Galp, the Portuguese oil company, has announced the formal initiation of an international arbitration process to address a tax dispute with the Mozambican government. The matter concerns a capital gains tax issue following the transfer of all Galp’s stakes in Mozambique’s Area 4. The company had requested a binding opinion regarding the fiscal implications of this transaction.
Galp’s notification to the market regulator, the Comissão do Mercado de Valores Mobiliários (CMVM), indicated its decision to seek arbitration to evaluate the Mozambican state’s conduct in the capital gains tax disagreement related to the sale of its stake in Mozambique’s Area 4. The notification marks the commencement of the arbitration proceedings, though specific financial figures were not disclosed.
The Mozambican Tax Authority (AT) clarified that technical clarification meetings were conducted involving various state entities, besides issuing the binding opinion to Galp. This dispute arose after the March sale of Galp’s 10% stake to the Emirati state oil company ADNOC, in Rovuma Basin’s Area 4, a natural gas production region, in a deal estimated at $950 million (819 million euros).
The AT communicated to Galp Group companies that tax on the capital gains totaling $175,923,515.72 (151.6 million euros) is due from the transaction. Moreover, as the sale involved deferred payments linked to the Final Investment Decision of Rovuma and Coral North projects—signed on October 2 in Maputo—a further tax obligation of $160 million (137.8 million euros) is expected.
Galp objected to the binding opinion and requested its revision, but the AT maintained its position after finding no grounds for amendments. The imposed tax was not paid within the allotted time, leading to legal enforcement proceedings. Galp challenged this decision by filing objections and a contentious appeal in the Maputo Tax Court, presenting a surety deemed inadmissible by the AT.
The AT stated that, despite the ongoing legal proceedings, the execution cannot be paused without a proper guarantee. Galp was notified to provide an acceptable guarantee within ten days, which was repeatedly found inadequate.
The Mozambican government has described Galp’s arbitration recourse as a typical course of action, asserting its responsibility to safeguard national interests in tax disputes over the Portuguese company’s stake sale in the gas project.
Government spokesperson Inocêncio Impissa emphasized the importance of ensuring Mozambique benefits fully from exploration projects and activities that involve resource extraction. “It’s all about ensuring Mozambicans derive legal gains,” he remarked during a press briefing following the government’s weekly meeting in Maputo.
