Galp’s €151M Mozambique Tax Dispute Threatens Portugal’s Green Transition

Portugal’s energy champion Galp and the Mozambican government insist they are not locked in open combat, yet behind the diplomatic smiles a bruising fight over capital-gains taxation is rapidly escalating. The clash turns on whether Galp must hand over €151 M (about $175.9 M) tied to the sale of its 10 % stake in Area 4 of the Rovuma Basin. While the Mozambican authorities have begun enforcement proceedings, Galp has already triggered international arbitration, and both sides privately concede that the outcome could reshape the rules of engagement for Portuguese investors across Lusophone Africa.

Diplomatic Denials, Fiscal Reality

Publicly, ambassadors from Lisbon and Maputo strike a conciliatory tone, repeating that there is “no war” afoot. In practice, however, the Mozambican Tax Authority has frozen part of the proceeds from the March transaction and warned that penalties could push the bill beyond €160 M. Galp counters that most of the revenue reflects the recovery of shareholder loans, not taxable mais-valias, and labels the charge “unfounded”. The company’s decision to file for arbitration in late October signalled that the legal gloves are off, despite the softer language circulated through diplomatic channels. For Portuguese households monitoring their own fuel bills, the dispute is more than a distant courtroom drama: every euro siphoned off by foreign tax collectors can trim the group’s dividend capacity and its promised investments in the Iberian green-energy rollout.

Why It Matters for Portugal’s Energy Future

Galp remains Portugal’s largest listed firm and a crucial player in the country’s transition toward renewables, from hydrogen in Sines to solar parks in the Alentejo. Yet nearly half of its cash flow still comes from hydrocarbons abroad. The sale of Area 4 freed up roughly $881 M in fresh liquidity just as the company prepares multibillion-euro bets on low-carbon projects at home. If a sizeable slice ends up in Maputo’s coffers, Galp could be forced to slow or reshuffle Portuguese investments, delaying promised electric-mobility infrastructure, new bio-refineries, and thousands of domestic jobs. Investors on the Lisbon exchange have already baked in the arbitration risk, sending the stock on a roller-coaster ride that has wiped out over €800 M in market value since mid-September.

Inside the Arbitration Playbook

Under the terms of the bilateral Mozambique–Portugal investment treaty, either side can request confidential arbitration in case of a dispute. Galp opted for the Permanent Court of Arbitration in The Hague, arguing that Mozambican law exempts transactions involving the repayment of shareholder loans from tax on gains. Sources close to the file say the first procedural hearing could take place in early February, with a merits decision unlikely before 2027. Mozambique will lean on precedent from a 2019 ruling against an Asian consortium that paid a comparable levy; Galp plans to highlight contradictions inside Maputo’s own medium-term fiscal framework, which assumes the cash will flow without clarifying the legal grounds. Arbitration awards are enforceable against state-owned assets abroad, so victory for Galp could let the company seize Mozambican bank accounts in Europe—a scenario Lisbon quietly hopes to avoid.

The View from Maputo: Budget Gaps and Gas Dreams

For President Filipe Nyusi’s administration, the stakes are stark. Revenues from the fledgling LNG sector are meant to fund everything from cyclone reconstruction to teacher salaries. The finance ministry projects average annual gas-related receipts of €75 M through 2027, a figure that already looks optimistic after Cyclone Gombe damaged export facilities last year. Losing the Galp case would punch a sizeable hole in a budget that relies on foreign aid for roughly 16 % of expenditure. Officials also worry that a defeat could embolden other investors—among them Eni, ExxonMobil and TotalEnergies—to mount similar challenges, trimming future takings from the much-hyped Coral Sul and Mamba reservoirs.

What Comes Next for Lusophone Relations

Seasoned observers of Portugal-Mozambique ties recall that past commercial rifts—from the Cahora Bassa dam renegotiation to telecom disputes—were eventually settled through high-level political intervention. Both governments hint at a preference for a negotiated fix that would spare them the public glare of a verdict. Behind closed doors, envoys are exploring a compromise under which Galp would pay a smaller sum while gaining assurances on future tax stability for its remaining African ventures. Whether that deal materialises could determine how Portuguese capital views not only Mozambique but the broader Community of Portuguese-Speaking Countries as a safe harbour for investment. For now, the official mantra remains: no war, only a disagreement. Yet veterans of cross-border tax rows know that disagreements of this size rarely stay polite for long.