The Taxation Act defines a dividend as any distribution, whether in cash or in property, by a company to a shareholder with respect to the shareholder’s interest in the company but does not include distributions in complete liquidation.
Dividend tax, which is a form of withholding tax, is imposed on dividends received by shareholders of a company. Dividend tax is a final tax.
Dividends are distributed from profits of the current year which the company has no desire to retain or retained profits of previous years. However, the existence of a dividend for tax purposes shall be determined without regard to whether or not the company has current or accumulated profits.
A public officer of a company incorporated in Malawi, shall within 30 days of the declaration by the company of a dividend, furnish the Commissioner General with a tax return comprising a copy of the resolution declaring the dividend.
The tax return should also include a statement containing in respect of each person to whom a dividend has accrued; the name, address and Taxpayer Identification Number (TPIN) of the person; the amount of the dividend accrued; and the date on which the dividend was declared.
Every company incorporated in Malawi shall, within 180 days of the declaration of any dividend, withhold 10 percent of such dividend and remit the amount to the Commissioner General. However, no withholding tax shall be deducted provided that where the dividend is distributed by a subsidiary or a holding company to a holding or related company and the income being distributed is derived from a dividend which was subject to withholding tax in the first instance.
If property is distributed by a company to a shareholder with respect to his shares, the company shall recognize capital gain or loss in the same manner as if the property had been sold to that shareholder at its open market value.
In the case of a complete liquidation of a company, any distribution to shareholders shall be treated as if the shareholders had sold their shares in the company in exchange for the property or the cash received.
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