New Tax Measures for 2016/17 Gazetted
NEW TAX MEASURES FOR 2016/17 GAZETTED
The Malawi Revenue Authority (MRA) is informing the business community and the general public that Amendment Bills to the Taxation Act, Value Added Tax (VAT) Act and Customs and Excise Act which were deliberated during the recent sitting of Parliament have now been gazetted and became law on 19th August 2016.
The amended Acts provide for the following tax measures:
The VAT Act has been amended and the standard 16.5 percent rate has been introduced on the following products:
1. Tap (piped) water produced by water boards,
2. Ordinary bread
3. Newspapers, periodicals, journals and magazines
4. Laundry Soap
5. Milk but infant milk is exempted.
The Taxation Act has been amended and the new law provides for:
1. An increase in the Corporate Tax rate from 21 percent to 30 percent for companies involved in life assurance business.
2. Removal of an exemption of MK10,000 on bank interest
3. Specific Taxation Regime for the mining sector.
(a). The taxation of mining projects have been ring fenced. Incomes and expenses from one mining project cannot be transferred to or offset against or aggregated with incomes and expenses of another mining project. Each mining project will be required to file a separate income tax return.
(b). Mineral royalty will be an allowable deduction for tax purposes
(c). The Malawi Revenue Authority has been granted the power to administer mineral royalty.
(d). The law provides for preferential Non Resident Tax (NRT) rate of 10 percent on payments by a mining project by way of interest, royalty and management fees. The normal NRT rate is 15 percent.
(e). A minimum resource rent tax of 15 percent.
(f). Separate rules and regulations pertaining to determination of income, deductions and capital allowances as provided under the Sixteenth Schedule.
(g). Separate rules for the administration of royalty are provided in the Seventeenth Schedule.
4. Grants power to the Commissioner General to allocate any payment for tax between different tax obligations of the taxpayer. For instance, the Commissioner General may use a payment meant for corporate tax to pay off any outstanding Pay As You Earn (PAYE) obligations of the Taxpayer.
5. An increase in an administrative minimum penalty from MK50, 000 to MK2, 000, 000 for concluding a transaction without a Tax Clearance Certificate.
6. All persons who supply goods and services to Malawi Government and its agencies are required to obtain a Tax Clearance Certificate from the Malawi Revenue Authority.
CUSTOMS AND EXCISE ACT.
The Customs and Excise Act has been amended and the new law provides for:
1. Garnishment of accounts of delinquent (non-complying) excise taxpayers
2. Distraint Action by the Commissioner General on non-complying excise taxpayers. The Commissioner General may distrain taxpayers’ assets for non-payment of excise duty.
3. An administrative penalty of 30 percent on a dishonoured [Return To Drawer] cheque meant for payment of duty.
4. A reduction in an excise tax rate from 20 percent to 10 percent applicable on production of Maheu Maize Drink
The effective date for all amendments in the VAT Act is 1st October, 2016 while amendments in the Taxation Act and Customs and Excise Act became effective from 1st July, 2016.
Tom Gray Malata
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