2008-2009 BUDGET HIGHLIGHTS: WHAT IS THERE FOR INVESTORS?

Continuing with its various efforts to create a conducive and profitable business environment, Malawi Government has instituted new tax measures. The measures, disclosed in the budget statement by Finance Minister honourabe Goodall Gondwe in parliament on 23rd May 2008 are expected to encourage more investment especially in agriculture. In his budget statement, honourable Goodall Gondwe recalled that since 2004 the government has been pursuing policies that have brought about economic growth

“We were set to attain economic growth rates of 6 percent at the minimum and to continue with the policy of poverty reduction that aimed at empowering the poor to participate vigorously in the economic activities of the nation”

Honourable Gondwe reminded the house such good economic policies have been rewarded by the international community who accorded Malawi the status of highly indebted poor country (HIPC) completion point and has led Malawi to attain growth rates above the target of over 7.0 percent.

Below are the tax measures that seek to further improve the business environment and create a fair tax system:

Tax incentives

Value added tax has been reduced from 17.5% to 16.5%
Elimination of VAT for construction and manufacturing machinery

Additionally the Malawi Government is offering a new tax package that aims to encourage investment in particular sectors. These include

• Duty free importation of capital equipment for electricity, telecommunications , water, mining and dairy farming industries
• The Petroleum industry will enjoy duty free importation and VAT exemption for materials imported for the construction of petroleum storage facilities. The industry will also be given 100 percent allowance in the first year for petroleum storage materials

Agriculture

• Tobacco - Excise duty on cigarettes that contain 70% of Malawian tobacco has been reduced in order to encourage investment in tobacco value addition.
• Hessian sacks will also be imported free of duty
• Fish farming – Removal of both duty and VAT on fishing trawlers and duty free importation of specialist fish equipment

Other agricultural incentives

• No duty on aflatoxin testing equipment
• No custom duties on all insectides, fungicides, herbicides and pesticides

Note: All investors are encouraged to consult the Malawi Revenue Authority on the implementation of these new tax measures