MRA drills USAID partners on tax exemptions

The Malawi Revenue Authority (MRA) has equipped partners of USAID Malawi with technical knowledge on tax exemptions to ensure compliance and allow them to follow the right procedures when applying for waivers. The Authority made two presentations on Value Added Tax (VAT) and duty exemptions during financial management trainings which USAID Malawi organised for its partners in Lilongwe and Blantyre in March and April, respectively.

Making a presentation on VAT waivers, Maganizo Chinkono from Domestic Taxes Division said USAID partners can be exempted from paying VAT on both goods and services by applying to the Commissioner General with all the necessary documentation. He said the basis for VAT relief includes existence of an agreement with the Government of Malawi, the Geneva Convention and being listed in the third schedule of the VAT Act.

“USAID Malawi has an agreement with the Malawi Government and is therefore relieved from VAT. By extension, USAID partners are also relieved from VAT but they have to include the agreement they have with USAID when applying for a waiver,” he said. He said relief supplies are exempt from VAT and they include goods for use by international agencies or Technical Assistance Schemes where the terms of the agreement made with the Malawi Government include exemption from taxes.

He pointed out that USAID partners can get VAT relief on goods by obtaining quotations, orders and pro-forma invoices to show willingness to purchase the supply. “They should present these documents to MRA, pay a processing fee of MK 10,000.00, obtain approval of the ST 14 from MRA and present ST 14 to the supplier,” he said.

Similarly, USAID partners can also get VAT relief on services provided if the application is made by privileged organizations or individuals who are not registered for VAT. Making the second presentation on duty exemptions, Frederick Mpeusa from Customs and Excise said USAID Malawi is a duty free privileged organization under the ‘Economic, Technical and Related Assistance Agreement’ between the Government of Malawi and the US Government.

He said duty-free clearance of goods accorded to the US Government is provided for in Malawi Customs and Excise (Tariffs) Order under Customs Procedure Code (CPC) 415. “Duty free clearance of goods for projects or programs carried out by the US government or its agencies through a non-privileged organization (third party organizations) but under the approval of government (Ministry of Finance-Treasury) are cleared under CPC 445,” Mpeusa told the USAID partners.

He said all applications for other goods under CPC 415, 416 and 417 should be addressed to Deputy Commissioners of the clearing station. “Applications should be made by authorised offices or officers. Applications should have all supporting documents attached such as contract agreements, list of signatories, Bills of Quantities, Invoices Notification of Arrival and others depending on the type of application,” he said.

Both presentations attracted several questions from participants who wanted to get more information and clarification on VAT and duty exemptions. The questions ranged from how to apply for exemptions, how the USAID partners can benefit from the tax waivers, how they can get VAT refunds and how they can dispose goods exempted from duty. USAID Malawi partners who took part in the financial management trainings included PSI Malawi, Catholic Relief Services (CRS), Plan International, Save the Children, CADECOM, CRECCOM, Christian Aid, Baylor-Tingathe, WESM, RTI-Link, Pact Malawi, KNCV TB Foundation, RTI-Merit and World Learning.  The trainings were held in Lilongwe from 21st to 24th March 2016 while the ones in Blantyre were held from 4th to 8th April 2016.