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Tax rates in Malawi

Tax Rates

Consumption Taxes

Nature of the Tax
Value Added Tax (VAT)
Tax Rate
16.5% (standard rate)
Reduced Tax Rate
No reduced rates are available. Nevertheless, several items are zero-rated, including exports of goods and services; laundry soap; exercise books; goods shipped as stores on aircraft and vessels leaving the territory of Malawi; fertilizers; condoms; salt; motor vehicles for the transport of goods; pharmaceutical products; buses; military equipment; building materials for factories and warehouses; goods for use in tourism industry; miscellaneous chemical products cycle ambulances; motorcycle ambulances; syringes with or without needles; mosquito and sandfly nets; poultry or chicken feed; gas cylinders; wood cookstoves; solar products; energy-efficient bulbs.

Exempt goods and services include banking and life assurance services; live animals; postal services; transport of exports; educational services; medical equipment; animal products; vegetable products in raw state; printed matter; petroleum products; vehicles other than railway and train way rolling-stock; industrial machinery and construction machinery; coin; banking and life insurance services; funeral service; medical services; rentals and sale of properties used for residential purposes; betting and gaming including lotteries; rail locomotives and parts; medical surgical or laboratory sterilizers.
Other Consumption Taxes
Customs and excise duties are prescribed in the Customs and Excise Tariff Order for goods imported into the country. However, member states of the Common Market for Eastern and Southern Africa (COMESA) enjoy a duty-free status for some products (including live animals, food products, some agricultural products, furniture and stationery).
A levy of 0.2% per kg applies on tobacco. Certain goods and services - including alcoholic drinks, tobacco, and cell phone airtime - are subject to excise duties.
Any entity operating a commercial passenger motor vehicle with up to 33 seats is liable to presumptive tax, which is payable quarterly in equal instalments.

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Corporate Taxes

Company Tax
30%
Tax Rate For Foreign Companies
All companies (resident and non-resident) are subject to tax on Malawi-source income.
Branches of foreign companies are taxed at 35%, while Malawi-registered companies are taxed at the rate of 30%.
Non-resident tax is payable on income sourced from Malawi at the rate of 15% of the gross income and 10% for income derived from a mining project by way of interest, royalty, payment for independent personal services, or dividend.
Any income payable to a person who is not resident in the country arising from a source within Malawi is liable to a final withholding tax of 15% of the gross income.
Capital Gains Taxation
Capital gains are taxed at the rate applicable to the particular entity (30% standard rate, 35% for branches of foreign companies, 15% for designated priority industries, etc.).
Gains arising from the sale of shares traded on the Malawi Stock Exchange that have been held for more than one year are not taxable, same as for gains arising from the disposal of personal and domestic assets not used in connection with trade.
Main Allowable Deductions and Tax Credits
Expenses that are wholly, exclusively, and necessarily incurred in the production of income are generally tax-deductible.
Depreciation allowances are applicable with rates varying between 2.5% and 40%. Premium paid for the right of use or occupation of land or buildings, plant or machinery, patent design, trademark, copyright, and similar rights can be deducted. Goodwill is not deductible, whereas start-up expenses incurred up to 18 months before starting business generally can be deducted.
Other deductible expenses include donations made to approved charities and non-profit organisations (capped at MWK 5 million), so as certain contributions towards the construction of hospitals and schools (50% of the donation). Further deductions are allowed for certain costs of research relating to a trade, training allowances and transport allowances and salaries paid to employees with disability (50% of the amount). Ordinary pension contributions to an approved pension fund can be deducted up to 15% of an employee's annual salary or the actual contribution, whichever is lower.
R&D expenses are fully deductible. Exporters of non-traditional can deduct 30% of taxable income for processed goods and 10% of taxable income for unprocessed goods.
Taxes are non-deductible (except for local taxes), so as fines and penalties.
Losses may be carried forward for six years, while the carryback of losses is not permitted.
Other Corporate Taxes
A presumptive tax on turnover applies to small businesses with turnover of less than MWK 12.5 million. The rates are as follows: 0 for income up to MWK 4 million, MWK 110,000 for income between 4 and 7 million, MWK 170,000 for income between 7 and 10 million, MWK 225,000 for income between 10 and 12.5 million. The tax does not apply on rental income and professional management fees; income in corporate companies; and any income that is subject to final withholding tax.
Stamp duty is imposed at 1.5% on transfers of immovable properties (while share transfers are not subject to stamp duty).
A fringe benefits tax is charged at the rate of 30% (benefits include housing, school fees, utilities, travels, etc.). The rate is 15% of the original cost for motor vehicles.
Employers contribute a minimum of 10% of the employee's salary for social security.
Miners pay a resource rent tax of 15% on after-tax profits (determined by using a specific formula).
Malawi does not levy property or transfer taxes.
Other Domestic Resources
Malawi Revenue Authority
Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.

Country Comparison For Corporate Taxation

  Malawi Sub-Saharan Africa United States Germany
Number of Payments of Taxes per Year 35.0 36.6 10.6 9.0
Time Taken For Administrative Formalities (Hours) 169.0 284.8 175.0 218.0
Total Share of Taxes (% of Profit) 34.5 47.3 36.6 48.8

Source: Doing Business, Latest available data.

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Individual Taxes

Tax Rate

Individual Income tax (employment income) Progressive rate from 0% to 35%
Up to MWK 1,200,000 0%
MWK 1,200,000 - 12,000,000 25%
MWK 12,000,000 - 36,000,000 30%
MWK 36,000,000 - 72,000,000 35%
Over  MWK 72,000,000 40%
Non-resident individuals 15%
Allowable Deductions and Tax Credits
In Malawi, non-business expenses are not deductible, and there are no personal allowances. Certain donations are deductible up to a maximum total of MWK 5 million for charities and MWK 5 million for non-profit organisations.
Penalties and fines paid in any country may not be deducted. Individuals may deduct losses and other expenditures that are not of a capital nature and that are wholly, exclusively, and necessarily incurred for the purpose of the taxpayer’s trade or the production of income.
If a married couple elects to file a joint return, tax on the wife’s earned income is computed as though it were the sole income of the couple and added to tax on the husband’s income.
Special Expatriate Tax Regime
Regardless of residence, an individual will be taxed only on Malawi-source income and not on passive foreign income.
Any income payable to a person who is not resident in Malawi arising from a source within the country is liable to a final withholding tax of 15% of the gross of such income.

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Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
See the list of Tax Conventions signed by Malawi.
Withholding Taxes
Dividends: 10% (deriving from a mining project)/15% (non-residents); Interest: 20% (residents)/15% (non-residents); Royalties: 10% (deriving from a mining project)/20% (residents)/15% (non-residents)

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Sources of Fiscal Information

Tax Authorities
Overview of Malawi's tax measures in response to Covid-19
Malawi Revenue Authority
Other Domestic Resources
Ministry of Finance

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Latest Update: July 2022