1.  Pay roll Tax: Section 102, deductions & payment rules

Pay roll tax is a tax administration scheme whereby the employer is charged with the deduction of the correct amount of tax from the weekly or monthly emoluments of his employees and the remittance and accountability of the same within the prescribed period to the Commissioner General.

Every person in Malawi who has an employee or employees earning emoluments of more than K3,000.00 per month must register for a Pay roll tax Scheme with the Commissioner General.

Pay roll tax accounts for about 44% of the total annual tax collection by the MRA. The Pay roll tax scheme is so efficient in Malawi that it makes assessments at the end of the year virtually unnecessary. It has the advantage of enabling the taxpayer to pay the tax as he earns his emoluments thereby saving him from the trouble of paying a lump sum of the annual tax at the end of the tax year when the money is already spent.

Pay roll tax tax enables the government to receive the tax revenues evenly throughout the tax year thereby facilitating the cash budget planning and implementation on a monthly basis because it ensures a regular flow of weekly or monthly tax revenue.

Pay roll tax tax is payable to the Commissioner General within 14 days of the end of the month in which it is deducted failing which penalties are paid as follows:

1. 15% of the amount of tax
2. A further 5% per month or part thereof.

2.   Assessment Tax: Section 92

This is the tax liability determined by way of tax assessments made after the end of the year of Assessment on persons in business to show the balance of tax payable after crediting on that notice of assessment advance taxes such as provisional tax, withholding tax, Pay roll tax tax, etc. It applies to limited companies, sole traders and partners in business.

Under section 84 and the self assessment concept, the balance of tax payable must be paid at the time of submitting the tax return, where this is not done, any balance is paid together with a penalty where it arises immediately the assessment is issued to the taxpayer. The balance and the penalty so determined are paid to the tax department immediately otherwise interest on overdue tax becomes due. Payment is made by cash or cheque. Where a cheque has been made "Refer to Drawer" by the bank, only cash or a bank certified cheque is accepted for payment of the tax together with a penalty of 30% of the amount of the R/D cheque. Section 105 (8).

Assessment tax contributes about 9% of the total annual income tax. That is, after crediting the advance or withholding taxes.

3.  Provisional Tax:  Section 84A and Taxation (Provisional tax) Information Regulations Section 146

Provisional Tax is the estimated total amount of income tax payable by every businessperson chargeable with income tax in respect of any year of assessment. It is estimated by the taxpayer at the beginning of the year of assessment and payable in quarterly installments within 14 days after the end of each quarter of that year of assessment. Provisional tax is an advance tax. It contributes about 31% of total annual income tax revenue and provides the revenue with a quarterly inflow to government.

4.  Withholding Tax: Section 102A and  Taxation (withholding Tax) (Information deductions and payment) Regulations Section 146

It is an advance tax deducted from any payment specified in the Fourteenth Schedule in accordance with the rates specified in that schedule.

Where the recipient produces a valid Withholding Tax Exemption Certificate issued by the Commissioner General, withholding tax shall not be deducted but no exemption certificate shall be issued in respect of the following:

1. Bank interest
2. Rent
3. Royalties
4. Commissions, and
5. Payment of casual labour

Withholding tax shall be remitted to the Commissioner General within 14 days from the end of the month in which such deduction was made.

A person who fails to deduct withholding tax pursuant to the prescribed manner shall himself be personally liable to pay the Commissioner General the amount of any withholding tax which he has failed to deduct. Regulation 3 (2).

A person who fails to remit the amount of withholding tax within the prescribed period shall himself be personally liable to pay to the Commissioner an additional sum equal to 20% of the amount of withholding tax he has failed to pay and such additional sum together with the amount of the withholding tax shall become payable forthwith. Regulation 6 (4)

These penalties in regulations 3(2) and 6(4) are in addition to a fine of K200. A penalty for failure to register for withholding tax is currently under consideration. Withholding tax accounts for about 13% of the total annual income tax revenue and it also provides the government with a constant or regular flow of tax revenues.

5.   Fringe Benefits Tax: Section 94A Taxation (Fringe Benefits Tax) (Information and payment ) Regulations Section 146

It is a tax payable by every employer other than the Government, who provides fringe benefits to any of his employees.  It is payable on the total taxable value of such fringe benefits at the rates specified in the eleventh schedule (35%) subject to the Taxation (Fringe Benefits Tax) (Information and Payment) Regulations made under section 146 under which regulations, paragraph 5 stipulates the determination of the taxable values of the various types of fringe benefits.

Fringe Benefits Tax shall be paid to the Commissioner General in quarterly installments not later than 14 days after the end of each quarter of the year of assessment.

An employer who fails to register in accordance with the regulations or fails to pay the Fringe Benefits Tax shall be liable to a penalty of 20% of the Fringe Benefits Tax. Fringe Benefit Tax contributes about 3% of the total annual income tax.

6.  Non Resident Tax: Section 76A

It is a final tax payable by persons not resident in Malawi on any income arising from a source within Malawi which is not attributable to a permanent establishment of that person in Malawi.

Non resident tax is payable at the rate of 15% of the gross amount of such income and upon:

1. accrual of the amount to such person, or

2. payment of the amount to such person whether directly to him or to his account in or outside Malawi or

3. remittance of the amount to such person or

4. 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 remit it forthwith to the Commissioner General.

Non resident tax is not payable in respect of:

1. income and other amounts exempt from tax under the provisions of the First Schedule, and

2. any pension or annuity payment.