What is VAT (Value Added Tax) in Malawi?


What is “Value Added”?

“Value Added” is the difference between the inputs purchased and the outputs sold in a business.

In simpler terms, if a biscuit is produced from various inputs purchased at MK700 and sold at MK1,000, the value added would be MK300.

Therefore, VAT at the standard rate of 16.5% would be charged on MK300.

What is 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.

Who is required to register for VAT?

Any business person who makes an estimated annual revenue of 25 million Kwacha or more is required to register for VAT.

You can register for VAT at your nearest MRA office.

Fortunately, MRA has offices in all three regions of the country.

Once you register for VAT, you will be required to charge VAT and remit it to MRA by the 25th of the month following the month to which the tax relates.

You will be fined MK300,000 if you fail to remit within this deadline.

On the other hand, you can still register for VAT even if your annual revenue is below 25 million kwacha.

This is called “Voluntary Registration”.

You should be aware that failure to issue VAT receipts carries a fine of K500,000 and five years imprisonment if convicted in court.