Malawi Revenue Authority

Faqs

Date: 16 January, 2025 - Print

How can one make an objection or appeal relating to their tax affairs?

An objection

This is an expression of dissatisfaction on a decision made by a station manager on a taxpayer’s tax affairs based on a point of law and facts surrounding the assessment. A taxpayer can make an objection by making the following procedures:

•The objection should be submitted to the Station Manager following the notice of assessment or notification of a decision made
•The taxpayer should initially engage the Station Manager in a discussion to resolve the matter at the station level
•While making the objection, the taxpayer is required to pay the taxes assessed
•If the taxpayer is right in his/her objection, a decision in favour of the taxpayer will be made by the Station management

Appeal

An appeal means to call up a higher authority to review a decision or judgment made by a lower authority. If the taxpayer is dissatisfied with the decision made at the station level, the law allows the taxpayer to make an appeal to a higher authority.
•He/she may appeal by writing to the Commissioner General 30 days from the date the Station Manager made the decision
•He/she must specify the grounds of the appeal based on the law and their interpretation
•The Commissioner General will examine the validity, facts and grounds of the appeal and will request the assessor to give his/her arguments based on the facts and understanding of the law
•After weighing the facts from the two parties, the Commissioner General will then give a judgment and communicate to the taxpayer accordingly
•If the decision made by the Commissioner General does not please the taxpayer, the taxpayer may take the matter to a Special Arbitrator or Referee such as the Chief, Principal or Senior Resident Magistrate for a review
•Where the taxpayer is not satisfied with the decision made at this level, he/she is free to lodge an appeal at the High Court until when he/she is satisfied with the decision made

What is Pay As You Earn (PAYE)?

PAYE is the method of collecting Income Tax from employees on their earnings. Deduction is done by the employer when the payments are being made. It could be weekly, fortnightly or monthly hence the name Pay As You Earn.

Who is eligible to operate PAYE?

Any employer who pays an employee in excess of MK20, 000 per month or MK240, 000 per year is liable to deduct PAYE and remit to MRA before the 14th month of the month following which it was deducted.

What are the applicable rates of PAYE?

With effect from 1st July 2013, the applicable rates for PAYE on a monthly basis are as follows:

• The first MK20, 000 at 0%
• The next MK5, 000 at 15%
• The excess of MK25, 000 at 30%

When an employer employs one or more persons whose earnings exceed MK20, 000 per month or MK240, 000 per year, that employer is required to register for operation of PAYE. Upon registration, MRA will supply the employer with registration forms (Form P1) where all the details concerning the employer and the appropriate number of employees who are eligible for PAYE are filled. An employer is required to register for PAYE within a period of 21 days after becoming an employer.

Is overtime, leave grant or 13th cheque subjected to PAYE?

Yes. This is so because all these payments constitute income.

What is Withholding Tax?

Withholding Tax is an advance payment of income tax that is deducted from specified payments. A person making the payment deducts the tax.

Who is liable to operate Withholding Tax?

Any individual, partnership, trust, association, company, club, statutory body, council, government ministry or department or any religious organization, as long as it makes payments to any person, is eligible to register with MRA and operate Withholding Tax. Withholding Tax is deducted using specified rates (14th Schedule to the Taxation Act) as follows:

	Nature of Payment	Rate
1	Royalties	20%
2	Rent	15%
3	Payment for any supplies to traders and institutions: i. Foodstuff ii. Other	3% 3%
4	Commission	20%
5	Payment of Carriage and Haulage	10%
6	Payment of Contractors and Sub-Contractors	4%
7	Payment for Public Entertainment	20%
8	Payment of over K15,000 for Casual Labour	20%
9	Payment of Services	20%

10	Bank Interests in Excess of K10,000	20%
11	Fees	10%
12	Payment of Tobacco Sales	3%

What are the advantages of Withholding Tax?

(a) To Taxpayers
   The taxpayer is relieved of the burden of squaring-up the liability at once because one pays the due tax little by little
   You pay tax when money is available

(b) To Government
   It accords the Government a steady flow of revenue
   It brings people who have not registered for tax into the tax net

What is a Withholding Tax Exemption Certificate?

This is a certificate issued by MRA on application to exempt a taxpayer from being withheld tax on specified payments. Even though one would not be deducted tax at the time of the transaction, he/she would be required to file a return of income to MRA at the end of his/her accounting period.

What are the conditions for obtaining a Withholding Tax Exemption Certificate?

The certificate will be issues to a taxpayer if he/she has:
   Timely filed a return of income that is due
   Filed returns of income for all the years since commencement of business
   Paid all outstanding taxes due, including Valued Added Tax and Customs duties
   Been audited for tax - if the Commissioner General so directs
   Complied with any special or general directions, or has fulfilled any conditions, which the Commissioner General considers necessary to give or impose, having regard to the circumstances of the application

Does a Withholding Tax Exemption Certificate apply on all specified goods and services?

A Withholding Tax Exemption Certificate does not apply on payments for royalties, rent, fees, commissions, contractors and subcontractors and bank interest.

Is WHT tax the final tax that one is required to pay to MRA in a year?

WHT is not the final tax but it is an installment of the tax one would be expected to pay at the end of the year. For example, if one’s net profit after assessment is K300, 000 but he/she had provisionally paid K250, 000 in form of WHT, he/she would be required to pay K50, 000 only because K250, 000 was already paid in form of Withholding tax.
What will happen to anybody who fails to deduct Withholding Tax when due?
Any person who fails to deduct Withholding Tax shall be personally liable to pay the amount of any Withholding Tax which was not deducted plus an additional penalty of 20% of the amount of Withholding Tax that was to be paid.

What is Turnover Tax?

Turnover Tax (TOT) is the tax that is levied on gross income from businesses. Income from businesses include: gross receipts, gross earnings, revenue takings, yields and proceeds.

What is the rate of Turnover Tax?
Turnover Tax is levied at 2% of the gross receipts of businesses.

Who is supposed to register for Turnover Tax?

All business entrepreneurs whose annual turnover does not exceed MK10 million are supposed to register for TOT at the nearest MRA office. Upon registration, the registered taxpayers are issued with a registration certificate. However, registration for this tax is optional. Those taxpayers whose turnover fall within
the MK10 million bracket may chose not to register for this tax.

How will taxpayers who chose not to register for this tax be treated?

Taxpayers who are eligible for Turnover Tax but choose not to register for it must apply to the Commissioner General for exemption from Turnover Tax. Upon approval, such a taxpayer is assessed under the normal income tax system of submitting annual accounts and tax computations using the normal rates.

What should a trader do if the turnover exceeds MK10 million?

When the income of a business registered under Turnover Tax exceeds K10 million in any year of assessment, the taxpayer should notify the Commissioner General of the change of status within a month.

When satisfied, the Commissioner General approves the change of status which becomes effective from the first day of the month following the month during which the turnover exceed MK10 million. When approved, such businesses follow the formal tax system of preparing accounts and tax computation and submitting them together with the annual tax return.

What records should turnover taxpayers maintain?

Taxpayers under Turnover Tax system are required to systematically maintain records of their daily sales (both cash and credit sales). These records should be inspected by MRA officers upon notification once in a while for the purpose of verifying that the correct tax is being paid. It is an offence not to maintain these records.

When should a TOT return be submitted to MRA?

The return should be submitted to MRA on or before the 20th day of the following month. For example, a return of the month of July 2016 should be submitted to MRA on or before the 20th August 2016.

What are the advantages of registering for Turnover Tax?

The advantages are:
•It gives room for the growth of small taxpayers in the country that is why the rate of the tax is very low
•Operation of this tax is very simple. Taxpayers are required to maintain records of their daily sales for the tax purpose
•The cost of complying with this type of tax is low. Since taxpayers are not required to produce a full set of accounts, they reduce the time and cost of maintaining their books of accounts

How is TOT calculated?

TOT is calculated by adding all daily gross sales for the month and multiply by 2%. For example, if total sales for the month of December 2016 is K1, 000, 000 then TOT due is K20, 000 (20% x K1, 000, 000).

What if the business makes no sales in a month?

In the event that the business makes no sales in a particular month, the taxpayer will still be required to submit a nil return.

Is Turnover Tax applicable on all categories of income?

Turnover tax does not apply on:
• Rental income
• Management fees
• Professional fees or training fees
• Income of incorporated companies
• Any income that is subject to a final withholding tax

What is a Tax Clearance Certificate?

Tax Clearance Certificate?

A Tax Clearance Certificate (TCC) is a written confirmation from MRA that one’s tax affairs are in order at the date of issuance. A Tax Certificate Clearance may also be issued to a taxpayer who has tax arrears, provided that such arrears are covered by an installment arrangement agreed by MRA and the business person.

What are the advantages of TCC?

•Renew your Certificate of Fitness (COF) for your commercial vehicle(s)
•Renew your Business Residence Permit (BRP)
•Renew your Professional Business License(s) such as permits of medical practitioners or dentists, legal practitioners (lawyers), engineers and architects who are engaged in private practice on their own behalf as a private practice or in partnership with another private practitioner(s)
•Renew of your Certificate of Registration under the National Construction Industry Council (NCIC) Act
•Transfer of a company as a going concern
•Externalization of funds to non-resident service providers whose source is deemed to be Malawi
•Renew your Temporary Employment Permits (TEPs)
•Renew your business licenses by the Ministry responsible for industry and trade
•Renew of your tourism licenses by the Ministry responsible for tourism
•Renew of your extension or transfer of mining licence(s), or transfer of mineral rights by the Ministry responsible for energy and natural resources
•Renew of your telecommunications licence(s) by the Malawi Communications Regulatory Authority (MACRA)
•Renew of your energy licence(s) by the Malawi Energy Regulatory Authority (MERA)
•Renewal of registration of public transport conveyances by the Road Traffic Directorate (RTD)
•Change of ownership of a company

What are conditions for issuing a TCC?

•The applicant should be a registered taxpayer, except where the applicant is not subject to, or is exempt from Income Tax
•The Income Tax returns of the applicant due are submitted to the Commissioner General
•The applicant should have no outstanding Income Tax
What are the procedures that one should following in order to obtain a TCC?
•An application letter-the taxpayer is required to submit a written application to MRA in which he/she should express their interest to obtain a TCC
•Land certificate or title deed
•Original sale agreement depicting the original cost of the property
•Current sale agreement
•Current valuation report
Upon receiving the documents above, the Authority would assess the tax compliance status of the applicant. This status is analyzed by checking how the taxpayer pays his/her taxes and submit their tax returns.

Who are required to use EFDs?

manufacturers
wholesalers
retailers
service providers

Why introduce EFDs?

To reduce the following challenges:

suppression of sales
non issuance of tax receipts / invoices
non- remittance of VAT collected
undervaluation of tax receipts / invoices
Using multiple sets of business records
non -disclosure of branches and associated businesses

EFDs will therefore address these challenges as the devices will provide evidence of sales transactions in a technically easy and undisputed way as the daily sales transactions will be transmitted online through GPRS/mobile network connectivity to MRA’s central server.

When a consumer pays for a product or service, the machine will register it and at the end of the day transmit details of ALL the sales to MRA servers, making it easy to account for and verify VAT collected on daily basis since the details which the VAT operator will be using will also appear in MRA’s server.

What are Electronic Fiscal Devices (EFDs)?

They are an advanced version of electronic cash registers that record all sales transactions at the point of sale
They have fiscalised memory (meaning data cannot be erased)
They produce fiscalised receipts- These are receipts that have fiscal data needed to assess tax.
They use GPRS/ Mobile network connectivity to transmit the data to MRA Central server
They can be connected to a computer, bar code reader or be a stand alone