The Taxation (Amendment) Act and the Value Added Tax (Amendment) Act have been published in the Malawi Government Gazette. The amendment laws were assented to by President Dr. Lazarus Chakwera on 31st October 2020 and gazetted on 3rd November 2020. The effective date for the new tax measures is, therefore, 3rd November 2020.
This means that the two acts have now come into force and they should be implemented. As far as the Taxation (Amendment) Act is concerned, the the amendments include the increase of the tax-free threshold for Pay As You Earn (PAYE) from K45, 000 to K100,000 per month or from K540,000 to K1,200,000 per annum.
Taxable income will now be charged at 30 percent for ecclesiastical, charitable or educational institutions of a public character or of trusts. Taxpayers with mining projects will be charged taxable income at 30 percent provided that an additional tax of 5 percent of taxable income will be charged for taxpayers whose companies are not incorporated in Malawi. This applies to taxpayers not resident in Malawi.
Furthermore, an additional resource rent tax at a minimum rate of 15 percent on after-tax project resource rent will also be charged. Taxpayers in the life insurance business will be charged taxable income at rate of 30 percent.
Other changes include the amendment of Section 2, the definition of the word “amount realized” by deleting paragraph (a) and substituting it with the following new paragraph (a); “in the case of disposal of an asset by sale for cash, means the cash received or contracted to be received, including any contingent amount agreed at the time of disposal”.
Section 15 (1) paragraph (e) of the Taxation Act has also been amended by inserting immediately after the word “trust” the words “in which the individual is a settler of a trust.
The Fourteenth Schedule to the Taxation Act has also been amended and the amendments include the increase in the tax-free threshold for casual labour from K15,000 to K35,000 per transaction. Payment in excess of K35,000 for casual labour will be charged at 20 percent.
Besides that, a 20 percent Withholding Tax on winnings from betting and gambling transactions including lotteries has been introduced. Winnings means any payment made to any person who wins a bet or a gamble including lottery. Withholding Tax on fees and rent has been increased from 10 to 20 percent and from 15 to 20 percent, respectively. Payment for other farm produce has been introduced at 3 percent.
As far as VAT (Amendment) Act is concerned, a 16.5% VAT on refined cooking oil has been introduced and this would allow manufacturers to claim input VAT. Visit www.mra.mw for more information on the new tax measures.
BY WADZA OTOMANI