and in line with international best practices to combat tax erosion, i.e., the reduction of the tax base through abusive tax avoidance schemes. However, the country's ability to assert its sovereign rights requires a firm response from the State, close scrutiny by civil society and responsible action by international partners, including the Portuguese State, which is Galp's reference shareholder," the CIP points out.
Lusa reported on 4 July that the Mozambican government expects Galp to pay capital gains tax in 2025 and 2026 on the sale of its 10% stake in the Area 4 consortium.
"In 2024, Galp announced its intention to sell its 10% stake in Area 4 to the United Arab Emirates national oil company, Adnoc. Some transactions related to this operation are expected to be completed in 2025 and 2026, which should generate capital gains tax payments," reads the Medium-Term Fiscal Scenario, approved in June by the Cabinet.
Area 4 is operated by Mozambique Rovuma Venture (MRV), a joint venture co-owned by ExxonMobil, Eni and CNPC (China), which holds 70% of the concession.
Galp announced on 28 March that it had completed the sale of its 10% stake in Area 4 in Mozambique for US$881 million (€816 million) to XRG, part of the Abu Dhabi National Oil Company (ADNOC).
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