VAT does not apply on banking services

The Malawi Revenue Authority (MRA) has dismissed claims by the Bankers Association of Malawi (BAM) that Value Added Tax (VAT) has been introduced on banking services.

Disputing the claims at a press briefing on Thursday, 28^th October 2021, the Deputy Commissioner General, Henry Ngutwa, stated that all along banking services have been exempted from VAT since the VAT Act was enacted in 2005.

He further clarified that there have never been any amendments as far as exempting banking services from VAT was concerned rather the VAT (Amendment) of 2021 only makes a clarification on what constitutes banking services and non-banking services.

The First Schedule to the VAT Act exempts banking services from VAT and this means that VAT is not chargeable on banking services,’’ he elaborated.

The Banking Act (Section 2) refers to the business of receiving deposits or deposit substitutes from the public that are (a) payable, with or without interest, on demand, or after the expiration of a state period; and (b) transferable by cheque or by other means.

‘’This shows that there are some services that are essential for completing banking services but those services are not banking services in and of themselves hence they are not exempted from VAT,’’ added Ngutwa.

To date, fees, charges and commissions on non-banking services that banks have been charging their customers were inclusive of VAT but some banks were not remitting the same to Government as the law requires.

The new amendment, therefore, simply clarifies the existing law in order to ensure its proper implementation and enforcement, he concluded.

By Wadza Otomani