A Withholding Tax Exemption Certificate is a certificate issued by the Malawi Revenue Authority (MRA) to exempt a taxpayer from being withheld tax on specified payments. Withholding Tax is an advance payment of income tax that is deducted from specified payments. A person making the payment deducts the tax.
The exemption certificate exempts the taxpayer from being deducted Withholding Tax at the time of the transaction. However, the taxpayer would still be required to file a return of income, and pay tax if he has made a profit, at the end of his accounting period. A taxpayer is required to apply for an exemption certificate in writing to the Commissioner General who may issue a Withholding Tax Exemption Certificate to any person who has met all of the required conditions.
The applicant should meet the following conditions; timely filed a return of income which is due; filed returns of income for all the years since commencement of business; paid all outstanding taxes due including Valued Added Tax (VAT) and Customs duties; and audited for tax if the Commissioner General so directs and has complied with any special or general directions. A Withholding Tax Exemption Certificate does not apply on payments for royalties, rent, fees, commissions, contractors and subcontractors and bank interest.
Any individual, partnership, trust, association, company, club, statutory body, council, Government Ministries, Departments and Agencies (MDAs) or religious organization is eligible to operate Withholding Tax if it makes payments to any person. Withholding Tax is deducted using specified rates in the 14th Schedule to the Taxation Act.
Any person who fails to deduct Withholding Tax shall be personally liable to pay the amount of any Withholding Tax which was not deducted plus an additional penalty of 20% of the amount of Withholding Tax that was to be paid.
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