Tax Structure and Incentives

Malawi as a source-based tax system, in terms of which both residents and non-residents are subject to tax on income from a source in Malawi.

  • A company is resident in Malawi if it is incorporated in Malawi
  • Resident companies are subject to corporate income tax at the rate of 30%, whereas permanent establishments of foreign companies are taxed at the rate of 35%.
  • Losses may be carried forward for a period of six years.
  • Priority sector companies are either taxed at 0% for a maximum period of 10 years or a rate of 15%.
  • Investment income of pension funds is taxed at 15%.
  • Capital gains are included in ordinary taxable income and subject to corporate income tax at the standard rate of 30% / 35%.
  • Double tax agreements are in force with France, Norway, South Africa, Switzerland and the United Kingdom

Withholding tax (WHT) rates as of 1st April 2022

Payment to WHT rate residents Non-residents*
Branch profits
N/A
N/A
Dividends
10%
15% 10% (mining projects)
Interest
20%
15% 10% (mining projects)
Royalties
20%
15% 10% (mining projects)
Management, consulting and technical service fees
20%
15% 10% (certain services to mining projects)

Any employer who pays an employee in excess of K100,000 per month or K1,200,000 per year is liable to deduct Pay As You Earn (PAYE) and remit to the Malawi Revenue Authority (MRA).

Pay As You Earn (PAYE) rates as of 1st April 2022

Monthly chargeable income (MWK) Tax rate
The first 100,000
0
The next 230,000
25%
The next 2,670,000
30%
The next 3,000,000
35%
Excess of 6,000,000
40%

The Malawi Government through Taxation Act, VAT Act, and Customs and Excise Act offers the following fiscal incentives:

  • 100% Investment allowance on New and Unused Industrial Buildings ,Plant and Machinery
  • No Minimum Tax Based on Turnover
  • 25 % Export Allowance on revenue for non-traditional exports
  • No Taxes on gains from sell of listed shares that are held for more than 1 year
  • 40% Investment Allowances for used Buildings, Plant and Machinery
  • Transport tax allowance of 25% on international transport costs, excluding traditional exports
  • Allowance for manufacturing companies to deduct all operating expenses incurred up to 25 months prior to the start of operations
  • Exemption of Duty, Excise and VAT on raw materials used in manufacturing – subject to approval
  • Exemption of Duty, Excise and VAT on Industrial Machinery and Equipment
  • Carry forward of loss, up to seven years, enabling companies to take advantage of allowances
  • Additional allowance of 15% for investment in designated areas of the country
  • Exemption of duty on importation of buses with a seating capacity of 45 persons and above
  • Exemption of duty on direct importation of goods used in the tourism industry

Manufacturing under bond Incentives

Manufacturing Under Bond (MUB) scheme offers incentives to those companies that export some, but not all, of their products. These incentives include:

  • Export allowance of 25% on revenue for non-traditional exports
  • Transport tax allowance of 25% on international transport costs, excluding traditional exports
  • Exemption of duties on imports of capital equipment used in the manufacture of exports
  • Exemption of surtaxes
  • Exemption of excise tax on the purchase of raw materials and packaging materials
  • Timely refund of all duties (duty drawback) on imports of raw materials and packaging materials used in the production of exports

Export Processing Zones (EPZ)

Legislation for the establishment of EPZs came into force in 1995. All companies engaged exclusively in manufacture for export can apply for EPZ status. The incentives under this scheme include:

  • Exemption of corporate tax
  • Exemption of withholding tax on dividends
  • Exemption of duty on capital equipment and raw materials
  • Exemption of excise tax on the purchases of raw materials and packaging materials made in Malawi
  • Exemption of value added tax.