Malawi
Taxation Act
Chapter 41:01
- Commenced on 1 January 1964
- [This is the version of this document as it was at 31 December 2014.]
- [Note: This version of the Act was revised and consolidated in the Fifth Revised Edition of the Laws of Malawi (L.R.O. 1/2018), by the Solicitor General and Secretary for Justice under the authority of the Revision of the Laws Act.]
Part I – Preliminary
1. Short title
This Act may be cited as the Taxation Act.2. Interpretation of certain general terms
In this Act, unless inconsistent with the context—“adjusted basis”, in relation to an asset, means the basis of the asset—3. Commissioner of Taxes
Part II – Administration
4. Delegation of functions by Commissioner
5. Report by Commissioner
6. Officers to observe secrecy
7. Forms
The Commissioner may from time to time approve the form of returns, claims, statements, notices and all such other forms as may be required for the administration of this Act.[14 of 1969]8. Service of documents
Any notice or document required or authorized under this Act to be served upon any person shall be sufficiently and effectively served—9. Service of oral notices
10. Validity of documents
Part III – Income
Division 1—Determination of assessable income
11. Income and assessable income
The income of a person shall include the total amount in cash or otherwise, including any capital gain, received by or accrued to or in favour of the person in any year or period of assessment from a source within or deemed to be within Malawi and his assessable income shall be that income excluding any amount exempt from tax under this Act.[7 of 1992]12. Special circumstances in which income deemed to have accrued
13. Exemption
14. ***
[repealed by 17 of 2012]15. Non-recognition of capital gain or capital loss in certain cases
15A. Involuntary conversion of assets
15B. Capital gains on disposal of business assets
16. Income— payments for services*
17. Assessment to tax for single terminal
A single terminal payment to an employee in lieu of paid leave shall be assessed to tax as if such leave had been taken by the employee immediately after cessation of employment and after he had been paid accordingly.[17 of 2012]18. Sums payable by an employer for expenses of an employee
Any sum paid by an employer to an employee in respect of expenses shall be treated as a prerequisite of the office or employment of that employee and shall be included in the employee’s assessable income:Provided that the employee may claim as a deduction the amount of any such payment as is expended by him wholly and exclusively in performing the duties of his office.[1 of 1991]19. ***
[repealed by 1 of 1991]20. ***
[repealed by 1 of 1991]21. ***
[repealed by 1 of 1991]22. Income— passages
Any amount paid by the Government to its employees in respect of or in connexion with leave passages to any country outside Malawi and any comparable amounts similarly paid by any other employer under a contract with an employee, which has been approved by the Commissioner, shall not be treated as a benefit within the meaning of section 18.23. Premiums
There shall be included in income any amount received or accrued from another person as a premium or like consideration paid by such other person for the right to use or occupation of land or buildings or for the right of use of plant or machinery or for the use of any patent, design, trade-mark or copyright or any other property which, in the opinion of the Commissioner is of a similar nature.24. Timber sales
Where land is sold or otherwise disposed of for valuable consideration and there is timber growing on such land which, in the opinion of the Commissioner, has been grown as timber for sale, the market selling value as defined in section 50 of such timber at the time such land is sold or so disposed of shall be included in income.[14 of 1971]25. General
There shall be included in income any amount recovered or recouped during the year of assessment in respect of amounts allowed as deduction under division 2 of this Part of this Act or under any previous law whether in that or any previous year of assessment.[7 of 1992]26. Foreign exchange gain and foreign exchange loss
27. Income deemed to have accrued in Malawi
Division 2—Deductions
Determination of taxable income
28. Allowable deductions in determining taxable income
29. ***
[repealed by 10 of 1983]30. ***
[repealed by 10 of 1983]31. ***
[repealed by 4 of l988]32. Allowable deductions — repairs
Sums actually expended by the taxpayer during the year of assessment for repairs not being expenditure of a capital nature—33. Allowable deductions — capital allowances
There shall be allowed as a deduction from assessable income capital allowances as provided in the Second Schedule:Provided that the Minister may, by regulations, determine ceilings of capital allowances deductible in any given year of assessment in respect of certain assets.[1 of 1991]34. Allowable deductions — premiums paid
35. Allowable deductions — bad debts
There shall be allowed as a deduction bad debts proved to be such to the satisfaction of the Commissioner and which have become bad during the year of assessment if the amount of the debt is included in the current year of assessment or was included in any previous year in the taxpayer’s assessable income either in terms of the Act or any previous law.36. Allowable deductions — doubtful debts
36A. Allowable deductions — export allowance
36B. Allowable deductions — payroll levy
There shall be allowed as a deduction an amount paid by an employer, who is also a taxpayer, as payroll levy determined under section 20 of the Technical, Entrepreneurial and Vocational Education and Training.[9 of 2000; Cap. 55:06]37. Allowable deductions — pension funds and provident funds
There shall be allowed as a deduction—38. Allowable deductions — sale of timber
Where income arises from the sale of timber a deduction shall be allowed—39. Allowable deductions — research, etc.
There shall be allowed as a deduction—39A. Allowable deductions — social contribution
There shall be allowed as a deduction of fifty per centum for any amount paid as a social contribution directly into the building of a public hospital or school, or the sponsoring of youth sporting development activities.[17 of 2012]40. Allowable deductions — annuity payment
Any amount paid by way of annuity, allowance or pension during the year of assessment by any taxpayer—41. Allowable deductions — new businesses initial expenditure
41A. ***
[repealed by 24 of 2011]41B. Allowable deductions — transport allowance
There shall be allowed as a deduction an additional twenty-five per centum of the international transport costs incurred by the taxpayer for his exports, whether produced by manufacturing in bond or otherwise, but other than exports of products specified in the Schedule to the Export Incentives (Exclusion) Order, made under the Export Incentives Act.[7 of 1992; 24 of 2011; 17 of 2012; G.N. 23/1990; Cap. 39:04]42. Allowance of losses — general
There shall be deducted, from any amount of assessable income, any assessed loss arising solely out of operations in Malawi, whether determined under this Act or any previous law, incurred by the taxpayer in any previous year of assessment to the extent to which such assessed loss has not been allowed as a deduction from his income of a previous year of assessment:Provided that—43. Allowance of losses — change in shareholding in company
44. Allowance of losses — formation of new company
If a company with an assessed loss (hereinafter referred to as the “old company”)—45. Deductions not to be made
No deduction shall in any case be made in respect of any of the following matters—46. Deductions not admissible as regards income derived from trade
No deduction shall, as regards income derived from any trade, be made in respect of any of the following matters—Division 3 — Stock and work in progress
47. Trading stock and work in progress to be taken into account
48. Valuation of stock and work in progress at end of year
Trading stock and work in progress shall be valued on the basis of the cost price or market selling value of each item of trading stock or of all work in progress, as the case may be, at the end of the accounting year:Provided that, by agreement with the Commissioner, a taxpayer may elect to adopt any basis which conforms to recognized accountancy practice and is not contrary to this Act, but where such basis is elected the election shall be binding for future accounting periods unless the Commissioner otherwise agrees and any change shall be upon such terms and conditions as he may impose.49. Valuation of stock and work in progress at beginning of year
The value of trading stock and work in progress to be taken into account at the beginning of the accounting year shall be its value as ascertained under this Act or any previous law at the end of the immediately preceding accounting year.50. Definition of cost and market selling value
For the purpose of this Division—“cost” means the historical cost of bringing the relevant item of stock to its existing condition and location;“market selling value” means the expected realizable value of the relevant item of stock in the taxpayer’s normal selling market, the value of work in progress shall include overhead charges to the extent of the recognized accountancy practice for the type of business.[14 of 1971]51. Domestic consumption
The value of trading stock taken by the taxpayer for his domestic or private consumption or use shall be—52. Gifts and sales
Where—53. Valuation of livestock
Livestock shall be valued at cost or market selling value and sections 47 to 52 inclusive shall apply.[14 of 1971]Division 4 — Determination of taxable income where adequate books and records are kept
54. Books of accounts
55. Period of accounts
Division 5 — Businesses carried on partly in and partly out of Malawi and businesses controlled abroad
56. Profits of non-resident persons from sale of exported produce
57. Persons carrying on business which extends beyond Malawi
Part IV – Special trades and cases
58. Taxation of income derived from farming
59. Co-operative agricultural societies
60. Consumers’ co-operative societies
61. Clubs, etc., formed, etc., for pleasure or recreation
62. Building society interest
Interest received from a building society registered in Malawi shall be included in the assessable income of the recipient.63. Insurance business
64. Hire purchase or other agreements providing for postponement of ownership of property
If any taxpayer has entered into any agreement with any other person in respect of any property the effect of which is that, in the case of movable property, the ownership shall pass or, in the case of immovable property, transfer shall be effected from the taxpayer to that other person upon or after receipt by the taxpayer of the whole or a certain portion of the amount payable to the taxpayer under the agreement, the whole of that amount shall, for the purposes of this Act, be deemed to have accrued to the taxpayer on the date on which the agreement was entered into:Provided that—65. ***
[repealed by 17 of 2012]**Any pension fund approved by the Commissioner under section 65 (now repealed) shall, immediately before the commencement of this Act, be deemed to have been registered under the Pension Act (Cap. 55:02).Part V – Taxation of companies
Division 1—Income tax
66. Charge
Subject to this Act income tax shall be charged, levied and paid for each year of assessment upon the income of every company at the company rate of income tax as specified in the Eleventh Schedule upon the taxable income of any company received or accrued from sources within or deemed to be within Malawi.[1 of 1990]67. Public officers of companies
68. Duty of companies to furnish returns
69. Notification of dividend declared
The public officer of a company incorporated in Malawi shall, within 30 days of the declaration by the company of a dividend furnish to the Commissioner—70. Dealings by a company in another company’s shares
Where a company dealing in shares and liable to tax in respect of profits arising from such dealing (hereinafter referred to as “the first company”) purchases a controlling interest in a company with an undistributed profit (hereinafter referred to as “the second company”) and the second company declares a dividend payable to the first company, the shares of the second company then being sold by the first company at a loss, such loss shall not be deductible from the taxable income of the first company.[7 of 1992]70A. Taxation of dividends
70B. Recognition of gain or loss on distribution of property with respect to shares
If property is distributed by a company to a shareholder with respect to his shares (whether as a dividend, a liquidating distribution or otherwise), the company shall recognize gain or loss in the same manner as if the property had been sold to that shareholder at its open market price.[10 of 1993]70C. Effect of a distribution of shares of a company to its shareholders
Where a distribution of the shares of a company to its shareholders is in a way which does not alter the proportionate ownership interest of any of its shareholders, then—70D. Distribution in complete liquidation of a company
In the case of a complete liquidation of a company, any distribution to shareholders shall be treated as if the shareholders had sold their shares in the company in exchange for the property or the cash received, but such distribution shall not be treated as a dividend and a gain or loss shall be recognized accordingly.[10 of 1993]70E. No gain or loss on certain contributions to capital
No capital gain or loss shall be recognized upon the contribution by one or more persons of assets to the capital of a company where, upon such contribution, the contributing person or persons own at least eighty per cent of the equity interest in the company; and in such case, the basis of the contributed assets in the hands of the company shall be the adjusted basis in the hands of the person or persons immediately prior to the contribution.[10 of 1993]70F. Basis of assets in a qualified reorganization of a company
Part VI – Individuals
71. Charge
Subject to this Act income tax shall be charged, levied and paid for each year of assessment upon the income of any individual received or accrued from a source within or deemed to be within Malawi upon that individual’s total taxable income ascertained under this Act at the rate specified in the Eleventh Schedule.[10 of 1983; 1 of 1995]72. Deemed taxable income
73. Income of married women and minor children
74. Partnership
Persons carrying on any trade in partnership shall make a joint return as partners in respect of such trade, together with such particulars as may from time to time be prescribed and each partner shall be separately and individually liable for the rendering of the joint return, but the partners shall be liable to income tax only in their separate individual capacities. Separate assessments shall be made upon partners.Part VII – Trustees
75. Special provisions in connexion with income derived from assets in deceased and insolvent or bankrupt estates
76. Tax payable by trust
Tax shall be payable by a trust for each year of assessment at the rate specified in the Eleventh Schedule.Part VIIA – Non-residents
76A. Liability for non-resident tax
Part VIII – Representative taxpayers
77. Representative taxpayers
78. Liability of representative taxpayer
78A. Protection for certain trustees
A trustee who has authorized the receipt of profits arising from trust property by, or by the agent of, the person entitled thereto, shall not, if—79. Right and personal liability of representative taxpayer
80. Company regarded as agent for absent shareholder
Where a shareholder or member of a company is absent from Malawi, such company shall, for the purposes of this Act, be deemed to be the agent for such shareholder or member and in respect of any income received by or accruing to him or in his favour as shareholder or member, have and exercise all the powers, duties and responsibilities of an agent for a taxpayer absent from Malawi.81. Power to appoint agent
82. Remedies of Commissioner against agent and trustee
Against all property of any kind vested in or under the control or management of any agent or trustee the Commissioner shall have the same remedies and in as full and ample a manner as he has against the property of any other person who is liable to pay tax.83. Power to require information
For the purposes of sections 81 and 82 the Commissioner may require any person to give him information in respect of any moneys, funds, or other assets which may be held by him for, or due by him to, any other person.Part IX – Returns, provisional tax and assessments
84. Return of income
84A. Payment of provisional tax
84B. Exemption from provisional tax
Section 84A shall not apply to any individual whose taxable income for the year of assessment in question is estimated—84C. Payment of balance of income tax
When submitting a return of income under section 84, the person submitting the return shall pay the difference, if any, between—84D. Payment of tax
Every person not otherwise covered by section 84C, except the person whose taxable income substantially comprises income from which P.A.Y.E. tax has been deducted, shall, at the time of submitting a return of income under section 84, pay income tax calculated on the total taxable income as computed and disclosed in the return being submitted.[4 of 1988]84E. Penalty for failure to pay taxes
If the amount of tax unpaid, as a percentage of total tax liability— | Penalty |
---|---|
(a) does not exceed 10 per cent | Nil |
(b) exceeds 10 per cent but does not exceed 50 per cent | 25 per cent of the unpaid amount of tax |
(c) exceeds 50 per cent | 30 per cent of the unpaid amount of tax. |
85. Duty to furnish returns as to employees, their earnings and other matters
85A. Tax clearance certificate
86. Commissioner to have access to all public records
87. Duty of person submitting accounts in support of return or preparing account for other persons
88. Production of documents and evidence on oath
89. Estimated income
90. Assessment to tax
91. Additional assessment
91A. Turnover tax
92. Assessments and notices thereof
93. Register of assessments
Complete copies of all notices of assessment made under this Part shall be filed in the office of the Commissioner and shall constitute the register of assessments for the purposes of this Act.94. Inspection of register
The register of assessments shall not be open to public inspection, but every taxpayer shall be entitled to copies certified by or on behalf of the Commissioner of his own notice of assessment.Part IXA – Taxation of fringe benefits
94A. Liability of employers to pay fringe benefits tax
94B. Section 94A not to apply in certain cases
Section 94A shall not apply to fringe benefits provided to an employee whose annual taxable income does not exceed the amount specified in paragraph A of the Appendix to the Eleventh Schedule as attracting the zero per cent rate of taxable income.[2 of 1994; 6 of 2005; 14 of 2009]94C. Employee defined
In this Part, “employee” includes a “director”.94D. Fringe benefits tax not to be imposed on employees
For the avoidance of doubt, nothing in this Act shall be construed to impose liability for fringe benefits tax on an employee in receipt of any fringe benefit in respect of which his employer is liable to fringe benefits tax.Part X – Appeals
95. Burden of proof
In any appeal under this Act the burden of proof that any amount is exempt from or not liable to income tax, or is subject to any deduction or allowance in accordance with this Act shall be upon the person claiming such exemption, non-liability, deduction or allowance.[14 of 1969]96. Procedure on appeals
97. Appeal to Commissioner
98. Appeal to Special Arbitrator
99. Publication of decisions of Special Arbitrator
100. Appeals from assessments, etc., by administrative officers
101. Appeal to High Court
Part XI – Collection and recovery of tax
Division 1—Withholding taxes
102. Deduction of tax from salaries and wages—Pay As You Earn
102A. Deduction of tax from certain payments
102B. Payment of withholding tax
103. Priority of tax deduction at source
Every sum required to be deducted under sections 102 and 102A shall be a first charge on the payment to the recipient and shall be deducted prior to any other deduction whether such other deduction be deductible under any court order or under any other law.[1 of 1983]104. Formal assessment to be unnecessary
No assessment need be made on a person in respect of his emoluments for any period during which tax was deducted from his emoluments if the tax deducted each week or month was the correct amount to be deducted in accordance with the tables and regulations prescribing their use:Provided that if such deductions were incorrect in whole or in part with the result that tax has been overpaid the error may be corrected by means of an assessment and the tax overpaid shall be repaid to that person.[6 of 1972; 10 of 1983]104A. Credit for tax deducted at source
Where withholding tax has been deducted or paid under sections 102, 102A and 102B, the tax so deducted or paid shall be allowed as a credit against tax charged on assessments issued under sections 90 and 91 of this Act.[1 of 1985; 19 of 2013]Division 2—Assessments raised by the Commissioner
105. Payment of tax on assessment
105A. Mutual assistance to recover outstanding tax
106. Persons by whom the tax is payable
Subject to this Act the tax shall be payable—107. Recovery of tax
107A. Creation of a lien
108. Form of proceedings
109. Production of register of assessments
The production of any register of assessments or of any document under the hand of the Commissioner or of any officer duly authorized by him purporting to be a copy of, or extract from, any such register of assessments shall be conclusive evidence of the making of any assessment referred to therein and, except in the case of proceedings on appeal against an assessment, shall be conclusive evidence that the amount and all the particulars of such assessment appearing in such register or document are correct.[14 of 1969]110. Payment of tax by persons leaving Malawi
111. Security for payment of tax
Part XII – Penalties
112. Liability for penalties
113. Imposition of penalty
114. Accounts deemed to have been submitted by person
For the purposes of section 112 of this Act, any accounts submitted on behalf of any person shall be deemed to have been submitted by him unless he proves that they were submitted without his consent or connivance.[14 of 1969]115. Assisting in making incorrect returns
Any person who assists in or induces the making or delivery for any purposes of income tax of any return, accounts, statement or declaration which he knows to be incorrect shall be liable to a fine of K30, 000.[11 of 2002]116. Obstruction of officers
Any person who obstructs or hinders an officer in the discharge of his duty under the Act or the rules shall be liable to a fine of K50, 000.[11 of 2002]116A. Forceful rescue of seized property
Any person who forcibly rescues or attempts to rescue any property, article, or object which has been taken, detained, or seized by any officer under the authority of this Act shall be guilty of an offence and liable to a fine of K50, 000 and to imprisonment for one year.[10 of 1993; 11 of 2002]116B. Physical assault of officers
Any person who physically assaults an officer discharging his duties under this Act shall be guilty of an offence and liable to a fine of K50, 000 and to imprisonment for two years.[10 of 1993; 11 of 2002]117. Inciting a person to refuse to pay tax
Any person who without lawful justification or excuse incites any person to refuse to pay any tax payable by him under this Act shall be liable to a fine of K50, 000.[2 of 1999; 11 of 2002]118. Time limit for penalty proceedings
119. Liability of officers of company
Where a company is liable to a penalty under this Act every person who, at the time of the act or omission rendering the company liable to such penalty was a public officer, director, general manager, secretary or other similar officer of such company or was purporting to act in such capacity shall also be liable to the same penalty unless he proves that such act or omission was done or omitted without his knowledge or consent and that he exercised due diligence to prevent such act or omission having regard to the nature of his functions in such capacity and in all the circumstances.[14 of 1969]120. Recovery of tax repaid in consequence of fraud or negligence
Where in consequence of a person’s fraud, willful default or negligence, any tax has been repaid which ought not to have been repaid the amount thereof may be recovered by assessment, but without prejudice to the right of the Commissioner to recover such tax by means of civil proceedings.121. Saving for criminal proceedings, etc.
Part XIII – General
122. Relief from double taxation
123. Reduction of tax payable as a result of agreements entered into in terms of section 122
124. Relief from double taxation in cases where no agreements have been made under section 122
If any person in or any person outside Malawi who is deemed to have derived income from a source within Malawi in terms of section 27 (1) (c) who has paid or is liable to pay tax for any year of assessment on income which is derived from a country or territory which has not entered into an agreement with Malawi in terms of section 122 proves to the satisfaction of the Commissioner that he has paid tax on the same income in the country or territory from which such income was derived and requests relief in respect of that tax then the tax chargeable under this Act in respect of such income shall be reduced by the amount of foreign tax paid or payable on such income as if section 123 (3) was applicable thereto. For the purpose of this section, tax in respect of such income, which is deducted from such income in such country or territory, shall be deemed to be tax paid by such persons.[18 of 1968]125. Error or mistake
126. Repayment of tax
127. Transfers to defraud, and artificial transactions
127A. Transfer pricing related to business transaction
Where a person who is not a resident in Malawi engages in one or more commercial or financial transactions with a person resident in Malawi and the course of such transactions is so arranged that it produces to the person resident in Malawi either no profits or less than profits which might be expected from such transactions if there had been no such relationship, then the profits of that resident person from that business transactions shall be deemed to be the amount that might have been expected to accrue if the course of that business had been conducted by independent persons in accordance with the arm’s length principle.[14 of 2009; 19 of 2013]128. Errors, etc., in assessment and notice may be rectified, and Commissioner may remit tax
Part XIV – Graduated tax
129. ***
[repealed by 2 of 1994]130. ***
[repealed by 2 of 1994]131. ***
[repealed by 2 of 1994]132. ***
[repealed by 2 of 1994]133. ***
[repealed by 2 of 1994]134. ***
[repealed by 2 of 1994]135. ***
[repealed by 2 of 1994]136. ***
[repealed by 2 of 1994]137. ***
[repealed by 2 of 1994]138. ***
[repealed by 2 of 1994]139. ***
[repealed by 2 of 1994]140. ***
[repealed by 2 of 1994]141. ***
[repealed by 2 of 1994]142. ***
[repealed by 2 of 1994]143. ***
[repealed by 2 of 1994]144. ***
[repealed by 2 of 1994]145. ***
[repealed by 2 of 1994]Part XV – Regulations
146. Regulations by Minister
The Minister may make regulations for the better carrying out of the purposes and provisions of this Act, and without prejudice to the generality of the foregoing such regulations may make provision for—147. Saving
All subsidiary legislation made under the Taxation Act, (now repealed) shall, until replaced or revoked under this Act, continue in operation as if they were regulations made by the Minister under powers conferred upon him under this Act.History of this document
31 March 2022 amendment not yet applied
Amended by
Taxation (Amendment) Act, 2022
19 October 2020 amendment not yet applied
Amended by
Taxation (Amendment) Act, 2020
01 July 2018 amendment not yet applied
Amended by
Taxation (Amendment) Act, 2018
31 December 2017
Consolidation
31 December 2014 this version
Consolidation
01 January 1964
Commenced
Subsidiary legislation
Title | Numbered title |
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Notice: Paragraphs (d) and (e) of section 39 of the Taxation Act | Government Notice 21 of 2021 |
Taxation (Priority Industries) (Amendment) Regulations, 2017 | Government Notice 20 of 2017 |