The Taxation Act defines a dividend as any distribution, whether in cash or in property, by a company to a shareholder with respect to the shareholder’s interest in the company but does not include distributions in complete liquidation. A dividend tax is a tax imposed on dividends received by shareholders of a company. Dividend tax is a final tax and it is a withholding tax.
Dividends are distributed from profits of the current year which the company has no desire to retain or retained profits of previous years. However, the existence of a dividend for tax purposes shall be determined without regard to whether or not the company has current or accumulated profits.
A public officer of a company incorporated in Malawi shall within 30 days of the declaration by the company of a dividend furnish to the Commissioner General a copy of the resolution declaring the dividend.
The public officer should also submit a statement, containing in respect of each person to whom the dividend has accrued; the name and address of the person; the amount of the dividend accrued; and the date on which the dividend was declared.
Every company incorporated in Malawi shall, upon distribution of any dividend, withhold 10 percent of such dividend and remit the amount to the Commissioner General within 14 days from the date of distribution of the dividend.
If property is distributed by a company to a shareholder with respect to his shares, the company shall recognise capital gain or loss in the same manner as if the property had been sold to that shareholder at its open market value.
In the case of a complete liquidation of a company, any distribution to shareholders shall be treated as if the shareholders had sold their shares in the company in exchange for the property or the cash received. The distribution shall not be treated as a dividend and a capital gain or loss shall be recognised accordingly.
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