ADMINISTRATION OF TAXES

RULES AND POWERS OF THE COMMISSIONER

ADMINISTRATION OF TAX

Income Tax legislation is set out in the Tax Act. CAP 41:01 of the Laws of Malawi.

The Malawi Revenue Authority (MRA) is an Agency of the Government of Malawi

responsible for assessment, collection and accounting for tax revenues. MRA was established
by an Act of Parliament in 1998 and was launched in February 2000. It was formed to
improve on the functions previously carried out by Departments of Customs and Excise, and
Income Tax in the Ministry of Finance.

The MRA is overseen by a Board of Directors and headed by a Commissioner General to

provide leadership, strategic direction and control. In pursuance of these duties and to
accomplish the mandate of MRA, functional departments and divisions are in place.

MRA has two revenue divisions of Customs and Excise and Domestic Tax Divisions. It also
has supporting divisions and departments namely Finance, Administration, Legal,
Information &Technology, Tax Investigations, Policy Planning & Research, Internal Audit,
Security and Public Relations & Taxpayer Education.

The Customs and Excise Division administers and enforces the Customs and Excise Act. The
division collects Import and Excise duty and Import VAT, trade statistics, protects the
community from entry and exit of prohibited goods and facilitates trade.

The Domestic Tax Division administers the Taxation and VAT Acts. The Division collects
direct Income Taxes from individuals and corporations. These are in form of Pay As You
Earn (PAYE), Provisional Tax, Fringe Benefit Tax and Withholding Tax. The division also
collects domestic VAT and domestic excise.

MRA has three regional offices in Blantyre Lilongwe and Mzuzu, it has 32 offices spread
across the country from Nsanje to Chitipa.

THE MALAWI TAX SYSTEM

The Malawi tax system is a mixture of direct and indirect taxes. There are five main groups
of taxes.
DIRECT TAXES

1. Taxes based on income - Income Tax - This is a direct tax based on the income of a
taxpayer (individual or corporate body)

2. Tax based on wealth - Estate Duty - This too is a direct tax which is based on the
wealth of an individual at the date of death.

INDIRECT TAXES
3. Sales Tax - A sales Tax is an advalorem duty based on the value of goods or services
that have been purchased. Sales tax in Malawi is known as VAT.

4. Customs Duties - This tax is levied on the value of goods that have been imported.
5. Excise Duties - these duties are imposed on selected locally manufactured goods to
discourage the consumption of such goods.

SECRECY - Section 6

Any person carrying out duties under the Taxation Act is required to observe secrecy i.e. a
person is not supposed to reveal any matter that comes to his knowledge in the performance
of his duties under the Act.

Before taking up office under the Act every officer (including the Commissioner) is required
to take an oath of secrecy before a magistrate or a Commissioner for oaths.

Anyone who takes office before taking an oath of fidelity or secrecy shall be liable to a fine
of K20. If a person who has taken an oath of secrecy or fidelity reveals any matter to any
person which has come to his knowledge in the course of carrying out duties under the Act,
he will be liable to a fine of K1, 000 and to imprisonment for two years.

Exceptions to the Secrecy Rule

The duty to observe secrecy can be waived in the following circumstances:-

1. Where the information is required by the Auditor General or any officer duly
authorised by him for the performance of official duties;

2. Where information is required by authorised government officers of another country

which has a double tax treaty with Malawi to enable it to assess the tax position of a
taxpayer;

3. Where the information is required by a taxpayer or a duly authorised agent of the

taxpayer;

4. Where the Commissioner wishes to compile and publish statistics about the total
amount of income received by any class of persons as declared in returns to the
Commissioner; and

5. Where information is required for the purposes of carrying the Act into effect or for
the purpose of any prosecution for an offence committed in relation to any tax on
income.

Each company is required to appoint a public officer who is responsible for ensuring that all
taxation matters are properly dealt with. All notices, assessments and returns by the tax
department are delivered to the Public Officer at his specified office.

Any notice or document is regarded as served upon a person sufficiently and effectively if:-

a. Personally served upon him;

b. Left with some audit person who is resident at, occupying or employed at his last
known place of abode, office or place of work.

c. Sent by post addressed to such last known place of abode whether inside or outside
Malawi, office or place of business.
d. Affixed at the last known place of abode office or place of business and a person shall
be deemed to have received the notice on the 14th after the affixing.

NOTE:
The above points shall not apply if the officer is satisfied that such a person would not
understand the meaning of notice due to illiteracy or infirmity. The officer then may direct
that the substance of such document be communicated to such person in such a manner as he
may deem fit.

POWERS OF THE COMMISSIONER GENERAL

The administration of legislation such as the Taxation Act demands constant use of
“Common sense”. When regulations are set as to what is assessable, what category of
expenditure is deductible and so on, it is almost impossible to envisage various circumstances
which may be met in everyday affairs? The Commissioner’s job to oversee the
implementation of the Act would be very difficult if he was not given authority to exercise
discretion in certain specific areas.

The Act gives the Commissioner discretionary powers to exercise in certain areas. The
discretionary powers address matters of fact than points of law.

SOME EXAMPLES OF EXPRESSLY STATED DISCRETIONARY POWERS OF

THE COMMISSIONER

SECTION POWER

24 To decide whether timber has been grown as timber for sale

35 Approval for deduction of bad debts

36A Determination of taxable income from which Export Allowance is deducted

38 (a) (I) + (ii) Determination of allowable deductions against assessable income

arising from the sale of timber.

43 (1) To decide whether a change in the shareholding of a company has been

effected to take advantage of assessed losses.
48 - Proviso Acceptable basis of stock valuation

55 (I) Accepting accounts prepared to a date other than 30 June for assessment.

59 Determination of taxable income of a non-exempt producer’s cooperative.

84E Reduction or waiver of penalty for non-payment of provisional tax.

105(6) Extension of time to pay tax; remission of penalty.

SCHEDULE POWER

Second Par 3(2)c Determination of rates of Annual allowance for certain qualifying
assets.

ADMINISTRATION OF TAXES (TABLE 1)

MIN. OF FINANCE (Presents proposals)

PARLIAMENT (Passes proposals and they

become finance Act
of that year)

MALAWI REVENUE AUTHORITY

Under Commissioner General of Taxes
(For implementation)

Commissioner of Domestic Commissioner of Customs

Taxes (Direct Taxes) and Excise (indirect taxes)