Taxation of expatriates in Malawi
There is no special tax regime for expatriates in Malawi and individuals are taxable on their Malawian source income irrespective of where payment is made. Expatriates may be exempt from tax under the terms of a relevant double taxation agreement. The conditions that need to be met are usually that the expatriate should be in Malawi for less than 183 days in the tax year and remuneration is paid offshore.
Every non-resident employer is required to appoint a local resident agent for P.A.Y.E (Pay As You Earn) purposes. Work permits for expatriate staff will only be granted on condition that the employer is registered for P.A.Y.E through a resident agent.
National Pension Scheme contribution
A National Pension Scheme (NPS) managed by approved Pension Fund Administrators does operate in Malawi and can also apply to expatriates. Only those expatriates on Temporary Employment Permit who can produce written evidence that they are within a home country pension scheme are exempt.
Personal income tax rates
Malawian employers are allowed to use the Graduated Tax Table system for their payroll tax. This system requires that the employer deducts the payroll tax accurately such that the individual employees do not have to submit income tax returns for their employment income to the tax authorities at the end of the year unless they have other sources of income.
The Taxation Act provides for the taxation of fringe benefits granted in the hands of the employer in respect of services rendered.
With regard to employment relationship, fringe benefit means any asset, service or other benefit in kind, provided by or on behalf of an employer to an employee, if such provision includes an element of personal benefit to the employee. All employers except the government are liable to Fringe Benefit Tax (FBT). FBT is taxed at 30% of the taxable value of the fringe benefits being provided.
Taxable income of the individual is computed after considering amounts exempt from income tax and deductions allowable in terms of the Taxation Act. While taxable income from employment is subject to tax at various rates, income from trade or investment is subject to tax at an effective rate of 30%.
Expatriates working in Malawi temporarily or on a contract basis may import their personal effects into the county without any customs duty and VAT being levied. These include:
- Household effects and other movable articles,
- Equipment necessary for the exercise of a calling, trade or profession,
- Television and hi-fi sets and
- General household appliances.
All of these items must be imported for their personal use only, and must be brought within a period of six months from the date of entry into Malawi. These goods may also not remain in Malawi on a permanent basis and must be returned overseas upon departure of the expatriate, unless the foreign national obtains permanent resident status or citizenship in Malawi during the period of stay.