Malawi

Corporate - Significant developments

Last reviewed - 04 March 2020

Effective 22 November 2019:

  • There is 30% export allowance on processed non-traditional goods.
  • There is 10% export allowance on raw non-traditional goods.
  • An additional 50% of the amount paid as basic salary to an employee with disability, as defined by the Disability Act, is tax deductible.
  • Presumptive tax has been introduces on commercial motor vehicles with seating capacity of up to 33. The tax has to be paid quarterly.
  • A penalty of 6% of an adjusting amount has been introduced on the amount adjusting a tax return following a tax audit by the Commissioner General.  
  • Local withholding tax on rentals and fees has been revised upwards.
  • Automatic withholding tax exemptions have been introduced on sales of up to 1,200 kilograms or 10 bales of tobacco sold at auction floors.

Other developments over the past are:

  • The debt-to-equity ratio has been set at 3:1 for the purposes of thin capitalisation and the limit for interest deductibility.
  • The terms debt, equity, and interest have been defined.
  • The Act has set the rate for the purposes of determining the deemed interest on interest-free loans as income sourced from Malawi. The interest rate is the prevailing bank interest rate plus 5% for domestic loans and LIBOR plus 5% on the United States dollar (USD) equivalent of the loan for foreign loans.
  • The sum of tax deductible donations to approved charitable and not-for-profit organisations has been increased to 5 million Malawian kwachas (MWK) annually.
  • It is mandatory for a Public Officer of the company to file a return of dividend declaration within 30 days of the declaration. The return has to comprise:
    • a copy of the resolution declaring the dividend and
    • a statement containing in respect of each of the persons to whom a dividend has accrued:
      • the name, taxpayer identification number, and address of the recipients
      • the amount of the dividend accrued, and
      • the date on which the dividend was declared.
  • Dividend withholding tax (WHT) has to be remitted to the tax authority within 180 days of the declaration of the dividend.
  • There is personal liability for not withholding tax from income due to a non-resident. The liability extends to those that receive, process, or handle payment or remittance to a non-resident in whatever way.
  • It is now mandatory for any business to register for tax when the business is potentially liable to tax.
  • It is now mandatory to file a return of estimated income and the related tax at the commencement of each year. The return has to be filed within 25 days from the beginning of the first quarter and should contain:
    • an estimate of the chargeable income for the year of assessment
    • an estimate of the tax due on the chargeable income, and
    • a quarterly estimate of the tax due on the chargeable income.
  • The Commissioner General may obtain information from third parties like banks, companies, and any other person.
  • A WHT exemption certificate will no longer be granted in respect of interest, rent, royalties, fees, commissions, and payment of casual labour.
  • The Act now identifies and allows payment of taxes through commercial banks, and where a taxpayer pays through a bank, a notification has to be sent to the tax authority.
  • Mining is included in the definition of a business for the purposes of value-added tax (VAT). 
  • There is an introduction for a withholding agent for recovery of VAT. A VAT withholding agent is required to issue a withholding VAT certificate. Failure to issue such a certificate renders the person liable to penalties.