Organization : Malawi Revenue Authority
Type of Facility : Register For VAT Value Added Tax
Country: Malawi
Website : http://www.mra.mw/
Value Added Tax (VAT):
VAT is a general tax on consumption expenditure that is levied on the ‘value added’ that has been created at various stages in the production and distribution chain. The standard rate for VAT is now 16.5%.
Related : MRA Malawi Revenue Authority Customs Declaration Process : www.statusin.org/8960.html
What is Value added?:
Value added is the difference between the business’s purchases of inputs and sales of output. Assuming that a business produces a carton of soap sold for K20, 000 from inputs such as soda, palm oil etc. bought at K15, 000, the value added would be K20, 000-K15, 000 = K5, 000.
VAT would be charged on this value (K5, 000) at a standard rate of 16.5%. Similarly, if a distributor sells one tonne of sugar at K200, 000 from a factory price of K160, 000 including expenses, value added would be: K200, 000-K160,000=K40,000. VAT is chargeable on this value (K40, 000) at a standard rate of 16.5%.
How is VAT collected?:
VAT is collected by registered businesses that act as agents of the Government at all points in the chain of production and distribution. These include manufacturers, wholesalers, retailers and service providers. When a registered supplier supplies taxable goods or services, he/she is required to charge VAT and issue a tax invoice, showing the VAT paid on those goods or services
Is VAT charged on imported services?:
VAT is also charged on imported services. The person/organization importing the service is mandated to account for the VAT and remit it to MRA.
When is the due date for remittance of VAT?:
A registered person who makes taxable supplies must charge VAT and remit to MRA by the 25th day of the month immediately following the month to which the return relates.
Who is liable to register for VAT?:
Any person who makes taxable supplies of goods or services and whose business turnover is estimated or exceeds K10 million per year is obliged to register for VAT. Registration for VAT can be done at any MRA Domestic Tax office nearer to the trader. When one is registered for VAT, he/she would be given a registration certificate, which must be displayed or exhibited permanently at the principal place of business.
When should a businessperson apply for VAT registration?:
Any businessperson who qualifies as a taxable person or has grounds to believe that he/she will qualify as a taxable person is liable to apply for registration to MRA. The person must apply to MRA for registration within 30 days of becoming liable or qualified to register for VAT
What should a registered person do after registering for VAT?:
When one is registered for VAT, he/she should start keeping business records of VAT paid and charged immediately after they are registered. These include records of all supplies made or received. For all purchases and sales, VAT invoices must be properly recorded and filed since they show the amount of VAT paid on the goods and services. In addition, all bills of entry for imported goods showing the amount of VAT paid must be recorded properly and filed. A summary of VAT paid and received for the period covered by the return should be maintained.
Can a firm register for VAT even if its taxable supplies fall below the K10 million per annum limit?:
One can register even if its taxable supplies are lower than K10 million. This is called voluntary registration.
For one to qualify for voluntary registration, he/she must:
1. Have a fixed place for conducting business
2. Keep proper accounting records for all transactions
3. Be in a position to file regular and reliable tax returns as required by the Law
What will happen to a businessperson who qualifies to register for VAT but does not do so?:
The businessperson will be liable to a penalty of K500,000 and imprisonment for five years upon conviction for deliberate or reckless failure to register or K200, 000 penalty for any other reason. In addition, the business or individual will be liable to pay the amount of tax not collected on taxable supplies made from the date the registration was due.
How can a taxpayer determine whether an item is taxable or not?:
All items are taxable at a standard rate of 16.5% except those listed on the 1st Schedule and the 2nd schedule. The 1st Schedule lists Exempt Supplies (No VAT charged). The 2nd Schedule lists zero rated supplies (where VAT is charged at zero rate)
Value Added Tax Invoices:
VAT invoices must be clearly identified as such with words “TAX INVOICE” displayed prominently on each invoice. Only VAT-registered persons are authorized to issue VAT invoices and no claim for Input Tax is allowable unless a Tax Invoice supports it. It follows that VAT-registered suppliers must issue a Tax Invoice for every supply made to a customer.
Features of a VAT invoice:
** The date of issue and serial number
** The name, address and taxpayer identification number of the supplier and the customer
** A clear description of the goods or services supplied including the quantity or the extent of the service provided
** The consideration for the supply, including the VAT due
** The type of transaction by reference to the following categories; sale; hire purchase; hire; lease or rental; exchange; goods and services supplied from the customer’s own supplies
** The VAT exclusive charge for each description of goods or services supplied
** The rate of VAT
** The total charge on the invoice, exclusive of VAT
Notice:
The Law relating to Value Added Tax is the VAT Act. This information is not intended to be a legal interpretation of the Act (regulations made there under) nor does it override any provision thereof.