Some important Legislative Provisions and their
Implications
Section 4(i)
"All officers appointed for the purpose of carrying out this Act
shall be under the direction and control of the Commissioner General and shall perform
such duties as the Commissioner General may direct, and the Commissioner General may, in
writing and subject to the limitations as he may think fit, delegate to such officers any
of the functions conferred or imposed on him by this Act."
Section 6(2)
"Subject to this section, every officer shall preserve and aid in
preserving secrecy with regard to all matters that may come to his knowledge in the
performance of his duties in connection with this Act, and shall not communicate any such
matter to any person whomsoever other than the taxpayer concerned, or his lawful
representative, nor suffer or permit any person to have access to any records in the
possession or custody of the Commissioner General except in the performance of his duties
under this Act …."
Section 11
"The income of a person shall include the total amount in cash or
otherwise including any capital gain, received by or accrued to or in favour of the person
in any year or period of assessment from a source within or deemed to be within Malawi and
his assessable income shall be that income excluding any amount exempt from tax under this
Act."
Section 15(i)
"(1) No capital gain and no capital loss shall be recognized for
the purposes of this Act in respect of the transfer of any capital asset:
(a) between spouses; or
(b) between former spouses
(c) to a spouse from the estate of a deceased spouse
and the adjusted basis, if any, of such asset in the hands of the
transferor shall be the basis of the asset in the hands of the transferee."
"(2) No capital gain and no capital loss shall be recognized upon
the disposal of the principal residence of an individual and for this purpose an
individual shall be taken to have not more than one principal residence at a time, and the
determination of the Commissioner General with respect to any issue relating to the
principal residence of an individual shall be final."
Section 23
"There shall be included in income any amount received or accrued
from another person as a premium or like consideration paid by such other person for the
right to use or occupation of land or buildings or for the right of use of plant or machinery or
for the use of any patent, design, trade-mark or copyright or any other property which, in
the opinion of the Commissioner General, is of a similar nature."
Section 27 (i)
"An amount shall be deemed to have accrued to any person from
a source within Malawi whenever it has been received by or has accrued to or in favour of
such person-
as remuneration for any services rendered or work or labour done by
such person in the carrying on in Malawi of any trade, whether the payment for such
service or work or labour is made or is to be made by a person resident in or out of
Malawi and wherever payment for such services or work or labour is made or is to be made;
by virtue of any pension or annuity granted to such person by
- any person where-so-ever resident; or
- the government for services rendered, where-so-ever payment of such pension or annuity
is made and where-so-ever the funds from which payment is made are situated:
provided that no pension or annuity shall be deemed to be derived from a source
within Malawi if the service or employment for which it was granted was performed wholly
outside Malawi."
Section 28
1. "For the purpose of determining the taxable income of any
taxpayer, there shall be deducted from the assessable income of such taxpayer the amounts
of any expenditure and losses (not being expenditure and losses of a capital nature)
wholly and exclusively, and necessarily incurred by the taxpayer for the purposes of his
trade or in the production of the income."
2. "For the purpose of determining the taxable income of any
taxpayer, there shall be deducted from the assessable income of such taxpayer the amount
of any capital loss realized by the taxpayer in the year of assessment but to the extent
only of either
the capital loss; or
any capital gain realized by the taxpayer in that year of assessment;
whichever is the lesser.
Provided that any loss realized with respect to an asset used in a
trade or business and in respect of which an initial allowance, investment allowance or
annual allowance has been given under this Act shall not be subject to the limitation
under this subsection but shall be deducted in accordance with subsection 1."
3. "The whole or any part of the capital loss not deducted
by reason of the limitation imposed under subsection (3) shall be carried forward to the
following year of assessment and shall continue to be so carried forward until fully
deducted from the taxpayer's assessable income in accordance with that subsection."
Section 33
There shall be allowed as a deduction from assessable income capital
allowances as provided for in the second schedule to the Act.
NOTES
Whereas accounting depreciation is not allowable under
the Taxation Act,
the law provides for the allowance of standardized allowances known as "capital
allowances" in order to write off capital expenditure on certain classes of business
assets. There are three main types of capital allowances:
- initial allowance
- annual allowance
- investment allowance
There are also balancing charges and balancing allowances which are
calculated when a business asset on which capital allowances were granted is sold. Profits
or losses on sale based on book values are disallowed. Capital allowances are based on
written down values.
The first schedule to the Taxation Act gives general exemptions from
income tax.
Section 36A
"There shall be allowed as a deduction an amount
(hereinafter referred to as an "export allowance") determined under Section 14
of the Export Incentives Act in respect of exports made during the year of assessment.
"No deduction of an export allowance shall be made unless the
Commissioner General is satisfied that the taxable income from which the deduction is to
be made has been determined in accordance with the provisions of this Act."
Section 41A
"There shall be allowed as a deduction an additional fifty
percent of the costs incurred by a taxpayer during the year of assessment in the training
of an employee of the taxpayer who is a Malawian to enable such employee attain a
qualification at degree, diploma or certificate level."
Section 41B
"There shall be allowed as a deduction an additional
twenty-five per cent of the international transport costs incurred by the taxpayer for his
exports, whether produced by manufacturing in bond or otherwise, but other than exports of
products specified in the schedule to the Export Incentives (Exclusion) Order 1990, made
under the Export Incentives Act."
The excluded export products under the said order are currently what
are referred to as "traditional products" namely:- maize, tobacco, sugar and
coffee. No additional twenty five percent international transport costs allowance applies
to the said traditional products under this section.
Section 54
"Every person carrying on a business shall keep sufficient
records of his income and expenditure to enable his assessable income and allowable
deductions to be readily ascertained and shall retain such records for at least seven
years after the completion of the transaction, acts or operation to which they relate:
Provided that this subsection shall not require the preservation of any
records-
in respect of which the Commissioner has notified the taxpayer that
their preservation is not required; or
of a company which has gone into liquidation and which has been
finally dissolved."
Section 67
(1) "Every company which carries on a trade or has an office or
other established place of business in Malawi shall at all times be represented by an
individual residing therein."
(2) "Such individual shall be a person approved by the
Commissioner General and shall be appointed by the company or by an agent or attorney who
has authority to appoint such a representative for the purposes of this Act...."
(3) "The representative shall be called the public officer of the
company...."
(4) "In default of any such appointment, the public officer of any
company shall be such managing director, director, secretary or other officer of the
company as the Commissioner General may designate for that purpose"
Section 71
"Subject to this Act, income tax shall be
charged, levied and
paid for each year of assessment upon the income of any individual received or accrued
from a source within or deemed to be within Malawi upon that individual's total taxable
income ascertained under this Act at the rate specified in the eleventh schedule."
Section 76A
(1). Subject to subsection (3), any income payable to a person,
not being a person resident in Malawi, arising from a source within Malawi and not
attributable to a permanent establishment of that person in Malawi shall be liable to a
final tax at the rate of 15 percent of the gross amount of such income.
(2). "The tax payable under subparagraph (1) shall be deducted
from the amount referred to therein upon
accrual of that amount to such person; or
payment of the amount to such person whether directly to him or to
his account in or outside Malawi; or
remittance of the amount to such person; or
crediting of the amount or of the value thereof in favour of such
person and it shall be the responsibility of the person from whom the amount is due to
deduct the tax and to remit it forthwith to the Commissioner General."
(3) "The tax payable under subsection (1) is not payable in
respect of
income and other amounts exempt from tax under the provisions of the
15t schedule; and,
any pension or annuity.
It must be noted that whereas PAYE (or) payroll tax), withholding tax
and provisional tax are advance payments of Income Tax, Non Resident Tax is NOT a tax on
income as defined by Section 11.
Section 84
Section 84 requires every person chargeable with income tax under the
(Taxation) Act to prepare and deliver to the Commissioner General a return of income in
the form approved by the Commissioner General for the relevant year of assessment and
computed in accordance with the provisions of the Act within 180 days from the end of the
person's accounting year or such longer time as the Commissioner General may allow.
Section 87
(1). "Every return required to be rendered by a taxpayer under
this Act shall be accompanied by all such balance sheets, trading accounts, profit and
loss accounts and other accounts of whatsoever nature as are necessary to support the
information contained in the return, and all such accounts shall be authenticated by the
signature of the person rendering the return,'
(2). "if any person submits in support of any return furnished
by him under this Act any balance sheet, statement of assets and liabilities,
or account
prepared by any other person, he shall, together with such balance sheet, statement or
account, submit a certificate or statement by such other person recording the extent of
the examination by such other person of the books of account and of the documents from
which the books of accounts were written up.
(3). Any person who has prepared any balance sheet, statement of
assets and liabilities, or account for any other person shall furnish such other person
with a certificate or statement required under subsection (2)"
Section 89
(1) "In the following cases, namely where in respect of a year of
assessment
a taxpayer makes default in furnishing any return or information; or
the Commissioner General is not satisfied with the return or
information furnished by a taxpayer; or
the Commissioner General has reason to believe that a taxpayer is
about to leave Malawi without furnishing a return or a satisfactory return. The
Commissioner General may estimate the taxpayer's taxable income or assessed loss, notice
whereof shall be given to the taxpayer."
(2) "if it appears to the Commissioner General that any taxpayer
is unable from any cause to furnish an accurate return of income, the Commissioner General
may accept the taxpayer's estimate of the amount of his taxable income."
Section 90
(1) "The Commissioner General shall proceed to assess the
liability to tax of every taxpayer as expeditiously as possible after the expiry of the
time allowed to such taxpayer under section 84 for the delivery of a return of
income."
(2) "Where the Commissioner General has estimated the taxable
income or assessed loss of a taxpayer under Section 89 (1) he may assess his liability to
tax on the basis of such estimation."
(3) "Where the Commissioner General accepts the taxpayer's
estimate under Section 89 (2) he may assess him on such estimate, but may subsequently
adjust such assessment upon the taxpayer submitting a satisfactory return of income."
Section 95
"In any appeal under this Act the burden of proof that
any amount is exempt from or not liable to income tax, or is subject to any deduction or
allowance in accordance with this Act shall be upon the person claiming such exemption,
non-liability, deduction or allowance.
Appeals by the taxpayer against assessment, decision or the
determination of a reduction of tax under section 123 or 124 (for double taxation) made by
the Commissioner General may be made to the Commissioner General under Section 97 of the
Act.
Appeals against the decision of the Commissioner General made under
Section 97 may be made by the taxpayer under Section 98 to the special Arbitrator, and
appeals against the decision of the special Arbitrator, made under Section 98 may be made
under Section 101 to the High court of Malawi by either the taxpayer or the Commissioner
General but, only on a point of law and not on a point of fact and the decision of the
High Court shall be final.
Section 105
(1) Any tax chargeable under this Act is payable by the due
date as provided in this Act.
(2) Notwithstanding that an appeal against an assessment has been
made under Section 97 the tax shall be paid as provided in subsection (1) unless the
Commissioner General otherwise directs.
Provided that, if the Commissioner General has reason to believe that
the taxpayer may attempt to leave Malawi without intending to return without settling his
liabilities under this Act, the Commissioner General may require the taxpayer to pay the
whole of such tax forthwith.
(3) When an appeal is settled any balance of tax shall be due and
payable upon notification of settlement of the appeal.
(4) Where the assessment is reduced on appeal with the result
that too much tax has been paid under sub Section (2) the excess shall be refunded.
(5) If tax is not paid on or before the dates provided in
Subsection (1), (2) or (3) interest at the rate provided in subsection (6) shall be
payable.
(6) The interest referred to in sub section (5) shall be -
(a) where the tax unpaid does not exceed K22, twenty-five per
centum of the amount of such unpaid tax;
(b) where the tax unpaid exceeds K22, the rate of interest referred to
in subsection (5) shall be three quarters per centum per month in respect of the first
month or part thereof and the final rate of interest shall apply for the whole period
during which any tax has remained unpaid, so however that in no case shall the total
interest payable be less than K5.50. Provided that the Commissioner General may on good cause shown make such arrangements as
he thinks fit with any taxpayer for payment of tax and may remit the whole or any part of
the interest due under subsection (5) and (6) or may decide that no interest shall be
charged.
(7) Any interest payable under subsection (5) and (6) shall be
recoverable under sub-sections (5) and (6) shall be recoverable as if it was tax payable
under this Act and shall not be allowable as a deduction in computing taxable income.
(8) Where a payment of tax has been made by cheque and the cheque
is dishonored by the bank, a penalty equal to 30 per centum of the amount on the cheque
shall be charged, and collected summarily together with the amount of tax in cash.
Section 107
(1) Any tax shall when it becomes due or is payable, be deemed to
be a debt due to the Malawi Government and shall be payable to the Commissioner General in
the manner and at the place prescribed, and may be sued for and recovered by the
Commissioner General in any court of competent jurisdiction.
(2) Notwithstanding anything contained in any Malawi law relating
to magistrates courts any amount whatsoever due and payable under this Act shall be
recoverable by action in the court of the magistrate having jurisdiction in respect of the
person by whom such amount is payable under this Act.
(3) If any person neglects or refuses to pay tax dues:
If any person neglects or refuses to pay tax due and payable upon
demand made by the collector, the collector may, upon the authority of a certificate by
the Commissioner General that such tax is due and payable, for non-payment thereof
distrain such person by any of his property, both real and personal without any further authority
than such certificate and his warrant of appointment.
A distress levied by the collector shall be kept by the collector for
five days at the costs and charges of the person neglecting or refusing to pay, and if the
person aforesaid does not pay the sum due, together with the costs and charges, within the
said five days, the distress shall be sold by public auction for payment of the sum due
and all costs and charges. The costs and charges of taking, keeping and selling the
distress shall be retained by the collector, and any over plus coming by the distress,
after the deduction of the costs and charges of the sum due, shall be restored to the
owner of the goods detained.
Section 115
"Any person who assists in or induces the making or delivery for
any purposes of income tax of any return, accounts, statement or declaration which he
knows to be incorrect shall be liable to a fine of K1, 000."
Section 116
"Any person who obstructs or hinders an officer in the discharge
of his duty under the Act or rules shall be liable to a fine of K5,000."
Section 116A
"Any person who forcibly rescues or attempts to rescue any
property, article, or object which has been taken, detained, or seized by any officer
under the authority of this Act shall be guilty of an offence and liable to a fine of K5,
000 and to imprisonment for one year."
Section 117
"Any person who without lawful justification or excuse incites any
person to refuse to pay any tax payable by him under this Act shall be liable to a fine of
K5, 000."
Section 122
"If the Minister by Order declares that arrangements specified in
that order have been made with the Government of any country with a view to the
prevention, mitigation or discontinuance of the levying under the laws of Malawi and of
such other country of taxes in respect of the same income, or to the rendering of
reciprocal assistance in the administration of this Act or any previous law and taxes on
income levied under the laws of such other country, and that it is expedient that those
arrangements should have effect, the arrangements shall have effect notwithstanding
anything in this Act.
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