Minister of Finance and Economic Planning and Decentralisation Joseph Mwanamvekha yesterday introduced new tax measures meant to cushion low-income earners grappling with the high cost of living while broadening the tax net.
In his projected K8.589 trillion 2025/256 Mid-Year Budget Review Statement presented in Parliament, Mwanamvekha announced the zero pay as you earn (Paye) bracket will be increased from K150 000 to K170 000.
He said those earning between K170 000 to K1.57 million will be taxed at 30 percent while those in the bracket of K1.57 million to K10 million will be taxed at 35 percent and those earning K10 million above will be subjected to 40 percent rate.
The zero tax-free band increase comes amid calls for the same in the wake of the high cost of living that has impacted on buying power.
Mwanamvekha has further announced that the K100 000 and K500 000 thresholds for applying withholding tax on betting and lottery winnings have been removed, meaning all winnings will now be taxed.
“The withholding tax rate on gambling winnings will increase from 10 percent to 15 percent and the 15 percent excise tax applicable on gross lottery revenues will be fully enforced especially for radio stations and television stations,” said Mwanamvekha.
He further announced the change in threshold for taxable income on supernormal profits on companies.
He said the threshold for supernormal profit tax for companies will be reduced from K10 billion to K5 billion meaning company profits below K5 billion will continue to be taxed at the standard rate of 30 percent while profits of K5 billion and above will be taxed at 40 percent.
Further, government has reviewed the Value-Added Tax rate adjusting from 16.5 percent to 17.5 percent, a measure aimed at improving revenue collection in the country.
On enforcement on tax collection, Mwanamvekha said government has directed the Malawi Revenue Authority (MRA) to immediately enforce the collection of rental income tax on residential property, including a comprehensive registration exercise of landlords.
He said: “Government has observed that many residential property owners, particularly in the cities of Mzuzu, Lilongwe, Zomba, and Blantyre, collect significant rental income without paying taxes. As you are aware, there is withholding tax on rental income. However, due to implementation challenges, residential property owners have not been remitting the tax to the Malawi Revenue Authority, while most commercial property owners have been complying.
“To ensure that this directive is followed without delay, I would like to request Escom all the Water Boards, the Malawi Housing Corporation, the City Councils and the Ministry of Lands to cooperate with the MRA in providing the necessary information pertaining to the owners of residential properties in low density areas.”
Further, the finance minister said government noted with great concern the increasing tendency by many shops and businesses to avoid issuing VAT receipts when customers purchase goods or services.
He said moving forward, government will apply a heavy penalty against any shop owners or businesses found not issuing VAT receipts on their sales or services.
