There are a number of tax incentives provided for in the Taxation Act. These include annual allowances, initial allowances, investment allowances, transport allowances, export allowances, training allowance and mining allowance.
Annual allowances are available for qualifying assets on a declining balance basis at the following Rates:
(i) Industrial buildings, farm improvements & railway lines 5%
(ii) Farm fencing 10%
(iii) Heavy machinery and installations 15%
(v) Light machinery 10%
(vi) Trucks and tractors 33.33%
(vii) Light commercial vehicles 25%
(viii) Motor vehicles 20%
(ix) Commercial Buildings costing more than K100 million 2.5%
Initial allowances are available on capital expenditure during the year of acquisition at the following Rates:
(i) Industrial buildings, improvements, railway line 10%
(ii) Farm fencing 33.33%
(iii) Machinery 20%
(iv) Automobiles forming part of a commercial hire fleet 20%
Allowance shall be given to a taxpayer who is also a manufacturer equal to 100%
of the cost of new and unused (Industrial buildings) plant or machinery and
equal to 40% of the cost of used industrial buildings and plant or machinery.
An additional allowance may be granted of 25 percent of the international transport costs incurred by a taxpayer for his exports whether produced by manufacturing in bond or otherwise, but other than exports of products specified in the Schedule to the Export Incentives (Exclusion) Order made under the Export Incentives Act.
A registered exporter, shall in every financial year during which he exports products of Malawi, be entitled to an income tax allowance of 25 percent of his taxable income derived from his export sales.
A person carrying on mining operations incurs mining expenditure in any year of assessment shall be entitled to an allowance equal to 100 percent of such expenditure in the first year of assessment.