Late payment of VAT incurs penalties of:
15% of the amount not paid; and
a further sum of 5% per month or part thereof for the period during which the amount remains unpaid.
A claim for a refund may be made if the return for three consecutive months shows that a refund is due. Such refunds are to be made within 30 days of receipt of the application for refund. In practice, it is very difficult to obtain a refund of VAT, and claims remain outstanding for years.
If exports exceed 70% of the taxpayer’s total supplies, the Commissioner General may refund the excess input tax within the accounting period. However, exporters suffer the same problems in obtaining the actual refund as other business entities.
Objections and appeals
A person dissatisfied with the decision of an officer, other than the Commissioner General, may appeal to the Commissioner General within 30 days of the notice of the decision being served on the taxpayer or the taxpayer becoming aware of the decision. The appeal must be in writing, detailing the grounds of the appeal and supported by relevant supporting documents.
The Commissioner General must decide on the appeal within 30 days of receipt of the appeal.
A person dissatisfied with the decision of the Commissioner General may appeal to any Court of a Resident Magistrate. The appeal must be lodged within 30 days of notification of the Commissioner General’s decision.
Unless given leave by the Court, no appeal will be heard unless all returns due have been submitted and all VAT assessed or due has been paid.
The VAT Act does not specify any appeal procedures where the taxpayer is dissatisfied with the Resident Magistrate’s decision. In such an event, taxpayers are advised to obtain immediate legal advice.
The maximum period for claiming input tax is 12 months from the date the deduction accrued.
Tax invoices A proper tax invoice should include:
name and address of supplier;
name and address of customer;
tax registration number;
description of supply; and
rate of VAT.
The VAT Act is silent about electronic invoicing. While there are no specific rules regarding the language on tax invoices, English is normal for business transactions. Prices are often quoted in foreign exchange, with the amount being payable in Malawi Kwacha.
A tax invoice may be issued by the supplier (principal) or the agent, but the supplier retains responsibility.
Credit notes and debit notes
The original tax invoice may be incorrect where:
the supply is cancelled;
the nature of the supply was
fundamentally varied or altered;
the previously agreed consideration for the supply has been altered by agreement with the recipient of the supply; or
goods or services or part thereof have been returned.
Where a tax invoice has been issued and the amount shown as VAT charged on the tax invoice exceeds the VAT properly chargeable in respect of the supply, the taxable person making the supply must issue a credit note to the recipient of the supply.
Where a tax invoice has been issued and the VAT properly chargeable in respect of the supply exceeds the amount shown as VAT charged on the tax invoice, the taxable person making the supply must issue a debit note to the recipient of the supply.
Every taxable person is required to keep such records and books of accounts as the Minister may prescribe. These records and books of account must be produced at such place and time as the Commissioner General may require. They may be kept in electronic or scanned format, but original documents may be required at the request of the authorities.
The records must demonstrate adequately:
the completeness of supplies and accuracy of related VAT;
the entitlement to claim and accuracy of any VAT claimed.
The records and books may not be destroyed within a period of less than six years. They may be kept outside Malawi, as long as they can be produced in Malawi when necessary.