A tax return is an authorised document used by a taxpayer to declare tax payable or claimable or any information provided by the Taxation, Value Added Tax (VAT) and Customs & Excise Acts to enable MRA to assess one’s tax liability. To comply with Malawi Revenue Authority requirements a company must follow a series of procedures when filing taxes.
The process involved
This guide covers each step needed to handle tax returns for your company in Malawi.
Companies need to sign up with the Malawi Revenue Authority
Companies need to sign up with the MRA at Taxpayer Registration to receive their TPIN. Businesses can register with the MRA by using Msonkho Online.
Maintain accurate financial records
Keep all financial entries about income and expenses plus list properties and debts in precise detail. Make financial statements such as balance sheets and income statements according to IFRS standards for all companies and SMEs standards set by the Malawi Accountants Board.
Determine applicable taxes
The government charges 30% income tax from business entities operating in Malawi. Mining businesses must follow directed tax rates that differ from other types. Your business needs to register for VAT if its yearly revenue crosses the VAT threshold. After paying your employees you must deduct Pay As You Earn income tax from their salary and submit the payment to the Malawi Revenue Authority.
Access and complete relevant tax forms
Collect all tax forms available on the MRA website from their official online repository.
- Income Tax Return for Companies (ITF 12): Used for reporting corporate income tax.
- The VAT 3 Form allows you to record VAT payments both received and due.
- You need PAYE Return Forms (P9) to report employee income tax deductions.
- These official MRA tax forms are available on the Forms page on their website.
Utilize MRA’s online filing services
The MRA helps people submit tax returns through its online services platform. The website includes step-by-step e-guides that help you complete your online tax filing.
How many tax returns are there
There are three types of tax return. These are monthly, quarterly and annual returns.
Monthly returns
These are expected to be submitted every month like Pay As You Earn (PAYE), Withholding Tax (WHT), Value Added Tax (VAT): presumptive Tax and Domestic Excise. PAYE return should be submitted by the 14th and should be accompanied by Form P12 and P12A, WHT return is due by the 14th and should be accompanied by Form WTF1 & 2. Domestic Excise is due by the 20th and should be accompanied by Form 32 for goods and Form 32A for services. Presumptive Tax is also due by the 20th and should be accompanied by a Presumptive Return. VAT is due by the 25th and should be accompanied by Form VAT3.
Quarterly returns
Quarterly returns are required to be submitted to MRA at the end of each quarter. These deal with Fringe Benefit Tax (FBT) and Provisional Tax. FBT return is due by the 14th after the end of each quarter and must be accompanied by Form FBT2 while Provisional Tax is due by the 25th after the end of each quarter and must be accompanied by Form PTF1.
Annual returns
Annual returns are supposed to be submitted to MRA annually after 180 days from the accounting date of each taxpayer. For instance, self–assessment returns for large taxpayers under LTO and medium taxpayers under MTO. ITF1 for individual businesses and ITF12 for limited companies respectively.
What will happen to those who submit their tax returns late or not at all
Taxpayers who fail to meet their tax obligation to compile and submit their tax returns when due would be penalized accordingly.
For income tax such as PAYE, WHT and FBT, the penalty would be K300,000 for companies and K75,000 for individuals for the first month or part thereof. Any further delay for the above would attract MK50,000 for companies and K10,000 for individuals on top of MK300,000.00 for companies. And the MK75,000 for individuals or part thereof for the return that remains un-submitted. For VAT returns, a penalty of MK300,000 would be charged for companies and MK75,000 for individuals for the first month or part thereof and a further charge of MK50,000 for companies or MK20,000 for individuals for each month or part thereof for the return that remains un-submitted.
For Domestic Excise, late submission will attract a penalty of MK20,000 and MK1,000 for each additional day whereas failure to submit a return attracts a fixed penalty of MK100,000.
For Presumptive Tax, the penalty would be MK5,000 for the first day, MK250.00 each day the return remains un-submitted and 20% interest of the amount due plus 5% for any additional month.
Please, note that with effect from July 2017, the revised penalties on accruing or outstanding tax arrears are the taxes due plus 5% interest for each month the debt remains unpaid.
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