INVESTORS’ TAX INCENTIVES
Malawi offers a wide range of tax incentives with the aim of encouraging development, enhancing output, earning or saving foreign exchange and expanding employment opportunities.
Pre-business expenses of up to 18 months are allowable expenses (sec 41 of the Taxation Act)
Losses are carried forward for six years to encourage investment in profitable business ventures
Capital allowances & investment allowances are claimed as follows:
25% export allowance for non-traditional exports, these include: processed tea, processed tobacco etc.
15% international transport allowance for non traditional exports
Exports are zero-rated for purposes of Value Added Tax. It implies that exporters can claim input tax in the course of production
Various capital expenditures in the agriculture sector in relation to construction of dams, dykes and land preparation are claimable,
Growers of tea, coffee tobacco, sugar, cocoa to a plantation level are recognized as manufacturers which means they can claim all incentives available to a manufacturer
Annual and initial allowances on staff housing in the agriculture sector is claimable
The whole capital expenditure on plant and machinery is claimable in the first year of operation.
Value Added Tax
In order to promote national development through the use of machines in the construction and transport industry, VAT charged on other lifting, handling, loading or unloading equipment such as conveyors, teleferics classified under Heading 84.28 of the Customs and Excise Tariffs Order has been removed
Zero-rated special purpose motor vehicles other than those principally designed for transport of persons or goods under Customs Tariffs heading 8705.1.
GENERAL TAX INCENTIVES
Losses are carried forward up to 6 years for traders
Initial and annual allowances at various rates are granted besides the depreciation (annual) allowances
Initial and annual allowances are claimed at various rates as stipulated by the Taxation ACT
Commercial building with a construction cost of MK 100 million or above, are subject to annual allowance of 2.5 %
A taxpayer can claim 50% allowance on social contributions paid directly into the building of a public hospital or school, or the sponsoring of youth sporting development activities.
Customs & Excise
The Malawi Government provides tax incentives on raw materials, machinery and equipment. The incentives are provided for either in the main Customs Tariff or in specific Customs Procedure Codes (CPC) of the Customs and Excise (Tariffs) Order. Below is a list of incentives which are implemented under the Customs and Excise Act (Chapter 42:01).
Taxes on most machinery were removed in order to promote the various productive sectors of the economy. Government has further removed taxes on crane lorries, concrete mixer lorries, mobile drilling derricks and track laying tractors for the construction Industry to boost the industry.
ELECTRICITY GENERATION AND DISTRIBUTION SECTOR (CPC 489)
Other business players can now invest in the energy sector following the extension of the Customs Procedure Code 489 under the Customs and Excise (Tariffs) Order to allow all investors to import electricity generation and supply of commercial electricity distributing as approved by the Minister responsible.
This will encourage investment in the energy sector and improve the electricity generation and distribution capacity and support the industry that requires use of electricity for production.
In order to promote the energy sector, the following goods for use in electricity generation and distribution are duty free but subject to 16.5% VAT. The goods include: fuses, transformers, sling, ring main unit, insulators, galle chain equipment, conductors, surge arrestors, column duplex, AAC/PVC and electricity supply meters.
In addition, other goods such as energy saver bulbs, solar batteries, solar battery chargers, energy lamps, generators and inverters are import duty free but VAT at 16.5% is payable.
Solar products are import duty free in their right in the Customs and Excise (Tariffs) Order for example solar batteries and solar energy lamps. VAT is payable at 16.5%
COMMUNICATION SECTOR (CPC 480)
Access to information and the promotion of investment in Information and Communication Technology (ICT) remains critical. By investing in this sector, business players will enjoy duty free on specialized broadcasting equipment for Television and Radio stations as approved by the Minister responsible.
Investors intending to invest in the tourism sector in Malawi can enjoy the following incentives: free import duty, free import excise and VAT is zero-rated
CPC 442 (a) Goods for hotels, Lodges and Inns – with 50 rooms and above.
Glass, china porcelain earthenware and stone articles of table ware, enamel and hollowware for table use electro plated nickel – silver and pated ware, knives, forks, spoons and similar articles for cutlery and marked linen etched stamped or in any manner marked with the name of the hotel.
Industrial catering equipment, motor boats scuba diving, jet skis, kayaks, wind surfers, pedalos, air conditioners, generators, gym equipment, message equipment, industrial washing machines, bar fridges, sauna, hot steam baths for furniture and furnishings.
Shuttle buses and off-road game/scenery viewing motor vehicles (Safaris) are duty free under CPC 450 and CPC 451 respectively.
CPC 442 (b) Materials and equipment for the establishment of a conference centre of seating capacity of 200 people being:
Public address system, video conferencing equipment, television screens, amplifiers, LCD equipment and industrial catering and bar equipment and indelibly engraved, itched, stamped or in any other manner marked with the name of the hotel, lodge or inn.
Agricultural equipment and machinery are duty free in their own right according to the Customs and Excise (Tariffs) Order. This is to encourage diversification and promote animal husbandry; importers will be exempted from taxes on importation of livestock meant for breeding. This covers live bovine animals, live swine, sheep and goats as approved by Ministry of Agriculture.
IRRIGATION (CPC 446)
Investors in the irrigation sector enjoy import duty, import excise and VAT free (zero-rated) on the following goods for direct use in irrigation: - PVC pipes, asbestos pipes/rubber seals, galvanized pipes, elbow, sprinklers rainers, control valves, solvent cement, diesel engine ranging from 12 kw- 17kw with tubes, pressure gauges and nozzles imported by a farming entity recognized by the Secretary for Agriculture.
HORTICULTURE PRODUCTION (CPC 448)
By investing in the horticulture industry, companies can enjoy exemption of duty, import excise and VAT free (zero-rated) on seeds, cuttings, seed netting green house structure, climate control equipment, 1 generator set, water pump or borehole, flower power lights, pump, electrical engines, diesel engine for irrigation with tubing, PVC piping, valves, sprinkler system, irrigation filters/nozzles, pressure regulators, new refrigerated trucks per five years, cold rooms, strapping materials and clips, metal wires, strings elastic bands, processing equipment, bag strikers, laboratory equipment, chemical and reagents, soil testing kits, moisture testers, graders, chemicals rose cutter, spray equipment, sealing equipment and fumigation equipment. These goods must be intended for export.
FISHING INDUSTRY (CPC 477)
By investing in the fishing industry companies can enjoy import duty, import excise and import VAT free (zero-rated) on importation of machinery, plant, laboratory equipment and materials, aerators, pumps, blowers, diamond mesh, nets, measuring equipment, separators, specialized tanks and diffusers, boat engines and trawlers for deep sea fishing.
In addition, fishing vessels, factory ships and other vessels for processing or preserving fishery products are import duty free in their own right in the Customs and Excise (Tariffs) Order.
POULTRY FARMING (Under Tariff heading 84.36)
By investing in poultry farming companies can enjoy import duty free clearance of machines for cleaning, sorting or grading eggs, fruit or other agricultural produce, machinery for preparing animal feeding stuffs, poultry incubators.
Other Agricultural Goods (Under Tariff heading 84.33)
In addition to the incentives for the subsectors above, the following are some of the goods which are essential for farming and investors can enjoy duty free clearance in their own right according to the Customs and Excise (Tariffs) Order: fertilizers, pesticides, herbicides, ploughs, agricultural horticultural or forestry machinery for soil preparation or cultivation i.e. ploughs harrows, scarifers, cultivators, weeders, manure spreaders and fertilizer distributors and milking machinery.
Road Transport (CPC 440)
Investors in the road transport industry can enjoy import duty, import excise and import VAT free (zero-rated) on new buses and buses used for a period not exceeding five (5) years of a seating capacity of forty five (45) persons or more persons including the driver.
Rail Transport (Chapter 86)
In order to promote the railway industry, railway materials are import duty free and exempted from VAT.
Air Transport (Chapter 88)
In order to promote the air transport sector, aero planes and other aircrafts of unladed weight exceeding 2,000kg are import duty free in their own right in the Customs and Excise (Tariffs) Order.
CAPITAL MACHINERY AND RAW MATERIALS OF GOODS UNDER EXPORT PROCESSING ZONE (EPZ) (CPC 475)
By investing in a designated EPZ, investors enjoy exemption of all duties (Import, Excise and VAT (zero-rated) on capital machinery and raw materials directly used in the production of goods for export under CPC 475.
MINING AND EXPLORATION SECTOR ( Under CPC 481)
Specialized goods for use in mining being machinery plant and exploration equipment are duty free in the Customs and Excise (Tariffs) Order.
BANKING SECTOR (CPC 487)
ATM machines, Point of Sale Machines and Mobile banking vans imported by commercial banks locally registered by the Reserve Bank of Malawi are allowed import duty and excise duty free under CPC 487. However, VAT is payable at 16.5%.
EDUCATION SECTOR (CPC 406)
Investors in the education sector can enjoy import duty and import excise free clearance and VAT exemption of various educational materials when they are imported by educational institutions approved by the Secretary for the Ministry of Education.
The materials are as follows:- School stationery, instruments, apparatus, appliances and other tuitional requisites include specialized furniture for use in the Classroom, workshop or laboratory, athletic and sports goods, for tuitional purposes. In the case of pre-school play groups; photocopying machines, building materials, pianos, organs, keyboards and computers are import duty free. In addition books are duty free in their right in the Customs and Excise (Tariffs) Order.
HEALTH (CPC 405)
By investing in the health sector, investors can enjoy import duty and import excise free clearance and the exemption of VAT on the following goods:- Hospital, nursing home, clinic, surgery and dispensary instruments, apparatus, appliances and requisites including parts thereof and including specialized furniture diagnostic and laboratory reagents for use in the diagnosis or treatment of diseases or affections of humans or animals.
In addition medical, surgical, dental and sight testing instruments are also import duty free and exempted from VAT payment under Tariff heading 90.18 of the Customs and Excise (Tariffs) Order.
A qualifying agro-processing project may enjoy priority industry status (exemption from corporate tax) for a period not exceeding ten years. The qualifications are as follows:
Electricity Generation, Distribution and Transmission
A qualifying project in electricity generation, distribution and transmission may enjoy priority industry status (exemption from corporate tax) for a period not exceeding ten years. The qualifications are as follows:
An investment of minimum US$30 million or its Kwacha equivalent in plant and machinery, and minimum value-addition of 35%.
The Malawi Government has put on offer a wide range of tax incentives with a view to enable you tap them and grow or expand your business and immensely contribute to the overall socio-economic development of Malawi.