On 28 May 2021, Malawi Minister of Finance Honourable Felix Mlusi presented to the Parliament the fiscal budget 2021/2022. This 2021/2022 Budget’s theme is ‘Building Back Better: Achieving Aspirations of the Nation Together.
Earlier this week, the Budget Statement was published by the Malawi Ministry of Finance. The important fiscal changes are summarised below. These income tax and vat measures will be effective from 1 July 2021, customs and excise tax measures are effective from 29 May 2021.
Customs Measures
1. Duty-Free Week
With the aim to boost the growth of small businesses and to reinvigorate the economy, the 2021/2022 budget propose to introduce a duty-free week for imports not exceeding US $3000. This duty-free week will take place once a year. The exact dates will be gazetted well in advance so that tax-payers can prepare and benefit from this new incentive.
Income Tax Measures
1. Reintroduction of withholding tax (advance income tax) on imports
It is proposed to reintroduce withholding tax on imports. This withholding tax will apply to all commercial importers without a valid tax clearance certificate.
2. New PAYE brackets
The 2021/2022 Budget introduces two new PAYE brackets. First one of 25% for monthly income between MWK100,000 to MWK1.0 million and 40% for monthly income exceeding K6.0 million.
Accordingly, these are the new monthly PAYE brackets:
MWK0 – MWK100,000 – 0%
MWK100,000 – MWK1.0 million – 25%
MWK1.0 million – MWK.3.0 million – 30%
MWK.3.0 million – MWK. 6.0 million – 40%
3. Introduction of presumptive tax rates for small businesses
The budget proposed to introduce presumptive tax rates for small businesses. The small businesses concerned will be those whose turnover is less than MWK 12.5 million.
4. Compulsory TPIN
It will now be compulsory for all citizens to have a taxpayer identification number.
VAT Measures
1. VAT Registration
VAT registration threshold for compulsory VAT registration increase from MWK 10 million to MWK 25 million.
2. New Zero-Rated Items
These items are now zero-rated:
Fuel ethanol
printed books
textbooks
3. Aquaculture incentives
Fish feed is now zero-rated for VAT purposes.
There is also a VAT exemption for machinery used for producing fish feed.
4. Import VAT
Removal of import VAT on:
1. raw materials for use in the manufacturing of medicaments, pharmaceuticals, and medical apparatus
2. raw materials for use in printing and publishing books;
3.Reduction in the validity of invoices for claiming input VAT by VAT registered taxpayers from 12 months to 6 months
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