Malawi does not have separate legislation for the determination of taxable income of different types of legal persons. Taxation of all income is included in the Taxation Act.
Section 11 of the Taxation Act defines income as the total amount in cash or otherwise, including any capital gain, received by or accrued to a person in any year or period of assessment from a source within or deemed to be within Malawi. The taxpayer's assessable income excludes any amount exempt from tax under this Act.
Income deemed to arise in Malawi
The liability for Malawi tax is based on whether the income is sourced from Malawi, irrespective of the residence of the recipient of such income. Certain transactions may be deemed to be from a source within Malawi even if carried out outside Malawi. Section 27 of the Taxation Act limits the income that may be deemed to have arisen in Malawi to the following:
- Remuneration for services rendered or work performed in Malawi.
- Remuneration for services rendered or work performed in or out of Malawi where the amount may be claimed as a tax-deductible expense by a permanent establishment (PE) in Malawi.
- Amounts incurred, claimed, or claimable in connection with a PE in Malawi.
- Realised exchange gains and losses arising in connection with a PE in Malawi or foreign exchange assets and liabilities held in Malawi.
- Capital gains and losses realised with respect to tangible property located in Malawi and interests in companies incorporated in Malawi.
- Interest not charged on a loan by a lender to another person is deemed to be income accruing to the lender. The imputed interest on a domestic loan is charged at the prevailing bank interest plus 5%, while the foreign debt is charged at the prevailing LIBOR plus 5%.
Summary of tax rates
|Entity||Income tax rate (%)|
|Locally incorporated companies (1)||30|
|Branches of companies not incorporated in Malawi||35|
|Companies in Export Processing Zones||30|
|Companies in priority industries (2):|
|For a period not exceeding ten years||0|
|In all other cases for companies incorporated in Malawi||15|
|In all other cases for Malawi branches of external companies||20|
- In the case of a mining company, there is a mineral royalty, as prescribed in the regulations, as a separate tax. The mineral royalty is a tax-deductible expense.
- Agricultural produce processing and power generation are designated as priority industries.
Non-resident tax is payable on income sourced from Malawi at the rate of 15% of the gross income and 10% for income derived from a mining project by way of interest, royalty, payment for independent personal services, or dividend.
Any income payable to a person who is not resident in Malawi (i.e. who has not been in Malawi for an aggregate period of 183 days) arising from a source within Malawi is liable to a final WHT of 15% of the gross of such income. Non-resident tax is applicable where the recipient of the income does not have a PE in Malawi from which the income emanated.
The person that accrues, pays, remits, credits, processes, or handles payment of the amount due to a non-resident is personally liable should the tax not be withheld.
Non-resident tax may not be withheld on income of residents of countries that have a standing double tax agreement (DTA) with Malawi, subject to the provisions of the specific DTAs. For details of applicable WHT rates, see the Withholding taxes section. Currently, the following countries have a DTA with Malawi: Denmark, France, Norway, South Africa, Sweden, Switzerland, and the United Kingdom.
Local income taxes
There are no district or local income taxes in Malawi.