TAX INCENTIVES AND TAX RATES - (MRA)

Malawi offers a wide range of tax incentives with the aim of encouraging development, enhancing output, earning or saving foreign exchange, and expanding employment opportunities.

In 1991, the Government passed an Investment Promotion Act, which provides for tax benefits to exporters and pioneering industries in agriculture, agro-processing, manufacturing, tourism etc.

The Malawi Investment Promotion Agency (MIPA) was established to promote and facilitate both domestic and foreign investment.

Investors can qualify for Export Processing Zones (EPZ) privileges by operating at an approved location and acquiring a license to manufacture goods under bond. Designation as an EPZ or bonded manufacturer requires approval by an appraisal committee, which is chaired by the Minister of Trade and Private Sector Development.

Exporters are entitled to the following privileges:

Export allowance

Exporters are allowed up to 12.5% export sales.

Transport allowance

An additional 25% of international costs incurred by the taxpayer for his exports.

Training allowance

An additional 50% of the costs incurred by the taxpayer during the year of assessment in the training of an employee who is a Malawian, intended to enable him/her to attain a qualification at the degree, diploma or certificate level.

Losses allowance

From the amount of assessable income there shall be deducted any assessed loss arising solely out of trading operations in Malawi.

Investment allowance

This is given to taxpayer who is also a manufacturer. The allowance is equal to 40% of the cost of new and unused industrial building and plant and machinery and equal to 20% of the cost of used industrial buildings and plant and machinery.

Annual allowance

This is given in respect of capital expenditure incurred by the taxpayer.

Initial allowance

This is given in respect of expenditure incurred by the taxpayer during the year of assessment at 40%.

Tax holiday

Companies operating in priority industries so designated by the Minister of Trade and Private Sector Development are eligible for a tax holiday of either:

Companies operating in priority industries so designated by the Minister of Trade and Private Sector Development are eligible for a tax holiday of either:

• 10% for such period not exceeding 10 years or
• 15% throughout the period of operation.

(It is very important to note that no industry has yet been designated as a priority and as such, no tax holidays are operational to date).

Other incentives include:

• Duty free importation of qualifying capital goods used in manufacturing, tourism, mining, horticulture, Information Technology (IT) and telecommunication and agriculture.
• For manufacturing, the duty free benefit also applies to raw materials.
• Surtax, which is leveled at 17.5%, is reclaimable on all eligible inputs and operates on the same principles as VAT.
• Specific goods are Surtax exempt or zero rated
• Exempt goods include: Animal products, petroleum products, certain insecticides and fungicides, agricultural and horticultural appliances, water pumps, tractors etc.
• Zero-rated include: fertilizers and pharmaceutical products.
• Industrial rebate scheme: Qualifying industries can import raw materials duty free.
• Duty drawback: This applies to both manufacturers and non-manufacturers that may not be eligible under the industrial rebate scheme. When importing goods, full duty is payable. However, if one is producing for export, the original duty paid can be reclaimed. This process involves a letter of request to the Malawi Export Promotion Council.

Rebate of excise duty: This is applicable to very few industries and includes:

• Clothing industry
• Cigarette industry
• Pharmaceutical industry
• Brewery industry
• Footwear industry
• Plastic manufacturing industry

For more information contact:

The Commissioner General
Malawi Revenue Authority
Private Bag 247
Blantyre

MALAWI

Tel: 265 1 622 588
Fax: 265 1 622 302
E-mail: mrahq@malawi.net
Website: www.mra.mw