Fringe Benefit Tax (FBT) is paid on taxable values of fringe benefits provided by an employer to an employee. All employers except the Malawi government are liable to FBT. The employer is liable for payment of FBT. A fringe benefit is any asset, service or other benefit in kind, provided by or on behalf of an employer to an employee, if such provision includes an element of personal benefit to the employee.
Payment of school fees by a company for an employee’s children, or provision of accommodation to an employee or provision of concessionary loans to an employee are examples of fringe benefits.
Liability to Fringe Benefit Tax
Every employer other than the Malawi government, providing fringe benefits to employees is required to operate FBT. The rate for Fringe Benefit Tax is 30%.
Every employer who provides fringe benefits to employees is required to register for FBT 14 days after starting to provide fringe benefits to employees.
If an employer gives a loan to an employee to purchase a car, a house or furniture and other items and charges interest on the loan at a lower rate than the commercial lending rate, say 15% instead of 22%, the difference (7%) is treated as a benefit and therefore subject to FBT. Similarly, if an employer allocates a motor vehicle to an employee, FBT is payable. Note that cell phone allowance given to an employee in form of cash is taxable in the hands of the recipient under PAYE. It is treated as part of the employee’s emoluments.
However, an education loan, a house rental advance or an emergency advance obtained to cover education, medical or funeral expenses do not constitute a personal benefit and therefore not liable to FBT.
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