MRA loses tax case against Siku

The Malawi Revenue Authority (MRA) has lost a case it wanted Siku Transport to pay a tax liability of nearly K1 billion, including penalties and interest.
At the climax of the tussle MRA garnished Siku’s bank accounts and debtors and also seized 100 motor vehicles to enforce assessment, but the vehicles were later released after negotiations.
Siku’s position as presented before Blantyre Magistrate’s Court was that the assessment MRA conducted in September 2012 did not distinguish between exempt supplies and zero-rated supplies.
The scenario, the court learnt, might have compelled Siku, represented by lawyer Kingsley Mapemba, to pay MRA twice in value for duty purposes (VDP) and value added tax (VAT).

But the VAT is paid by an importer and not a transporter, according to a tax expert Siku paraded in court as a witness, Emmanuel Kaluluma, a former employee of MRA but now running a tax consultancy firm.
Kaluluma told the presiding principal resident magistrate, Innocent Nebi, that at no point has the law mandated a transporter to charge or pay VAT on transportation service that is performed outside Malawi.
He went on to say that the insistence by MRA to charge Siku to pay VAT on such services had an impact on the consumers in Malawi since the importer would have been subjected to pay VAT twice on the same goods.
Bentry Khonje, a manager at MRA in Domestic Taxes Division, testified that MRA solely uses the VAT Act to administer VAT in Malawi and nowhere else.
Khonje admitted that in allowing the transporter to charge VAT on the invoice and also exposing the same under VDP, the importer would indeed pay twice on the VAT, but said there was no problem because the importer could claim back from MRA.
Khonje, nevertheless, said it is the legal responsibility of the importer to pay VAT on goods brought into Malawi and that no transporter is allowed to pay VAT at the border on behalf of the importer.
Delivering his judgement on Monday, magistrate Nebi observed that he was in agreement with Kaluluma’s observations that if that was allowed, the importer was going to pass that tax burden to the consumers and it would be tantamount to double taxation.
Said Nebi: “It is holding of this court that the respondent was not legally right in charging value added tax (VAT) twice on goods and services whose value added tax was already paid by the importer at the border.
“In the result, therefore, the applicant’s appeal succeeds, and the respondent’s assessment…cannot stand as there is no legal basis. It is accordingly set aside.”