Tax Update
VAT amendments gazetted

VAT amendments gazetted

The Malawi Revenue Authority (MRA) is informing the business community and the general public that the Amendment Bill to the Value Added Tax (VAT) Act which was deliberated during the recent sitting of Parliament is has law. 

This follows the gazetting of the same on 19th August, 2016.  Amendments to the Taxation Act and Customs and Excise Act, which became effective on 1st July, 2016, have also been gazetted and they have also become law. 

Following this a standard rate of 16.5 percent has been introduced on tap (piped) water produced by water boards, ordinary bread, newspapers, periodicals, journals and magazines, laundry soap and milk. However, baby milk formula is exempted from VAT. Previously, these products were either zero-rated or exempted. 

What is VAT? This is a tax on consumption expenditure that is levied on the “value added” that has been created at various stages in the production and distribution chain. “Value added” is the difference between a business’ purchases of inputs and sales of output.  

When announcing the changes, the Government argued that it decided to impose VAT on these items because some exemptions and zero-ratings on various goods and services had eroded Malawi’s tax base and compromised revenue generation capabilities hence, the VAT.

The Government also observed that some exemptions and zero ratings acted as a subsidy to consumers yet were accessed by both the rich and the poor and the process the poor ended up subsidizing the rich. 

Amendments to the VAT Act became effective on 1 October, 2016. MRA, therefore, is appealing to those concerned to register and charge VAT in line with the law. 

Feedback: tax@mra.mw 0888958220, 0999551634

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