Malawi - Taxation

There were allegations of widespread corruption in the areas of customs and excise tax in 1999. Individuals pay taxes on all income from Malawi, whether they are residents or nonresidents. Most operating businesses are required to prepay estimated tax on a quarterly basis. The corporate income tax in 2002 was 30%, down from 38% in 1999. Branches of foreign companies were taxed at 35%, but reduced rates applied to insurance businesses (21%), and to ecclesiastical, charitable or educational institutions or trusts (25%). Companies operating in export processing zones (EPZs) are exempt from corporate tax, and companies operating in priority areas can qualify for, variously, a ten-year exemption or a reduced 15% tax rate. Other tax allowances are offered-for mining companies, for manufacturers, for exports, for training, among others-as investment incentives.

The income of individuals and partnerships is taxed according to a graduated scale with rates from 0% to 30%. For 2004, the government introduced a new top rate of 40%, and raised the threshold for taxable income from 30,000 Kwacha to 36,000 Kwacha (about $340 to $410). Municipal taxes are based on property valuations.

Malawi's main indirect tax has been a 20% turnover tax which it calls a surtax. The surtax applies to goods and selected services, including luxury goods and electronics. The government is planning to introduce a value-added tax (VAT) system.

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