Tax Types in Malawi
Understanding taxes can be a headache-inducing process.
All registered companies are required to pay taxes.
Therefore, you should know in advance what taxes you will have to pay and how much they will be.
Here are three taxes that are relevant to all businesses in Malawi.
VAT (VALUE ADDED TAX)
VAT is a tax on consumption expenditure, imposed on the “value added” generated at various stages of the production and distribution chain.
The standard rate of VAT in Malawi is 16.5% except for those that are exempted or zero-rated according to the 1st schedule and the 2nd schedule of the Taxation Act.
PAYE (PAY AS YOU EARN)
PAYE is a method of collecting income tax on an employee’s earnings.
Employers deduct PAYE when the payments are made.
It is called ‘Pay As You Earn’ because it can be weekly, fortnightly, and monthly payments.
Withholding TAX
Withholding tax is an advance payment of income tax that is deducted from certain payments.
It applies to a system under which a person due to make a payment to another person is under the obligation to retain or withhold part of that payment for tax purposes.
Although Withholding tax is not a system of taxation, it is a method of collecting income tax using a debtor as a tax collector.
Therefore, the tax withheld or retained is the recipient’s tax and must be remitted to MRA.
