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Malawi

Zero-rated supplies

Zero-rated supplies include, but are not limited to:

  • exports of goods and services;

  • goods shipped as stores on aircraft and vessels leaving the territory of Malawi;

  • fertilisers;

  • sheath contraceptives;

  • exercise books;

  • laundry soap;

  • salt;

  • certain agricultural, horticultural, forestry and harvesting machinery;

  • motor vehicles for transport of goods;

  • pharmaceutical products;

  • buses with a seating capacity of 45 or more persons, including the driver;

  • military equipment;

  • building materials for factories and adjoining warehouses;

  • goods for use in tourism;

  • miscellaneous chemical products;

  • cycle ambulances;

  • motorcycle ambulances;

  • certain industrial and construction machinery;

  • goods for specialised use in dairy farming;

  • goods for specialised use in the fish farming industry;

  • goods for specialised use in the mining industry;

  • goods used in water supply;

  • goods used in electricity generation and distribution; and

  • goods for specialised use in telecommunication.

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PricewaterhouseCoopers

Zero-rated items, other than exports of goods and services and goods shipped as stores on aircraft and vessels leaving the territory of Malawi, are defined by reference to specific Customs Tariff Headings and Customs Procedure Codes. Reference should be made to the actual Customs Tariff Headings and Customs Procedure Codes to determine whether an item is zero-rated.

Input tax

Input tax allowed

A taxable person may deduct from the output tax due for a taxable period VAT on goods and services purchased in Malawi or goods and services imported and used wholly, exclusively and necessarily in the course of business.

Input tax expressly denied Input tax is not claimable:

  • where it relates to exempt supplies by the taxable person;

  • after the expiration of 12 months from the date the right to the deduction accrued;

  • in respect of motor vehicles or motor vehicle spare parts unless the taxable person is in the business of dealing in or hiring of motor vehicles or selling motor vehicle spare parts. However, motor vehicles and motor vehicle spare parts used wholly, exclusively and necessarily for the business qualify for input tax deduction;

  • in respect of entertainment, including restaurant meals and hotel expenses, unless the taxable person is in the business of providing entertainment; and

  • in respect of the personal element where the purchase is partly for business and partly for personal or other use.

The Value added tax Act empowers the Minister, by Order published in the Gazette, to prescribe other classes, types or description of goods and services on which input tax is not deductible.

During Malawi Revenue Authority tax audits, input tax claimed is sometimes disallowed and penalties charged on transactions such as residential property expenses incurred by employers and security costs at residential properties. The claiming of such input tax is not excluded by the Value added tax Act and no Order has been gazetted. If a taxpayer receives a claim for the recovery of input tax incorrectly claimed, and the expense does not fall within the categories above, the taxpayer is advised to request a copy of the relevant Gazette. If no Gazette is produced, the taxpayer may consider following the appeal procedures.

Partial exemption

Where a taxable person makes both taxable and exempt supplies, but cannot directly attribute the input tax to the taxable or exempt supplies, the taxpayer may deduct as input tax an amount that bears the same ratio to the total VAT incurred as the taxable supplies bear to the total supplies, applying an apportionment formula where:

  • the numerator is the (total amount of input tax for the period multiplied by the total amount of taxable supplies made by the taxable person during the period); and

  • the denominator is the total amount of all supplies made by the taxable person during the period.

If taxable supplies amount to less than 5% of total supplies, the taxpayer may not claim any input tax for the period.

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