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Withholding Tax is an advance payment of
Income tax deducted from specified payments. The tax is
deducted by the person making the payment at the time the
payment is made.
2. Payments from which withholding tax is deducted
and the rates applicable
Withholding Tax is deducted from the
following specified payments and the rates applicable are
those appearing against each item in the Schedule below
| |
Nature of payment |
Rate of
Withholding Tax On gross Payments |
|
(a) |
Royalties |
20% |
|
(b) |
Rents:-excluding Rents payable by
Individuals whose Source of income is from employment
only and the rent Payable is for a Property used as A
dwelling house and Is at a rate not Exceeding K6,000
Per annum (or K500 Per month) |
20% |
|
(c) |
Payment of over K1,000 For any
supplies to traders And institutions under Tender or
any similar Arrangement |
|
|
i) foodstuff |
7% |
|
ii) Other |
10% |
|
A similar arrangement to tender is
any standing order or contract to supply goods whether
of a specified quantity or not and whether for a
specified or undefined period. Whether under a verbal
or written agreement.
The procurement of supplies by
issuing a Local Purchase Order does not in itself
amount to a similar arrangement to tender, neither
does an arrangement to settle an account in
installments, or sourcing of quotations. |
|
(d) |
Fees and commissions- excludes fees
and commissions on which PAYE is being operated,
technical and management fees relating to
reimbursement of expenses |
20% |
|
(e) |
Payment for carriage and haulage
(refers to movement of goods only) |
10% |
|
(f) |
Payment for tobacco and other farm
products of over K1,000 |
7% |
|
(g) |
Payment to contractors and
sub-contractors (includes all sorts of contractors and
sub-contractors |
10% |
|
(h) |
Payments for Public Entertainment
this does not include admission fees to places of
public and private entertainment, accommodation and
meal charges, but includes those made to musicians,
athletes, TV and Radio artists, Theatre Starts,
theatre stars and comedians |
20% |
|
(i) |
Payment of over K 500 labour or casual services |
20% |
|
(j) |
Bank interest of over K500 |
20% |
3. Payment due to the Malawi
Revenue Authority
No withholding Tax should be deducted
from any of the above payments when they are made to the
Malawi Revenue Authority
4. Persons to operate
Withholding Tax
Any individual, partnership, trust,
association, company, club, statutory body, council,
government ministry or department, religious or any
organization making any of the above payments is liable to
operate Withholding Tax.
5. Records to be kept by
persons operating withholding tax
Persons operating Withholding Tax should
keep
- Withholding Tax Certificate (WHT 1)
- Withholding Tax Summary Form for remittance
purposes (WTF2)
These can be obtained on request from All
MRA offices
6. How to operate withholding
tax
On making any of the payments specified
above, the person making the payment should, unless the
payment belongs to a person whose income is exempt from tax
or a person holding a Withholding Tax Exemption Certificate,
must deduct Withholding Tax.
7. What to do after the
deduction of withholding tax has been made?
After making the deduction the person
making the payment should
- prepare a Withholding Tax Certificate in triplicate;
- issue the person from whose payment Withholding Tax
has been deducted with the B copy of the Withholding Tax
Certificate;
- send the money deducted to the Commissioner General,
Private Bag 247, Blantyre, or the nearest Regional
Office within 14 days from the end of the month during
which the deduction was made together with the A copy of
the Withholding Tax Certificate (WTF1) properly
summarized on Withholding Tax Summary Form (WTF2)
8. Deduction made and remitted
to the Commissioner-General (CG)
Deductions made and remitted to the
Commissioner General will be given as a credit in the
assessment of the person from whose payment the Withholding
Tax was deducted.
9. Those who fail to deduct and
send the money in time
Those who fail to deduct or fail to send
the money deducted to the CG or to carry out any part of the
law relating to Withholding Tax will be guilt of an offence
and they will be liable to pay an additional charge of 20%
of the Withholding Tax due; and in addition may be made to
pay a fine of K200.
10 Exemption from
withholding tax
The Commissioner General has power to
issue Withholding Tax Exemption Certificate to:-
- persons whose income is exempted from Income Tax; and
- persons who have fulfilled all the following
conditions - The applicant
-
is a registered taxpayer
-
has submitted accepted
returns of income including statements of accounts.
The Commissioner General may in exercise of his
discretion allow a shorter period in respect of cases
where it can be proved that the person has submitted
returns for less than two years.
-
has settled all his outstanding
taxes; and
-
has complied with Provisional Tax,
Fringe Benefit Tax and Payroll tax requirements.
These notes have been prepared for
information only. For details of the Law, please refer to
the Taxation Act. |
