Employers have several tax responsibilities under the National Pension Scheme (NPS). They are required to contribute a minimum of 10% of their employees' pensionable earnings. Additionally, these contributions are generally tax-deductible up to a maximum of 15% of the employee's pensionable earnings.

Social Security Contributions (Pension)

Employers must contribute a minimum of 10% of their employees' pensionable earnings under the NPS. Employee contributions are 5% of their pensionable earnings. Employer contributions are generally tax-deductible up to a maximum of 15% of the employee's pensionable earnings.

Fringe Benefits Tax (FBT)

Employers providing fringe benefits to employees are liable for Fringe Benefits Tax. A fringe benefit is any benefit in kind (asset, service, etc.) given to an employee that includes a personal benefit element. FBT is charged at a rate of 30% of the calculated taxable value of the fringe benefit. Note that cash benefits cannot be treated as fringe benefits, regardless of their naming.

Other Potential Employer Taxes

Depending on the specifics of the business, employers might also be responsible for contributing to:

• Skills Development Levy (SDL): Usually a percentage of total payroll to promote workforce skills training.
• Medical Levy: Potentially applicable to employers in specific sectors.
• Local Taxes: Potentially including property rates, business licenses, etc. (varies according to location)

Important Notes

Tax regulations can change, so it's essential to consult up-to-date sources like the Malawi Revenue Authority (MRA) or qualified tax advisors for the most accurate information. Specific tax incentives or exemptions may exist in certain sectors or for particular business activities.

In Malawi, the Pay As You Earn (PAYE) system uses progressive tax rates, with rates ranging from 0% to 35% depending on the amount of taxable income. PAYE is calculated on an employee's taxable income after certain allowable deductions.

Progressive Tax Rates

Malawi uses a progressive tax system for PAYE, with rates ranging from 0% to 35% depending on the amount of taxable income.

Taxable Income

PAYE is calculated on an employee's taxable income after certain allowable deductions.

Deductions for PAYE Calculation

Pension Contributions

Employee contributions to the National Pension Scheme (NPS) at 5% of their pensionable income are deductible.

Exempt income

Certain types of income are exempt from PAYE, such as some housing or travel allowances.

Social Security Contributions (Pension)

Employees contribute 5% of their pensionable earnings to the National Pension Scheme (NPS).

Other Potential Deductions

Union subscriptions

These are applicable deductions if an employee is a member of a union.

Medical Levy

This is potentially applied in certain sectors.

In Malawi, the standard VAT rate is 16.5%, which applies to most goods and services supplied within the country.

VAT on Exported and Imported Services

Services exported from Malawi are generally zero-rated for VAT purposes, meaning no VAT is charged on the sale of exported services. This promotes competitiveness in the international market. On the other hand, VAT applies to services imported into Malawi. Typically, this is handled through a reverse charge mechanism where the recipient of the service becomes responsible for accounting for and paying import VAT to the Malawi Revenue Authority (MRA).

Taxable and Exempt Services

Most services provided within Malawi are considered taxable supplies and subject to VAT. Examples include professional services (accounting, legal, etc.), management and consultancy services, technical services, hospitality and catering services, and telecommunications services. However, certain services are specifically exempt from VAT in Malawi. These include financial services, educational services, medical services, and some transportation services.

VAT Registration

Businesses providing taxable services in Malawi must register for VAT if their annual turnover exceeds MK 25 million. Voluntary VAT registration is available for businesses with a lower turnover, if advantageous.

VAT Input Tax

Businesses can generally claim a credit for VAT paid on business-related expenses (input VAT) to offset their output VAT liability. This prevents tax cascading.

VAT Compliance

VAT-registered businesses must file periodic VAT returns (usually monthly) with the MRA, and pay the net VAT due.

In Malawi, businesses can benefit from a variety of tax incentives designed to stimulate investment, promote exports, and support specific sectors.

Annual, Initial, and Investment Allowances

These allowances are designed to incentivize investment activities. Annual allowances allow a percentage of the asset's cost to be deductible each year for assets like machinery and buildings. Initial allowances offer a substantial initial percentage deduction in the asset's first year of use. Investment allowances encourage investment in manufacturing with 100% deduction for new industrial buildings, machinery, and plant, or a 40% deduction for used versions.

Export Incentives

Export incentives are designed to promote exports, especially non-traditional ones. The export allowance allows 25% of taxable income from non-traditional exports to be deductible. The Industrial Rebate Scheme offers duty exemptions on certain raw material imports for manufacturing.

Other Incentives

Other incentives include a 25% deduction on international transport costs for most exports, a 50% deduction for qualified training costs, zero tax on gains from the sale of shares held for over a year, and the ability to carry forward losses for up to seven years to offset future taxable income.

Export Processing Zones (EPZs)

Businesses operating within designated Export Processing Zones enjoy additional tax benefits, including a zero corporate income tax rate, no dividend withholding taxes, exemptions from duties and excise on various capital goods, raw materials, and locally purchased packaging materials, and no Value Added Tax (VAT).

Additional Considerations

Specific criteria may need to be met for certain incentives, and some incentives could have a limited time frame. Additional deductions of 15% might apply for investments in designated areas. Organizations approved by the relevant Minister may enjoy customs duty, excise, and VAT exemptions on specific machinery, equipment, and meters for electricity generation and distribution.