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Inside Malawi’s 2024/25 fiscal plan: Take away home, taxes, allocations

LILONGWE-(MaraviPost)-The Minister of Finance Simplex Chinthyola Banda on Friday, February 23, 2024, presented the MK5.98 trillion national budget representing 31.9% of GDP.

Here are key hights of the budget:

1. Wages and Salaries

The wages and salaries are projected at mK1.08 trillion representing 5.7 percent of GDP. The wages and salaries estimates have also incorporated resources for recruitment amounting to K6 billion and mK70 billion reserved for general salary increment

2. Pensions and Gratuities

Pensions and Gratuities have been projected at MK193.17 billion while Government Contributory Pension Scheme has been allocated MK46.75 billion.

3. Maize Purchases and Allocation to ADMARC

MK12.0 billion has been allocated for maize purchases by the National Food Reserve Agency to replenish the Strategic Grain Reserves.

ADMARC has also been allocated MK40 billion for operations and revamping agricultural production and value addition

4. Affordable Inputs Programme

MK161.28 billion has been made for the Affordable Inputs Programme (AIP).

5. Environment and Climate Change Management

MK20.55 billion has been allocated to this sector.

6. Health and Population Sector

In the 2024/2025 Financial Year, the Health and Population sector has been allocated MK729.47 billion, representing 12.2 percent of the total national budget.

7. Transport and ICT Infrastructure sector

In the 2024/2025 Fiscal Year Government has allocated resources amounting to MK439.64 billion towards the
Transport and ICT Infrastructure sector, representing 7.4 percent of the national budget.

8. Lands and Housing sector

The government has allocated MK30.91 billion towards the Lands and Housing sector.

9. Local Councils

MK38.6 billion under the Constituency Development Fund, translating to MK200 million per constituency.
ii. MK6.19 billion for the District Development Fund.
iii. MK20.1 for the Construction of City Roads.
iv. MK2.3 billion for the construction of water structures under the Water Resources Fund, translating to K12 million per constituency.
v. MK922 million for the infrastructure Development fund.
vi. MK14 billion for the Rehabilitation of the District Hospital and
vii. MK36.88 billion under the Governance to Enable Service Delivery Project

TAX POLICY MEASURES FOR THE 2024/2025 BUDGET

Effective midnight February 24, 2024 Customs and Excise tax measures come into force, while Value Added Tax (VAT), Income Tax, and Administrative Measures will take effect on 1st April 2024 upon the passage of relevant Bills by this August House and assertion by President Lazarus Chakwera.

Customs Measures

In this Fiscal Year, the Government removed import duties and taxes on electric motor vehicles and materials used for the construction of electric motor vehicle charging stations to reduce demand for fossil fuels and their negative impact on climate.

The Government is removing import duty and import excise tax on electric motorcycles. However, the standard rate of Value Added Tax (VAT) will be applicable on both electric motor vehicles and electric motorcycles in line with good practice in VAT Administration.

The government will start waiving import duty and import excise tax on building materials, furniture, and
fittings specifically for the construction of hostels for students in tertiary institutions.

As one way of encouraging value addition and promoting local manufacturing, the government is:
i. Allowing the Malawi Army, Malawi Police Service, and Malawi Prisons to import duty-free fabrics and accessories for making uniforms under the Customs Procedure Code (CPC) 421.
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ii. Increasing import duty on finished iron sheets of tariff subheading 7210.49.90 from 15 percent to 25 percent.
iii. Increasing import duty for sacks of tariff subheading 6305.33.00 from 20 percent to 25 percent; and
iv. Introducing a surcharge of 10 percent on sacks for cement packaging.

As one way of broadening the tax base, the Government is Introducing import duty of 5 percent and 10
percent Excise Duty under tariff subheading 8802.30.00 which covers airplanes and other aircraft of an un-laden weight exceeding 2,000 kg but not exceeding 15,000 kg and similarly petroleum jelly under HS code 2712.10.00 will now attract excise tax of 10 percent

To ensure that tax benefits are enjoyed within a specific period and prevent abuse, the Government is restricting the duty-free importation of building materials under CPC 442 for the tourism sector to 3 years, subject to an extension
of 2 years at a 50 percent rate of the normally applied Import Duty and Excise Duty while VAT will be paid at the normal rate of 16.5 percent. Furthermore, duty-free importation of building materials for repairs under this CPC will not be allowed.

Abuse of duty-free institutional motor vehicles or other motor vehicles that are cleared at concessionary rates by some individuals who are not beneficiaries.

To control this abuse, the Government is introducing a new note (note 12) in the law stating that all institutional motor vehicles that are cleared under any Customs Procedures Code of the Customs and Excise (Tariff) Order (CPC) should conspicuously and indelibly bear the name of the institution on both sides of the vehicle before issuance of a Customs Clearance Certificate (CCC).

The CPCs to be affected by this change are 422 for Lorries, pickups, and vans specifically acquired for church and other religious institutions use; 437 for passenger-carrying motor vehicles for educational, health, tourism institutions, and NGOs; 438 for Goods-carrying motor vehicles for horticultural enterprises, educational, health, and tourism institutions and NGOs; 439 for 58 Passenger vehicle for NGOs; 450 for passenger-carrying motor vehicles for hotels, Inns, Lodges and Conference Centers; 451 for specialized vehicles for safaris, hotels, lodges Inns; and 452 covering one bus with a seating capacity of 26 or more for churches and similar religious institutions.

Excise Tax Measures

As one way of promoting the use of locally sourced raw materials for production and promoting local farmers,
The government is reducing the excise tax on clear beer made from sorghum and maize from 40% to 20%.

Income Tax Measures

To cushion employees in formal employment from the effects of the currency alignment, the Government has
increased the zero Pay As You Earn (PAYE) bracket from MK100,000 to MK150,000. Accordingly, the new monthly PAYE structure will be as follows:
i. First MK150,000 will be taxed at 0 percent.
ii. next MK350,000 will be taxed at 25 percent.
iii. next MK2,050,000 will be taxed at 30 percent; and
iv. excess of MK2,550,000 will be taxed at 35 percent.

The government is reducing the withholding tax (WHT) for mobile money agents from 20 percent to 1 percent.
This is being done to align with the prevailing Withholding Tax rate for banks and insurance agents, which is at 1 percent.

In addition, most of the mobile money agents do not make enough money to pay Personal Income Tax as their income falls below the minimum threshold of paying Personal Income Tax.

In this Fiscal Year, the Government introduced an additional 10 percent corporate income tax for bank profits above MK10 billion. This was done to generate additional revenue for reconstruction works in areas that were catastrophically damaged by the cyclone Freddy.

However, the Government recognizes that other sectors make similar profits as the banking sector. Accordingly, the Government is extending the application of the additional 10 percent corporate income tax on profits above MK10 billion to all businesses that make such profits to ensure equal and fair treatment of super-normal profits.

To align with the 15 percent tax rate on investment of pension funds, the Government is reducing the withholding tax on interest realized from investments of life assurance from 20 percent to 15 percent.

Further, the Government is amending paragraph (i) of the Eleventh Schedule to clarify that the 15 percent income tax rate on pension funds only applies to the return on investment of pension funds and not on the income
of the Pension Fund Managers which attracts 30 percent of corporate income tax.

Currently, Minibus Owners pay a flat rate of Presumptive Tax as part of their Income Tax obligations, regardless
of the seating capacity of the Minibus.

For instance, minibusses with a seating capacity of 14-16 seats pay the same amount of income tax. The seating capacity of any commercial motor vehicle is a more logical variable for calculating Income and therefore the amount of tax obligation.

The government will amend Section 91B of the Taxation Act to change the application of Presumptive Tax on commercial passenger motor vehicles to be based on seating capacity.

Consequently, Commercial Passenger Motor Vehicles under the Presumptive Tax regime will be required to pay a tax of MK5,000 per seat per year.

Value Added Tax Measures

The government is introducing a requirement to issue tax invoices by VAT-registered taxpayers even
when they sell exempt supplies by amending Section 25 (1) of the VAT Act.

Lloyd M’bwana
Lloyd M’bwanahttps://www.maravipost.com
I'm a Lilongwe University of Agriculture and Natural Resource (LUANAR)'s Environmental Science graduate (Malawi) and UK's ICM Journalism and Media studies scholar. Also University of Malawi (UNIMA) Library Science Scholar. I have been The Malawi Country Manager and duty editor for the Maravi Post since 2019. My duty editor’s job is to ensure that the news is covered properly, that it is delivered on time, and that it is created to the standards set out in the editorial guidelines of the Maravi Post.
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