Tax incentives in Malawi are enshrined in the main tax legislation that include the customs and Excise Act, the Taxation Act, the VAT Act and the Export Processing Zones (EPZ) Act, to encourage investment. Therefore, the government offers the following initiatives:
FDI Policy
- Private investment in Malawi is regulated by the Investment and Export Promotion Bill 2012.
- The Act states that investors, both domestic and foreign are allowed to invest in any sector of the economy, with no restriction on ownership.
- Further it puts no restrictions on the size of investment, the source of funds or whether products are destined for export or for the domestic market
- The Act also established of Malawi Investment and Trade Centre (MITC) which acts as a One-Stop Shop Investment and Trade Centre for all investors and exporters
Tax Benefits
The Malawi Government through Taxation Act, VAT Act, and Customs and Excise Act offers the following fiscal incentives:
- 100% Investment allowance on New and Unused Industrial Buildings ,Plant and Machinery
- No Minimum Tax Based on Turnover
- 25 % Export Allowance on revenue for non-traditional exports
- No Taxes on Gains from sell of Shares that are held for more than 1 year.
- 40% Investment Allowances for used Buildings, Plant and Machinery
- Transport tax allowance of 25% on international transport costs, excluding traditional exports
- Allowance for manufacturing companies to deduct all operating expenses incurred up to 25 months prior to the start of operations
- Exemption of Duty, Excise and VAT on raw materials used in manufacturing - subject to approval
- Exemption of Duty, Excise and VAT on Industrial Machinery and Equipments
- Carry forward of loss, up to seven years, enabling companies to take advantage of allowances
- Additional allowance of 15% for investment in designated areas of the country
- Exemption of duty on importation of buses with a seating capacity of 45 persons and above
- Exemption of duty on direct importation of goods used in the tourism industry
Repatriation of Capital
There are no restrictions on remittance of foreign investment funds (including capital, profits, loan repayments and lease repayments) as long as the capital and loans that were obtained from foreign sources and registered with the Reserve Bank of Malawi (RBM).
Manufacturing under bond Incentives
Manufacturing Under Bond (MUB) scheme offers incentives to those companies that export some, but not all, of their products. These incentives include:
- Export allowance of 25% on revenue for non-traditional exports
- Transport tax allowance of 25% on international transport costs, excluding traditional exports
- Exemption of duties on imports of capital equipment used in the manufacture of exports
- Exemption of surtaxes
- Exemption of excise tax on the purchase of raw materials and packaging materials
- Timely refund of all duties (duty drawback) on imports of raw materials and packaging materials used in the production of exports
Expropriation and Compensation
Malawi's constitution prohibits deprivation of an individual's property without due compensation. There are effective laws that protect both local and foreign investment
The likelihood of direct expropriations has been further reduced since the repeal of the forfeiture act in 1992.
Export Processing Zones (EPZ)
Legislation for the establishment of EPZs came into force in 1995. All companies engaged exclusively in manufacture for export can apply for EPZ status. As of December 2010, 16 were operating under the EPZ scheme. The incentives under this scheme include:
- Exemption of corporate tax
- Exemption of withholding tax on dividends
- Exemption of duty on capital equipment and raw materials
- Exemption of excise tax on the purchases of raw materials and packaging materials made in Malawi
- Exemption of value added tax
For more information visit the Malawi Revenue Authority website on http://www.mra.mw or contact:
The commissioner General,
Malawi Revenue Authority,
Private Bag 247,
Blantyre,
Malawi
Tel: (265) 01 822 588
Fax: (265) 01 822 302