‘Advance income tax could hurt businesses’

GONDWE—This can affect the cash flow of

Finance and taxation experts have lamented the introduction of Advanced Income Tax (AIT) law, saying it will hurt cross-border traders, especially those in small-scale bracket.

From May 1, cross-border traders who are not registered with the Malawi Revenue Authority (MRA) are required to be paying a three percent advance customs and excise value duty on their goods at the port of entry into Malawi.

This comes at a time the revenue collection body has moved to implement the Advance Income Taxation (ATI) on imports in line with the Customs and Excise (Tariffs) Amendment Order of 2021.


Under the provision, advance income tax will be computed at entry and deducted at the rate of 3 percent of the Value of Duty Purpose (VDP).

In an interview Wednesday, Institute of Chartered Accountants in Malawi (Icam) Chief Executive Officer Francis Chinjoka Gondwe said although the provision will help government maximise revenue collection, it could affect cashflow of businesses.

“Nevertheless, the advanced income tax could be more than applicable tax on business and this can affect the cashflow of businesses, meaning that the business might not have cashflow immediately until there is a refund at the end of the year,” he said.


But revenue collection body, the Malawi Revenue Authority (MRA), last week said the tax will not be imposed on imports that are meant for personal use, for businesses of registered taxpayers who are already issued with a valid Tax Clearance Certificate or Withholding Tax Exemption certificate and for government ministries, departments and agencies.

In a separate interview, taxation expert Emmanuel Kaluluma indicated that the rate of the tax is high and not in line with circumstances where a business has not made profit from the goods imported.

He is of the view that government should consider reducing the rate percentage just like it has done with withholding tax of tobacco growers.

“Government has no idea on whether that person is going to make profits or not because in business, sometimes when goods are slow selling you just want to sell them. So this type of taxation is challenging under such circumstances,” he said.

According to a public notice from MRA, signed by Commissioner General John Biziwick, the tax is withheld on commercial imports which are goods imported by persons engaged in business activities and these goods are not intended for personal, family or home usage.

“AIT is not a final tax and a tax refund could be given if the total advance income tax paid by the importer at the end of the year is more than the applicable tax on profits of the business,” the notice reads.

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