VAT amendments gazetted

VAT amendments gazetted

VAT amendments gazetted

The Malawi Revenue Authority (MRA) is informing the business community and the general public that the Amendment Bill to the Value Added Tax (VAT) Act which was deliberated during the recent sitting of Parliament has now been gazetted and became law on the 19th August, 2016. Amendments to the Taxation Act and Customs and Excise Act, which became effective on 1st July, 2016, have also been gazette and they have also become law.

The VAT Act has been amended and a standard rate of 16.5 percent has been introduced on tap (piped) water produced by water boards, ordinary bread, newspapers, periodicals, journals and magazines, laundry soap and milk but baby formula is exempted. Previously, these products were either zero-rated or exempted.

VAT is a tax on consumption expenditure that is levied on the “value added” that has been created at various stages in the production and distribution chain. “Value added” is the difference between a business’ purchases of inputs and sales of output.

The standard rate for VAT in Malawi is 16.5 percent except those listed on the 1st Schedule and the 2nd schedule to the Taxation Act. The 1st Schedule lists exempt supplies which do not attract VAT while the 2nd Schedule lists Zero –rated supplies where VAT is charged at zero percent.

When announcing the new VAT measures, Finance Minister Dr. Goodall Gondwe had argued that the numerous exemptions and zero-ratings on goods and services had not only eroded Malawi’s tax based and compromised revenue generation capabilities, but they had also acted as a subsidy to consumers who had purchased the zero-rated goods and services. Furthermore, he had argued that zero-rated and exempted goods were accessed by both the rich and the poor and the poor ended up subsidizing the rich.

Amendments to the VAT Act became effective on 1 October, 2016. We would therefore like to appeal to all water boards, all bakeries, all dairy manufacturers, all laundry soap manufactures and all publishers and retailers of newspapers, magazines, journals and periodicals to register for VAT and charge VAT accordingly. Failure to register for VAT is an offence under Section 45 of the VAT Act.

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