Taxation Act

1. Short title This Act may be cited as the Taxation Act.

2. Interpretation of certain general terms In this Act , unless inconsistent with the context— “ adjusted basis ”, in relation to an asset, means the basis of the asset— (a) in case of corporate shares, other than additional shares, increased by the amount of any contributions to the capital of the corporation made by the taxpayer who owns such shares; (b) in any other case, reduced by the amount of the initial allowance, investment allowance or annual allowance given to the taxpayer in respect of the asset, or increased by the cost of improvements and additions, excluding maintenance or repair costs, made to the asset by the taxpayer ; “ agent ” includes any partnership, company or any other body of persons, corporate or unincorporated, when acting as an agent; “ amount realized ”— (a) in the case of disposal of an asset by sale for cash, means the case received or contracted to be received; (b) in the case of an exchange of the asset for other property, means that open market price of such other property received on the date of the exchange; (c) in the case of an asset which is subject to a debt which is forgiven or assumed by another upon disposal of the asset, includes the amount of such debt; and (d) in the case of an asset disposed of without any consideration, including disposal by gift, bequest or as a corporate distribution with respect to shares, means the open market price of the asset so disposed of on the date of disposal ; “ assessable income ” means assessable income as defined in section 11 ; “ assessed loss ” means any amount by which the amounts allowed to be deducted under Part III, Division 2, and Part IV, from assessable income (as defined in Part III, Division 1) of any person exceed such income ; “ basis ”, in relation to an asset, means (except as otherwise specified in this Act )— (a) in the case of an asset purchased or constructed by the taxpayer , the cost of that asset; (b) in the case of any other asset, the open market price of the asset on the date of its acquisition by the taxpayer : Provided that the basis of any capital asset held by the taxpayer , other than an asset used in trade or business and in respect of which an initial allowance, investment allowance or annual al­lowance has been granted under this Act , shall— (i) be equal to its basis as determined in paragraph (a) or (b) adjusted by the consumer price index, published by the Na­tional Statistical Office at the date of disposal of the asset and applicable to the year in which the purchase or the construction of the asset was effected or completed, as the case may be; or (ii) where the taxpayer so opts, be equal to the valuation value as of April 1, 1992, which was submitted to and accepted by the Commissioner by 30th September, 1995, adjusted by the Consumer Price Index published by the National Statistical Office at the date of disposal of the asset; [10 of 1993; 6 of 2005; 13 of 2006; 7 of 2007] “ beneficiary with a vested right ” in relation to income the subject of a trust created by a trust instrument , means a person named or identified in the trust instrument who has at the time the income is derived an immediate certain right to the present or future enjoyment of the income ; “ business asset ” means an asset which is used or is held ready for use in a business, and includes any asset which is held for sale in a business, but does not include shares, treasury bills, bonds, debentures and any other investment assets; [17 of 2012] “ capital asset ” means all property held by the taxpayer , whether or not connected with a trade or business, excluding— (a) stock in trade and property held primarily for sale to cus­tomers in the course of business, including timber and crops or other plants grown primarily for sale; and (b) receivable accounts or notes acquired in the course of busi­ness in exchange for services rendered or property described in paragraph (a); “ capital gain ” means the excess of the amount realized on disposal of a capital asset over its adjusted basis or, where there is no adjusted basis , over its basis ; “ capital loss ” means the excess of the adjusted basis , or where there is no adjusted basis the excess of the basis , of a capital asset over the amount realized on disposal of the capital asset ; “ child ” includes a step-child, a lawfully adopted child, and a child for whom by custom an individual is responsible; “ collector ” means a person other than a tax authority to whom the Commissioner has delegated any of the functions conferred or imposed upon the Commissioner by this Act ; “ company ” includes any association wheresoever incorporated; “ disposal ” in relation to an asset, means the transfer of ownership of the asset by any means whatsoever, including, but not limited to, sale, gift, bequest, distribution or exchange; “ dividend ” means any distribution, whether in cash or in property by a company to a shareholder thereof with respect to the shareholder”s interest in the company , other than distributions in complete liquidation of the company or bonus shares as described in section 70C and for purposes of this Act the existence of a dividend shall be determined without regard to whether or not the company has current or accumulated profits; [10 of 1993] “ earnings ” means the total amount in cash paid at a rate which does not exceed K1,400 per annum received by or accrued to or in favour of an employee in respect of work done or services rendered in Malawi, and whether paid or payable daily, weekly, monthly or at other intervals, including any cash paid in lieu of notice to terminate employment, but excluding any amount received as a war disability pension or widow’s war pension, or as an old age pension paid out of public funds or as an award, benefit, or compensation paid under any written law in respect of injury, disease or disablement suffered in employment. “ employee or employed person ” means any person who has entered into or works under a contract or agreement, expressed or implied, oral or written, for any work or labour whatsoever; “ employer ” includes any person or public authority who pays a wage or salary to an employee in Malawi; “ foreign currency ” means a currency other than the Malawi currency ; “ foreign currency asset ” means an asset denominated in, or the amount of which is otherwise determined by reference to, a foreign currency and includes the notes and coins of such foreign currency ; “ foreign currency liability ” means a liability denominated in or the amount of which is otherwise determined by reference to a foreign currency and includes the notes and coins of such foreign currency ; “ foreign exchange gain ” or “foreign exchange loss” means the amount determined in accordance with section 26 ; “ fringe benefit ” means any asset, service or other benefit in kind provided by or on behalf of an employer to an employee, if such benefit includes an element of personal benefit to the employee; and “ fringe benefits tax ” means tax payable by employers as provided in section 94A . “ functions ” includes powers and duties; “ income ” means income as defined in section 11 ; “ income tax ” means tax payable under this Act ; [18 of 1998] “ income the subject of a trust to which no beneficiary is entitled ” means income the subject of a trust created by a trust instrument which— (a) is not paid to or applied to the benefit of— (i) a beneficiary with a vested right ; or (ii) a person who would but for— (A) the conferment on the trustee by the trust instrument of a discretion so to pay or apply the income ; and (B) the happening of some event stipulated in the trust instrument other than the exercise of that discretion, be a beneficiary with a vested right ; or (b) is not income deemed by virtue to section 72 to have been received or have accrued to or in favour of the person by whom the trust instrument was made; or (c) is not accumulated in terms of the trust instrument for the future benefit of a beneficiary with a vested right ; “ insolvency and bankruptcy ” shall be construed in accordance with any enactment in force in Malawi relating to insolvency and bankruptcy and as including an assignment to or arrangement or composition with creditors made in terms of any enactment in force in Malawi relating to those matters and “insolvent” and “bankrupt” shall be construed accordingly; “ involuntary conversion ”, in relation to an asset, means the conversion of an asset by whatever means which, in the opinion of the Commissioner, is beyond the control of the taxpayer , including, but not limited to, destruction in whole or in part, theft, seizure, requisition, condemnation, or threat or imminence of destruction, seizure, requisition or condemnation; [2 of 1994] “ Malawi currency ” has the meaning assigned thereto in the Reserve Bank of Malawi Act; [Cap. 44:02] “ married woman ” means a woman married by a law or by custom, who is not a woman referred to in paragraphs (c) and (d) of the definition of “ spouse ”; “ mineral ” includes any valuable crystalline or earthly substance forming part of or found within the earth and produced or deposited there by natural agencies but does not include any clay (other than fire-clay), gravel, sand, stone (other than limestone) or other like substance ordinarily won by the method of surface-working known as quarrying; “ mining operations ” means— (a) any operations for the purpose of winning a mineral from the earth; (b) any operations for the purpose of winning a mineral from any substance or constituent of the earth which are carried on in conjunction with operations referred to in paragraph (a) by the person carrying on those operations; and (c) such operations for the purpose of winning a mineral from any substance or constituent of the earth which are not carried on in conjunction with operations referred to in paragraph (a) or by a person carrying on those operations as the Commissioner may determine to be mining operations for the purposes of this Act ; and “mine” whether used as a noun or a verb, shall be construed accordingly; “ minor child ” means a child who is under twenty-one years of age and is unmarried; “ open market price ”, in relation to an asset, means the price which the asset would fetch if sold on the open market at the time of the event in question; “ parent ” includes a person liable at law or by custom to maintain a child ; “ pension fund ” means— (a) a superannuation, pension, widows’ or orphans’ fund established by any enactment whatsoever, whether in force in Malawi or elsewhere; (b) a scheme or fund, other than a fund defined in paragraph (a), which the Commissioner approves or is deemed to have approved as a pension fund under section 65 ; “ period of assessment ” means any period in respect of which any tax leviable under this Act is chargeable and includes for the purposes of the charging, levying and collection of tax in respect of any period ended on or before the 3lst day of March, 1963, any period in respect of which tax was chargeable under the Income Tax Act, of the former Federation of Rhodesia and Nyasaland; [16 of 1954 (F)] “ permanent establishment ” includes an office or other fixed place of business through which business activity is carried on; [12 of 1987] “ person ” includes an individual, a partnership, a company , a corporation, a trust, a club, a society, an organization, a public authority and an association; [18 of 1998] “ person resident in Malawi ” includes— (a) any individual present in Malawi for an aggregate of 183 days or more in any twelve months period commencing or ending in the year of assessment concerned; [29 of 2010] (b) any trust, estate or partnership established or otherwise organized under any written law of Malawi; and (c) any company incorporated in Malawi; [12 of 1987] “ previous law ” means any law relating to income tax applicable in the former Nyasaland, or the former Federation of Rhodesia and Nyasaland, or in Malawi, which was in force before the coming into operation of this Act ; “ provident fund ” means a fund approved by the Commissioner as a provident fund under section 65 ; “ spouse ” does not include— (a) a husband who is separated from his wife under a judicial order or written agreement of separation; or (b) a husband who— (i) is living apart from his wife; and (ii) is not wholly maintaining his wife; or (c) a wife who is separated from her husband under a judicial order or written agreement of separation; or (d) a wife who— (i) is living apart from her husband; or (ii) is not wholly maintained by her husband; “ statutory corporation ” means a body, other than a private society, incorporated by or in terms of a law in force in Malawi for special purposes specified in or under the law; “ tax ” or “the tax” means the appropriate tax payable under this Act ; “ taxpayer ” means any person chargeable with tax , and, for the purposes of any provision relating to any return, includes every person required by this Act to furnish such return; “ taxable income ” means income as defined in section 28 and is assessable income after deduction of allowable deductions; “ this Act ” includes any rules made under this Act; “ trade ” includes every profession, trade, business, employment, calling, occupation, or venture, including the letting of any property; “ trustee ” includes— (a) the administrator or executor of a deceased estate; and (b) the trustee of an insolvent or bankrupt estate or assignee, person having the conduct of an order of composition or trustee under a deed of arrangement in an insolvent or bankrupt estate; and (c) the legal representative of any individual under a legal disability or other person having, whether in an official or private capacity, the possession, disposal , control or management of the property of an individual under a legal disability; and (d) the person having the administration or control of property subject to a usufruct , fidei-cummissum or other limited interest; and “trust; ”, “property the subject of a trust” and “ income the subject of a trust” shall be construed accordingly; “ trust instrument ” means a deed, will, contract of settlement or other disposition, including a verbal declaration, by which a trust is created; “ withholding tax ” means the amount of tax deductible under section 102A ; [1 of 1985] “ year of assessment ” means any period of twelve months in respect of which the tax leviable under this Act is chargeable. [12 of 1987; 1 of 1990; 1 of 1991; 7 of 1992; 10 of 1993; 2 of 1994; 18 of 1998; 6 of 2005; 13 of 2006; 7 of 2007; 29 of 2010; 17 of 2012]

3. Commissioner of Taxes (1) There shall be constituted the office of Commissioner of Taxes (hereinafter referred to as “the Commissioner”) which shall be a public office the holder of which shall be charged with the general administration of this Act . (2) The Commissioner shall at all times conform with the general directions of the Minister. [G.N. 194/1967]

4. Delegation of functions by Commissioner (1) All officers appointed for the purpose of carrying out this Act shall be under the direction and control of the Commissioner and shall perform such duties as the Commissioner may direct, and the Commissioner may, in writing and subject to such limitations as he may think fit, delegate to such officers or to any administrative officer any of the functions conferred or imposed on him by this Act . (2) Nothing in this section shall be deemed to confer upon any person other than the Commissioner any of the functions of the Commissioner under this section or section 5 or to prevent the exercise of any function by the Commissioner in person and the Commissioner shall have in relation to any act of any other officer the same powers as if the act had been done by himself. (3) Any reference in this Act to the Commissioner shall be deemed to include in respect of matters as to which any other officer has exercised any function conferred upon him by this Act a reference to that other officer. [14 of 1969]

5. Report by Commissioner (1) The Commissioner shall furnish to the Minister annually for presentation to the National Assembly a report on the working of this Act . (2) In such report the Commissioner shall draw attention to any breaches or evasions of this Act which have come under his notice.

6. Officers to observe secrecy (1) For the purposes of this section, “officer” means a person who is or has been appointed or employed by the Government, and who by reason of that appointment or employment, or in the course of that employment, may acquire or has acquired information respecting the affairs of any other person , disclosed or obtained under this Act or any previous law and shall include a Special Arbitrator and any assessor appointed under section 98 (3). [14 of 1969] (2) Subject to this section, every officer shall preserve and aid in preserving secrecy with regard to all matters that may come to his knowledge in the performance of his duties in connexion with this Act , and shall not communicate any such matter to any person whomsoever other than the taxpayer concerned, or his lawful representative, nor suffer or permit any person to have access to any records in the possession or custody of the Commissioner except in the performance of his duties under this Act : Provided that the Commissioner may prepare and publish statistics showing the total amount of income or taxable income received by any class or classes of persons from all or any particular sources during any year of assessment as declared in returns made to the Commissioner. (3) No officer appointed or employed in carrying out this Act shall be required to produce in any court any return, document or assessment or to divulge or to communicate to any court any matter or thing coming under his notice in the performance of his duties under this Act except as may be necessary for the purposes of carrying this Act into effect or for the purpose of any prosecution for an offence committed in relation to any tax on income : Provided that nothing in this provision shall prevent such officer from being required to disclose such information relating to any taxpayer as that taxpayer may request or authorize to be disclosed. (4) Where any agreement or arrangement with any other country with respect to relief for double taxation of income or profit includes provision for the exchange of information with that country for the purpose of implementing that relief or preventing avoidance of tax , the obligations as to secrecy imposed by this section shall not prevent the disclosure of such information to the authorized officers of the Government of such country. (5) Notwithstanding anything contained in this section the Commissioner shall permit the Auditor General or any officer duly authorized in that behalf by the Auditor General to have such access to any records or documents as may be necessary for the performance of his official duties and the Auditor General and any such officer shall be deemed to be an officer employed in carrying out this Act for the purposes of this section. (6) The Commissioner and every officer shall, before acting under this Act , take and subscribe, before a magistrate or commissioner for oaths, the appropriate oath of fidelity or secrecy set out in the Ninth Schedule. (7) Every person who, in contravention of this section or of the true intent of the oath of fidelity or secrecy taken by him and without lawful excuse, reveals to any person whomsoever any matter or thing which has come to his knowledge in the course of his official duties, or suffers or permits any person to have access to any records in the possession or custody of the Commissioner, shall be liable to a fine of K1,000 and to imprisonment for two years. [10 of 1993] (8) Any person who acts in the execution of his office before he has taken the oath prescribed in terms of this section shall be liable to a fine of K20. [10 of 1993]

7. Forms The Commissioner may from time to time approve the form of returns, claims, statements, notices and all such other forms as may be required for the administration of this Act . [14 of 1969]

8. Service of documents Any notice or document required or authorized under this Act to be served upon any person shall be sufficiently and effectively served— (a) if personally served upon him; or (b) if left with some adult person apparently resident at, occupying, or employed at his last known abode, office or place of business in Malawi; or (c) if sent by post addressed to such last known place of abode, whether inside or outside of Malawi, office or place of business, or to any post office box rented in the name of such person or the employer of such person , in which case the term “post” means registered or unregistered post and, unless the contrary is proved, the service shall be deemed to have been effected at the time at which the notice would be delivered in the ordinary course of post; (d) if affixed at such last known place of abode, office or place of business in which case such person shall be deemed to have received the notice or document on the fourteenth day after the affixing.

9. Service of oral notices (1) Where a collector is of the opinion that by reason of the illiteracy or infirmity of any person , such person would not understand the meaning of any written notice, request, advice, decision, form or other document, he may direct that the substance of such document shall be communicated to such person in such manner as he may deem fit and section 8 shall not apply. (2) A certificate in the prescribed form by any Chief, Sub-Chief, village headman, or by a messenger in the public service or in the employment of a Chief or a local authority that, in accordance with the direction of a collector , the effect of any such document has been communicated to such person shall be admitted as evidence that such communication was made on the date specified on the certificate without proof of the signature of the person signing it.

10. Validity of documents (1) Notices given by the Commissioner under this Act may be signed by any officer authorized by him on his behalf and any notice purporting to be signed by order of the Commissioner shall be as valid and effectual as if signed by himself. (2) Every form, notice, demand, or other document issued or given by or on behalf of the Commissioner or any other officer authorized under this Act shall be valid if the name of the Commissioner or officer by whom the same is issued or given is printed or written thereon. Part III – Income Division 1—Determination of assessable income

11. Income and assessable income The income of a person shall include the total amount in cash or otherwise, including any capital gain , received by or accrued to or in favour of the person in any year or period of assessment from a source within or deemed to be within Malawi and his assessable income shall be that income excluding any amount exempt from tax under this Act . [7 of 1992]

12. Special circumstances in which income deemed to have accrued (1) Income shall be deemed to have accrued to a person notwithstanding that such income has been invested, accumulated or otherwise capitalized by him or that such income has not been actually paid over to him but remains due and payable to him or has been credited in an account or re-invested or accumulated or capitalized or otherwise dealt with in his name or on his behalf, and a complete statement of all such income shall be included by any person in the returns by him under this Act . (2) Income, other than earned income (as defined in section 73 ), received by or accrued to or in favour of a married woman shall be deemed to be income received by or accrued to or in favour of her husband. [1 of 1995]

13. Exemption (1) There shall be exempt from tax all that income specified in the First Schedule. (2) Where any income is exempt from income tax , the exemption shall be limited to the specified or original recipient of the income and shall not extend to persons receiving payments from that recipient, although the payments may be made wholly or in part out of that income . (3) The exemption of any income from income tax shall not exempt any person from furnishing any return or information which is required by the Commissioner. 14. *** [repealed by 17 of 2012]

15. Non-recognition of capital gain or capital loss in certain cases (1) No capital gain and no capital loss shall be recognized for the purposes of this Act in respect of the transfer of any capital asset — (a) between spouses; or (b) between former spouses; or (c) to a spouse from the estate of a deceased spouse ; or (d) to a child from the estate of a deceased parent , and the adjusted basis , if any, of such asset in the hands of the transferor shall be the basis of the asset in the hands of the transferee. (2) No capital gain and no capital loss shall be recognized upon the disposal of the principal residence of an individual and for this purpose an individual shall be taken to have not more than one principal residence at a time, and the determination of the Commissioner with respect to any issue relating to the principal residence of an individual shall be final. [10 of 1993; 5 of 1997] [7 of 1992; 10 of 1993; 5 of 1997; 13 of 2006]

15A. Involuntary conversion of assets (1) Where an asset of a taxpayer is involuntarily converted— (a) into an asset similar to, or related in service or use to, the asset so converted, no capital gain shall be recognized; (b) into an asset not similar to, or related in service or use to, the asset so converted, or into money, capital gain , if any, shall be recognized, subject to subsections (2) and (3). (2) Where a taxpayer whose asset has been involuntarily converted makes a valid and timely election and timely acquires an asset that is similar to, or related in service or use to, the asset so converted (hereinafter referred to as the “qualifying replacement asset”), capital gain , if any, shall be recognized only to the extent that the amount realized as a result of such conversion exceeds the cost of the qualifying replacement asset. (3) The election by a taxpayer whose asset has been involuntarily converted to limit any capital gain recognized as a result of such conversion shall be valid if the taxpayer , in a timely filed income tax return for the taxable year during which the conversion occurred— (a) briefly describes the type of involuntary conversion ; (b) identifies the asset so converted; (c) indicates the adjusted basis of the asset; and (d) states an intention to acquire a qualifying replacement asset. (4) For purposes of the section— (a) the acquisition of a qualifying replacement asset shall be timely if such acquisition is made within two years after the close of the first year of assessment in which any part of capital gain is realized; (b) the basis of— (i) a qualifying replacement asset received in the conversion shall be the adjusted basis of the asset so converted, less the open market value of any other asset and any money received by the taxpayer that was not spent on the qualifying replacement asset, plus any capital gain or less any capital loss recognized upon such conversion; (ii) an asset received in the conversion that does not qualify as a replacement asset shall be equal to its open market value; (iii) a qualifying replacement asset shall be equal to its cost less the amount of any capital gain not recognized. (5) Subject to the provisions of this Act , where the basis of the qualifying replacement asset exceeds the adjusted basis of the replaced asset, the investment allowance or the initial allowance shall be claimable on the difference. (6) This section shall not apply to motor vehicles not used in the business of transporting passengers or goods. [2 of 1994]

15B. Capital gains on disposal of business assets (1) Subject to subsection (2), no capital gain shall be recognized on the disposal of a business asset , if the gain has been used to acquire a qualifying replacement asset similar to, or related in service or use to, the asset so disposed. (2) The taxpayer whose business asset has been disposed of, shall acquire the qualifying replacement asset within eighteen (18) months from the date the disposal occurred and shall declare in his return of income . [13 of 2006; 7 of 2007]

16. Income— payments for services* (1) The income of a taxpayer shall include any amount received or accrued in respect of services rendered or to be rendered whether due and payable under any contract of employment or service or not including any contract gratuity. (2) For the purposes of this section— “contract gratuity” means a gratuity paid under a written contract of employment upon expiry, termination, renewal or extension of such contract, which is paid to an employee who is not during such employment a member of a pension fund other than a pension fund to which he is a voluntary contributor and in respect of which no contributions are payable by his employer out of which a pension will be paid to such employee in respect of such employment. [18 of 1968] (3) No amount paid as a contract gratuity by an employer other than the Government shall be excluded from the assessable income of a taxpayer , unless the provision of the contract providing for the payment of such contract gratuity is similar to and comparable with such provision in contracts between the Government and its employees and has been approved by the Commissioner. The Commissioner shall not approve any provision for the payment of a contract gratuity contained in a contract entered into between a company and any person other than a person — (a) whose time, in the opinion of the Commissioner, is wholly or almost wholly occupied in the service of the company ; and (b) who is unable either directly or indirectly to control more than five per centum of the voting rights attaching to all classes of shares of the company . [29 of 2010] *See section 3 of Act No. 11 of 1966 for transitional provisions in respect of 14 of 1969 contract gratuities in the year of assessment ended 31st March, 1966, and between 1st April and 31st December, 1966.

17. Assessment to tax for single terminal A single terminal payment to an employee in lieu of paid leave shall be assessed to tax as if such leave had been taken by the employee immediately after cessation of employment and after he had been paid accordingly. [17 of 2012]

18. Sums payable by an employer for expenses of an employee Any sum paid by an employer to an employee in respect of ex­penses shall be treated as a prerequisite of the office or employment of that employee and shall be included in the employee’s assessable income : Provided that the employee may claim as a deduction the amount of any such payment as is expended by him wholly and exclusively in performing the duties of his office. [1 of 1991] 19. *** [repealed by 1 of 1991] 20. *** [repealed by 1 of 1991] 21. *** [repealed by 1 of 1991] 22. Income— passages Any amount paid by the Government to its employees in respect of or in connexion with leave passages to any country outside Malawi and any comparable amounts similarly paid by any other employer under a contract with an employee, which has been approved by the Commissioner, shall not be treated as a benefit within the meaning of section 18 . 23. Premiums There shall be included in income any amount received or accrued from another person as a premium or like consideration paid by such other person for the right to use or occupation of land or buildings or for the right of use of plant or machinery or for the use of any patent, design, trade -mark or copyright or any other property which, in the opinion of the Commissioner is of a similar nature. 24. Timber sales Where land is sold or otherwise disposed of for valuable consideration and there is timber growing on such land which, in the opinion of the Commissioner, has been grown as timber for sale, the market selling value as defined in section 50 of such timber at the time such land is sold or so disposed of shall be included in income. [14 of 1971] 25. General There shall be included in income any amount recovered or recouped during the year of assessment in respect of amounts allowed as deduction under division 2 of this Part of this Act or under any previous law whether in that or any previous year of assessment . [7 of 1992] 26. Foreign exchange gain and foreign exchange loss (1) There shall be included in computing income for the purposes of this Act any foreign exchange gain and any foreign exchange loss, as determined in accordance with subsection (2), which arises from a source in Malawi. (2) The amount of foreign exchange gain or foreign exchange loss shall be determined in accordance with the following formula— a x r1 minus a x r2. where “a” is the amount of foreign currency received, paid or otherwise computed with respect to a foreign currency asset or liability in the transaction in which the foreign currency asset or liability is disposed of, converted, repaid, or otherwise eliminated; “r1” is the official rate of exchange for the foreign currency with respect to the Malawi currency at the date on which the foreign currency asset or liability was obtained or established by the taxpayer ; and “r2” is the official rate of exchange for the foreign currency with respect to the Malawi currency at the date of satisfying the transaction. [7 of 1968; 19 of 1969; 5 of 1977; 4 of 1982; 10 of 1983; 1 of 1991; 7 of 1992] 27. Income deemed to have accrued in Malawi (1) An amount shall be deemed to have accrued to any person from a source within Malawi whenever it has been received by or has accrued to or in favour of such person — (a) as remuneration for any services rendered or work of labour done by such person in the carrying on in Malawi of any trade , whether the payment for such service or work or labour is made or is to be made by a person resident in or out of Malawi, and wherever payment for such services or work or labour is made or is to be made; (b) by virtue of any pension or annuity granted to such person by— (i) any person wheresoever resident; or (ii) the Government for services rendered, wheresoever payment of such pension or annuity is made and wheresoever the funds from which payment is made are situated: Provided that— (i) no pension or annuity shall be deemed to be derived from a source within Malawi if the service or employment for which it was granted was performed wholly outside Malawi. For the purposes of this proviso the service or employment in respect of which a pension or annuity was granted shall be deemed to have been performed within Malawi if the remuneration for the service or employment was deemed to have accrued from a source within Malawi by virtue of paragraph (c); (ii) if the service or employment in respect of which any pension or annuity (other than a pension or annuity granted in respect of employment by the Government or any local authority or any statutory corporation ) was granted, was performed partly within Malawi and partly elsewhere, only a proportionate part of such pension or annuity shall be deemed to be derived from a source within Malawi. Such proportionate part shall be calculated in accordance with the ratio that the period of service or employment within Malawi bears to the total period of service or employment in respect of which such pension or annuity was granted; (c) by virtue of any services rendered by such person to the Government or any local authority or any statutory corporation , notwithstanding that such services are rendered outside Malawi: Provided that this provision shall apply only if the person rendering the services is resident outside Malawi solely for the purpose of rendering such service; (d) from a person in or out of Malawi who may claim or would otherwise claim a deduction for such amount, in connexion with a permanent establishment in Malawi, as remuneration for services rendered or work of labour done, wherever such services, work or labour may have been rendered or done. [12 of 1987] (2) Pensions payable to pensioners of the Government of the former Federation of Rhodesia and Nyasaland shall be deemed to arise or not to arise from a source within Malawi in accordance with the provisions contained in the Twelfth Schedule. (3) Any interest paid by reason of the deferment of the payment of any amount or any part of any amount referred to in paragraph (r) of the First Schedule shall be deemed to have accrued from a source within Malawi notwithstanding that such interest shall have been paid outside Malawi from a source outside Malawi. (4) Any dividend attributable to taxable income of a company incorporated in Malawi shall be deemed to accrue from source within Malawi. [12 of 1987; 7 of 1992] (5) Any amount incurred, claimed or claimable in connexion with a permanent establishment in Malawi shall be deemed to accrue from a source within Malawi, regardless of the place of residence of the recipient, or the place of payment, of such amount. [7 of 1992] (6) Any foreign exchange gain or foreign exchange loss realized in connexion with a permanent establishment in Malawi or arising in connexion with foreign currency assets or liabilities held in Malawi shall be deemed to accrue from a source in Malawi. [7 of 1992] (7) Any capital gain or capital loss realized in respect of tangible property located in Malawi or property representing an interest in a company incorporated in Malawi shall be deemed to accrue from a source within Malawi. [7 of 1992] Division 2—Deductions Determination of taxable income 28. Allowable deductions in determining taxable income (1) For the purpose of determining the taxable income of any taxpayer , there shall be deducted from the assessable income of such taxpayer the amounts of any expenditure and losses (not being expenditure of a capital nature) wholly and exclusively and necessarily incurred by the taxpayer for the purposes of his trade or in the production of the income . (2) Where a taxpayer claims to deduct an amount which might be regarded as deductible under two or more headings by virtue of any of the provisions of this Act , he shall not be entitled to claim that such amount shall be deducted more than once but shall elect under which one of these headings he wishes to claim such amount as a deduction. (3) For the purpose of determining the taxable income of any taxpayer , there shall be deducted from the assessable income of such taxpayer the amount of any capital loss realized by the taxpayer in the year of assessment , but to the extent only of either— (a) the capital loss ; or (b) any capital gain realized by the taxpayer in that year of assessment , whichever is the lesser: Provided that any loss realized with respect to an asset used in a trade or business and in respect of which an initial allowance, investment allowance or annual allowance has been given under this Act shall not be subject to the limitation under this subsection but shall be deducted in accordance with subsection (1). [7 of 1992] (4) The whole or any part of the capital loss not deducted by reason of the limitation imposed under subsection (3) shall be carried forward to the following year of assessment and shall continue to be so carried forward until fully deducted from the taxpayer ’s assessable income in accordance with that subsection. (5) The deduction of any foreign exchange loss shall be subject to the limitation that any realized foreign exchange loss shall not be deductible from assessable income of a taxpayer in the year of assessment to the extent of his unrealized foreign exchange gain which would otherwise be realized if all foreign currency assets and liabilities of the taxpayer were disposed of or satisfied on the last day of the taxpayer ’s year of assessment in which the loss was realized, and the whole or part of any such loss which is not deducted by reason of this limitation shall be carried forward to the following year of assessment and continue to be so carried forward until fully deducted from the taxpayer ’s assessable income in accordance with the limitation imposed by this subsection. (6) The limitation on the extent of deduction imposed by subsections (3) and (4) shall not apply in respect of the year of assessment in which the taxpayer dies or ceases to exist. [1 of 1991; 7 of 1992; 1 of 1995] 29. *** [repealed by 10 of 1983] 30. *** [repealed by 10 of 1983] 31. *** [repealed by 4 of l988] 32. Allowable deductions — repairs Sums actually expended by the taxpayer during the year of assessment for repairs not being expenditure of a capital nature— (a) to any premises or part of premises occupied for the purpose of his trade ; or (b) resulting from the letting of property; or (c) of articles, implements, plant, machinery and utensils employed by him for the purpose of his trade , shall be an allowable deduction. 33. Allowable deductions — capital allowances There shall be allowed as a deduction from assessable income capital allowances as provided in the Second Schedule: Provided that the Minister may, by regulations, determine ceilings of capital allowances deductible in any given year of assessment in respect of certain assets. [1 of 1991] 34. Allowable deductions — premiums paid (1) An allowance shall be made in respect of any premium or consideration in the nature of a premium paid by any taxpayer for the right of use or occupation of land or buildings, or for the right of use of plant or machinery, or for the use of any patent, design, trade -mark, copyright or any other property which, in the opinion of the Commissioner, is of a similar nature, where such land, buildings, plant, machinery, patent, design, trade -mark, copyright, or property is used for the production of income or from which income is derived but such allowance shall not exceed for any year of assessment such portion of the amount so paid as is equal to the amount of the premium or consideration divided by the number of years for which the right of occupation or use is granted: Provided that— (a) where the period for which the right of occupation or use is granted exceeds 25 years, the deduction shall be one twenty-fifth of such premium or consideration; and (b) where the taxpayer acquires the ownership of land or buildings, plant or machinery, patent, design, trade -mark, or copyright or other property in respect of which an allowance has been made in terms of this paragraph, then from the date he acquires such ownership he shall cease to be entitled to any allowance under this paragraph in respect thereof. (2) For the purposes of this section, the amount of any premium or consideration in the nature of a premium shall be reduced by the total amount of any similar allowance made under any previous law . 35. Allowable deductions — bad debts There shall be allowed as a deduction bad debts proved to be such to the satisfaction of the Commissioner and which have become bad during the year of assessment if the amount of the debt is included in the current year of assessment or was included in any previous year in the taxpayer ’s assessable income either in terms of the Act or any previous law . 36. Allowable deductions — doubtful debts (1) There shall be allowed as a deduction doubtful debts to the extent that they are estimated to be doubtful if the amounts of such debts are included in the current year of assessment or were included in the previous year of assessment in the taxpayer ’s income either in terms of this Act or any previous law . Such allowance shall be included in the income of the taxpayer in the following year. For the first year of assessment under this Act any such allowance made for the last year of assessment in terms of any previous law shall be deemed to have been made in terms of this Act . (2) Where in any year of assessment a taxpayer receives an amount in respect of a debt for which a deduction has been allowed to him under this Act or any previous law , his assessable income shall include that amount. 36A. Allowable deductions — export allowance (1) There shall be allowed as a deduction an amount (hereinafter referred to as an “export allowance”) equivalent to twenty-five per centum of the taxable income as determined under section 14 of the Export Incentives Act in respect of exports of non-traditional goods made during the year of assessment . (2) No deduction of an export allowance shall be made unless the Commissioner is satisfied that the taxable income from which the deduction is to be made has been determined in accordance with the provisions of this Act . [Cap. 39:04; 4 of 1988; 17 of 2012] 36B. Allowable deductions — payroll levy There shall be allowed as a deduction an amount paid by an employer , who is also a taxpayer , as payroll levy determined under section 20 of the Technical, Entrepreneurial and Vocational Education and Training. [9 of 2000; Cap. 55:06] 37. Allowable deductions — pension funds and provident funds There shall be allowed as a deduction— (a) an amount to be determined in accordance with the provisions of the Fifth Schedule in respect of ordinary contributions as defined in that Schedule which are made in the year of assessment to a pension fund ; (b) any contribution, other than any ordinary contribution as defined in the Fifth Schedule, by an employer to a pension fund which is made for the purpose of ensuring that the moneys in the fund are sufficient to meet all payments to be made in terms of the rule of the fund: Provided that the Commissioner may direct that such a contribution by an employer to a pension fund shall be treated as an expense to be spread over such period of years as the Commissioner may determine; (c) an amount contributed by an employer to a provident fund ; and [14 of 1969] (d) contributions to the Parliamentary Pensions Premium Fund made by a member of the National Assembly pursuant to section 11 of the Parliamentary Pensions (Enabling Provisions) Act. [4 of 1981; Cap. 2:06] [14 of 1969] 38. Allowable deductions — sale of timber Where income arises from the sale of timber a deduction shall be allowed— (a) in respect of such income from the sale of, or the sale of the right to fell, timber which was growing on the land at the time of the acquisition of the ownership of such land by the taxpayer , an amount determined as follows— (i) where such land was acquired by the taxpayer for valuable consideration, so much of the value of such consideration as the Commissioner thinks just and reasonable as representing the cost of the standing timber; (ii) where no valuable consideration was given by the taxpayer for such land, an allowance fixed by the Commissioner as representing the value of the standing timber at the time that the taxpayer acquired such land; (iii) where the taxpayer sells the timber the amount to be deducted for any year of assessment shall be the portion attributable to the timber sold during that year; and (b) in respect of income from the sale by the taxpayer of timber, the right to fell and dispose of which was not acquired with the land on which the timber was grown, so much of the consideration for which the timber was acquired as is attributable to the amount of the timber sold by the taxpayer in the year of assessment . 39. Allowable deductions — research, etc. There shall be allowed as a deduction— (a) the amount of any expenditure, not being expenditure of a capital nature, incurred by the taxpayer during the year of assessment on experiments and research relating to his trade ; (b) any sum contributed by the taxpayer during the year of assessment to any scientific or educational society or institution or other body of a public character approved by the Minister if the taxpayer has stipulated that the sum must be utilized by such society, institution, or body, as the case may be, solely for the purpose of industrial research or scientific experimental work connected with the trade of the taxpayer ; (c) any sum contributed by the taxpayer during the year of assessment in the form of a grant, bursary, or scholarship to enable any other person to take a course of technical education related to the trade of such taxpayer at any educational institution approved by the Minister; (d) individual donations of not less than K250 made during the year of assessment by the taxpayer to any such charitable organization as the Minister may from time to time by notice published in the Gazette approve for the purposes of this paragraph; and [19 of 1969; 7 of 1992] (e) individual donations of not less than K500 made during the year of assessment by the taxpayer to any such non-profit institution operated solely or principally for social welfare, civic improvement, educational development, or other similar purposes as the Minister may, from time to time, by notice published in the Gazette approve for the purposes of this paragraph. [2 of 1996] [1 of 1990; 7 of 1992; 2 of 1996] 39A. Allowable deductions — social contribution There shall be allowed as a deduction of fifty per centum for any amount paid as a social contribution directly into the building of a public hospital or school, or the sponsoring of youth sporting development activities. [17 of 2012] 40. Allowable deductions — annuity payment Any amount paid by way of annuity, allowance or pension during the year of assessment by any taxpayer — (a) to a former employee who has retired from the taxpayer ’s employ on the grounds of ill-health, infirmity or old age; or (b) to any person who is dependent for his maintenance upon a former employee of such taxpayer or (where such former employee of such taxpayer is deceased) was so dependent immediately prior to his death, shall be allowed as a deduction: Provided that the deduction under paragraph (b) shall not exceed in respect of persons so dependent on any one retired or deceased employee the sum of K1,200. 41. Allowable deductions — new businesses initial expenditure (1) In arriving at the taxable income of a taxpayer derived from a manufacturing business begun on or after the 1st day of April, 1963, there shall be allowed the amount of any expenditure which— (a) is incurred by the taxpayer , not more than eighteen months before beginning the business, in the course of establishing the business; and (b) would have been allowed as a deduction had it been incurred after the beginning of the business. (2) For the purpose of this section a “manufacturing business” is one carried on in buildings within the definition of industrial building contained in paragraph 8 of the Second Schedule. 41A. *** [repealed by 24 of 2011] 41B. Allowable deductions — transport allowance There shall be allowed as a deduction an additional twenty-five per centum of the international transport costs incurred by the taxpayer for his exports, whether produced by manufacturing in bond or otherwise, but other than exports of products specified in the Schedule to the Export Incentives (Exclusion) Order, made under the Export Incentives Act. [7 of 1992; 24 of 2011; 17 of 2012; G.N. 23/1990; Cap. 39:04] 42. Allowance of losses — general There shall be deducted, from any amount of assessable income , any assessed loss arising solely out of operations in Malawi, whether determined under this Act or any previous law , incurred by the taxpayer in any previous year of assessment to the extent to which such assessed loss has not been allowed as a deduction from his income of a previous year of assessment : Provided that— (a) a deduction under this section shall, as far as possible, be made in the first year of assessment after the year in which the assessed loss was incurred and, in the next year of assessment up to a period of the six years; (b) no person who— (i) has been adjudged or otherwise declared or has become insolvent or bankrupt; or (ii) has made a conveyance or assignment of his property or estate for the benefit of his creditors, or an arrangement with his creditors releasing him, wholly or partially from his debts, shall be entitled to carry forward an assessed loss incurred before the date he was adjudged or otherwise declared or became insolvent or bankrupt or made the conveyance, assignment arrangement, as the case may be; and (c) an assessed loss shall be reduced by the amount or value of any benefit received by, or accruing to, a person resulting from a concession granted by, or a compromise made with, any of his creditors whereby his liabilities have been reduced or extinguished, if such liabilities arose in the ordinary course of operations. [6 of 2005; 19 of 2013] 43. Allowance of losses — change in shareholding in company (1) If during any year of assessment there is a change in the shareholding of a company with an assessed loss or in the shareholding of a company which directly or indirectly controls any company with an assessed loss and the Commissioner is satisfied that such change has been effected solely or mainly in pursuance of or in connexion with any scheme for taking advantage of such assessed loss no assessed loss incurred prior to that change shall be deductible. (2) For the purposes of this section a company shall be deemed to be controlled by another company if the majority of the voting rights attaching to all classes of its shares are held directly or indirectly by such other company . 44. Allowance of losses — formation of new company If a company with an assessed loss (hereinafter referred to as the “old company ”)— (a) was incorporated outside Malawi; (b) carried on its principal business within Malawi; (c) is about to be wound up voluntarily in its country of incorporation for the purpose of the transfer of the whole of its business and property wherever situated to a company which will be or has been incorporated under Malawi law (hereinafter referred to as the “new company ”) for the sole purpose of acquiring the whole of the business and property wherever situated of the old company ; (d) the sole consideration for the transfer referred to in paragraph (c) will be the issue to the members of the old company of shares in the new company in proportion to their shareholding in the old company ; and (e) no shares in the new company will be available for issue to any persons other than members of the old company , the new company shall be allowed as a deduction after the transfer referred to in paragraph (c) has been effected the assessed loss of the old company to the extent to which that assessed loss has not been allowed as a deduction to the old company in a previous year of assessment . 45. Deductions not to be made No deduction shall in any case be made in respect of any of the following matters— (a) the cost incurred by any taxpayer in the maintenance of himself, his family or establishment; (b) domestic or private expenses of the taxpayer including the cost of travel between the taxpayer ’s residence and place of work; (c) any loss or expense which is recoverable under any insurance contract or indemnity; (d) tax upon the income of the taxpayer or interest payable thereon whether charged in terms of this Act or any law of any country whatsoever; (e) income carried to any reserve fund or capitalized in any way; (f) any expenses incurred in respect of any amounts received or accrued which are not included in the term “ income ” as defined in this Act ; (g) save as is provided in section 37 any contribution made by a taxpayer to a fund established for the purpose of providing pensions for employees or the windows, children, dependants or nominees of deceased employees or for all or any of those purposes; (h) save as is provided in section 37 any contribution made by a taxpayer to a fund established for the purpose of providing sickness, accident, unemployment or other benefits for employees or the widows, children or nominees of deceased employees or for all or any of these purposes; [14 of 1969] (i) any expense in respect of which a subsidy has been or will be received; and (j) fringe benefits tax and any penalty chargeable thereon. [1 of 1991] [1 of 1991; 14 of 1969; 10 of 1983] 46. Deductions not admissible as regards income derived from trade No deduction shall, as regards income derived from any trade , be made in respect of any of the following matters— (a) the rent of, or cost of repairs to, any premises not occupied for the purposes of trade , or any dwelling house or domestic premises, except such part thereof as may be occupied for the purposes of trade ; (b) interest which might have been earned on any capital employed in trade . Division 3 — Stock and work in progress 47. Trading stock and work in progress to be taken into account (1) Where a taxpayer carries on any business, the value, ascertained under this Division, of all trading stock and work in progress on hand at the end of any accounting year shall be taken into account in ascertaining whether or not the taxpayer has a taxable income . (2) Where the value of all trading stock and work in progress on hand at the end of the accounting year exceeds the value of all trading stock or work in progress on hand at the beginning of that year, the assessable income of the taxpayer shall include the amount at the excess. (3) Where the value of all trading stock and work in progress on hand at the beginning of the accounting year exceeds the value of all trading stock and work in progress on hand at the end of that year, the amount of the excess shall be an allowable deduction. 48. Valuation of stock and work in progress at end of year Trading stock and work in progress shall be valued on the basis of the cost price or market selling value of each item of trading stock or of all work in progress, as the case may be, at the end of the accounting year: Provided that, by agreement with the Commissioner, a taxpayer may elect to adopt any basis which conforms to recognized accountancy practice and is not contrary to this Act , but where such basis is elected the election shall be binding for future accounting periods unless the Commissioner otherwise agrees and any change shall be upon such terms and conditions as he may impose. 49. Valuation of stock and work in progress at beginning of year The value of trading stock and work in progress to be taken into account at the beginning of the accounting year shall be its value as ascertained under this Act or any previous law at the end of the immediately preceding accounting year. 50. Definition of cost and market selling value For the purpose of this Division— “ cost ” means the historical cost of bringing the relevant item of stock to its existing condition and location; “ market selling value ” means the expected realizable value of the relevant item of stock in the taxpayer ’s normal selling market, the value of work in progress shall include overhead charges to the extent of the recognized accountancy practice for the type of business. [14 of 1971] 51. Domestic consumption The value of trading stock taken by the taxpayer for his domestic or private consumption or use shall be— (a) in the case of non-farming stock an amount equal to the cost price to the taxpayer or the market selling value of such stock at the time the stock was taken, whichever the taxpayer may elect; (b) in the case of farming stock an amount which the Commissioner accepts to be a fair and reasonable valuation at the time such stock was taken. 52. Gifts and sales Where— (a) the taxpayer disposes by sale, gift or otherwise of property being trading stock, standing or growing crops or trees which have been planted and tended for the purpose of sale; and (b) that property constitutes or constituted the whole or part of the assets of a business which is or was carried on by the taxpayer ; and (c) the disposal was not in the ordinary course of carrying on that business, the market selling value of that property at the date of disposal shall be included in the assessable income of the taxpayer , and the person acquiring that property shall be deemed to have purchased at a price equal to that value. 53. Valuation of livestock Livestock shall be valued at cost or market selling value and sections 47 to 52 inclusive shall apply. [14 of 1971] Division 4 — Determination of taxable income where adequate books and records are kept 54. Books of accounts (1) Every person carrying on a business shall keep sufficient records of his income and expenditure to enable his assessable income and allowable deductions to be readily ascertained and shall retain such records for at least seven years after the completion of the transaction, acts or operation to which they relate: Provided that this subsection shall not require the preservation of any records— (a) in respect of which the Commissioner has notified the taxpayer that their preservation is not required; or (b) of a company which has gone into liquidation and which has been finally dissolved. (2) If a taxpayer fails or refuses to keep books or accounts which, in the opinion of the Commissioner, are adequate for the purposes of this Act the Commissioner shall by notice in writing require such person to keep such records, books and accounts as the Commissioner considers to be adequate in such form and in such language as may be specified in the said notice. [14 of 1969] 55. Period of accounts (1) Where a taxpayer makes up his accounts for a period of 12 months ending on some day other than the 30th June, the Commissioner may in his discretion accept such accounts for assessment in respect of the assessment year ending the 30th June prior or subsequent to the closing date of such accounts, and no part of such assessment shall be charged to tax in any other year of assessment . Any return in respect of which accounts have been so accepted shall be deemed for all purposes of this Act to be a return for such year of assessment : Provided that where the accounts of any taxpayer have been accepted for a year or period ending on some date other than the 30th June, either under this Act or any previous law , all subsequent accounts of such taxpayer shall, unless the Commissioner otherwise agrees, and upon such terms and conditions as he may impose, be made up for each succeeding period of 12 months ending on such other date. (2) Where a taxpayer whose accounts have been accepted in terms of subsection (1) ceases to trade , there shall be returned for assessment accounts which shall include all income which has been received by or accrued to such taxpayer in the period between the closing date of the last accounts so accepted for the immediately preceding year of assessment and the date when such taxpayer ceased to trade . (3) Where such period exceeds 12 months, separate accounts shall be rendered for a l2-month period ending on the date accepted as the closing date of his accounts under subsection (1) and for the balance of the period in excess of 12 months. (4) The taxable income determined on the basis of such accounts shall be charged to tax as follows— (a) if the period is in excess of 12 months, the taxable income determined on the basis of the accounts rendered for 12 months as required in terms of subsection (3) shall be deemed to be the taxable income for the year of assessment succeeding that in which the taxable income based on the accounts for the immediately preceding year of assessment was assessed, and the taxable income for the remaining period shall be deemed to be the taxable income of the following year of assessment ; (b) if the period is one of less than 12 months, the taxable income based on the accounts rendered in terms of paragraph (a) shall be deemed to be the taxable income of the year of assessment succeeding that in which the taxable income based on the accounts for the immediately preceding year was assessed: Provided that, where a taxpayer has rendered accounts for assessment and the whole or part of the taxable income determined from such accounts has been charged to tax in more than one year of assessment , either under this Act or under any previous law , then when such taxpayer ceases to operate the taxable income for the last year of assessment shall be reduced by an estimate of the taxable income which has been so charged to tax in more than one year of assessment . If such estimate exceeds the taxable income for the last year of assessment the taxable income for the penultimate year of assessment shall be reduced by the amount of such excess. The said taxable income shall be assessed as the taxable income of such taxpayer notwithstanding that such taxpayer may not have been in existence during any portion of such year of assessment . [13 of 2006] Division 5 — Businesses carried on partly in and partly out of Malawi and businesses controlled abroad 56. Profits of non-resident persons from sale of exported produce (1) Where a non-resident person produces, grows, mines, creates, manufactures, fabricates, improves, packs, preserves, or constructs in whole or in part anything within Malawi, and exports the same without sale prior to the export thereof, he shall be deemed to have derived from a source within Malawi a taxable income corresponding to the proportionate part of any profit ultimately derived from the sale thereof outside Malawi. (2) The taxpayer shall submit to the Commissioner proposals for the determination of the taxable income deemed to be derived from a source within Malawi. (3) The Commissioner shall consider the proposals submitted under the provisions of subsection (2) and, if he is of the opinion that the taxable income calculated in accordance therewith approaches as closely as possible to that which might be expected to ensure if the general provisions of this Act were applied, he may accept the same, and the taxable income as determined for any year of assessment shall be deemed to be the taxable income of such person or company for that year. (4) Should no such proposals be submitted, or if the Commissioner is not satisfied with the proposals so submitted, the Commissioner may determine the taxable income in such manner as appears to him most appropriate, having regard to the circumstances of the case. (5) Where a person sells, exports, transfers or otherwise disposes of goods, property or services, to a person whether resident or not, who is directly or indirectly related to such person , at a price which is lower than the market value of such goods, property or services, he shall be required to include the market value of such goods, property, or services in his assessable income . [1 of 1995] (6) Where the Commissioner is of the opinion that any goods, property or services have been sold, exported, transferred, or disposed of at a value lower than the market value, the Commissioner may determine the market value of such goods, property or services in such manner as appears to him appropriate having regard to the circumstances of the case, and shall adjust the taxable income of such person accordingly. [1 of 1995] (7) The foregoing provisions of this section shall apply mutatis mutandis to the determination of an assessed loss . [1 of 1995] [14 of 1971] 57. Persons carrying on business which extends beyond Malawi (1) Where the trade of any person , other than a person carrying on the business of insurance, extends to any country outside Malawi and the Commissioner is satisfied that it is impossible or impracticable to ascertain the taxable income derived by such person from sources in Malawi in the manner otherwise provided in this Act , such person shall submit to the Commissioner proposals for the determination of his taxable income in some alternative manner. (2) The Commissioner shall consider the proposals submitted in terms of subsection (1) and, if of opinion that the taxable income calculated in accordance therewith approaches as closely as possible to that which might be expected to ensure if the general provisions of this Act were applied, may accept the same, and the taxable income so determined for any year of assessment shall be deemed to be the taxable income of such person or company for that year. (3) Should no such proposals be submitted, or if the Commissioner is not satisfied with the proposals so submitted, the Commissioner may determine the taxable income in such manner as appears to him most appropriate, having regard to the circumstances of the case. (4) The foregoing provisions shall apply, mutatis mutandis , to the determination of an assessed loss .

19. Reply Within 42 days of the service on the respondent of the grounds of appeal the respondent shall lodge with the High Court in quintuplicate a statement in writing to be headed “Reply” and the reply shall specify the grounds upon which the respondent will rely on the hearing of the appeal. Except by special leave of the High Court the respondent shall not be entitled to rely upon any ground not specified in such written statement.

20. Service of reply Upon receipt of a reply lodged under rule 19 the High Court shall cause a copy of the reply to be served on the appellant at his address for service. Delivery at the address for service shall be sufficient service and personal service shall not be necessary.

21. Normal rules of procedure Save as provided in this Part the normal rules of procedure relating to appeals to the High Court shall apply. Ninth Schedule (Section 6 (6)) Declarations Part I – Form of declaration to be made by the Commissioner I, A. B., do solemnly declare that I will truly, faithfully, impartially and honestly, according to the best of my skill and knowledge, execute the powers and authorities vested in me by the Taxation Act, and that I will exercise the powers entrusted to me by the said Act in such manner only as shall appear to me necessary for the due execution of the same; and that I will judge and determine upon all matters and things which shall be brought before me under the said Act without favour, affection, or malice; and that I will not disclose any particular contained in any schedule, statement, return or other document delivered with respect to any tax charged under the said Act or any evidence or answer given by any person who shall be examined, or shall make affidavit or deposition, respecting the same, in pursuance of the said Act, except to such persons only as shall act in the execution of the said Act and where it shall be necessary to disclose the same to them for the purposes of the said Act or in order to facilitate, or in the course of, a prosecution for perjury committed in such examination, affidavit or deposition. Form of declaration to be made by officers I, __________________________________________________, do solemnly and sincerely declare that I shall regard and deal with all documents and information relating to matters dealt with by me in the course of my duties and all confidential instructions in respect of the administration of the Taxation Act which may come into my possession or to my knowledge as secret, and that I shall not reveal any such document or information to any person nor permit any person to have access to any such document save in the circumstances permissible under the provisions of the said Act. Tenth Schedule Personal allowances [repealed by 10 of 1983] [1 of 1990; 1 of 1991; 7 of 1992; 2 of 1994; 1 of 1995] Eleventh Schedule (Sections 66, 71, 76 and 94 A ) Rates of income tax Income tax shall be charged, subject to the minimum tax as specified in Part II of the Appendix to this Schedule, as follows— (a) in the case of an individual, at the rates laid down in paragraph A of the Appendix to this Schedule; (b) in the case of ecclesiastical, charitable or educational institutions of a public character or of trusts, at 25 per cent of the taxable income; [7 of 1992; 1 of 1995] (c) in the case of all companies, other than companies engaged in mining operations under a licence issued under the Mines and Minerals Act, 30 per cent of taxable income except that— (i) [deleted by 24 of 2011] (ii) in the case of companies operating in priority industries, so designated by the Minister for this purpose by Order published in the Gazette , the applicable rate shall be either— (A) 0 per cent for such a period, not exceeding 10 years, as the Minister may grant in the Order; or (B) 15 per cent: Provided that an additional tax of 5 per cent of taxable income shall be charged in respect of all companies not incorporated in Malawi; [5 of 1997; Cap. 61:01] (ca) in the case of companies engaged in mining operations under a licence issued under the Mines and Mineral Act— (i) 30 per cent of taxable income: Provided that an additional tax of 5 per cent of taxable income shall be charged in respect of all companies not incorporated in Malawi; (ii) an additional resource rent tax of 10 per cent shall be levied on profits after tax, if the company’s rate of return exceeds 20 per cent; [Cap. 61: 01] (cb) [deleted by 11 of 2014] (d) in the case of life assurance business, at 21 per cent of the taxable income; and (e) in the case of fringe benefits, at 35 per cent of the taxable value of fringe benefits. (f) in the case of turnover tax, at the rate of 2% of the taxable turnover. (g) in the case of earnings on investment of pension funds, at 15 per cent. [29 of 2010] [19 of 1995; 5 of 1997; 23 of 1997; 14 of 1999; 9 of 2000; 10 of 2001; 11 of 2002; 11 of 2002; 6 of 2005; 13 of 2006; 7 of 2007; 14 of 2009; 29 of 2010; 24 of 2011; 17 of 2012; 19 of 2013; 11 of 2014] Appendix Table of rates of income tax on taxable income Annual taxable income Rate First K240,000 0% Next K60,000 15% Excess of K300,000 30% [9 of 2000; 10 of 2001; 11 of 2002; 6 of 2005; 13 of 2006; 7 of 2007; 11 of 2008; 14 of 2009; 24 of 2011; 17 of 2012; 19 of 2013] Twelfth Schedule (Section 27 (2)) Assessment of federal pensioners 1. (1) Pensions payable to pensioners of the Government of the former Federation of Rhodesia and Nyasaland in respect of service with that Government notwithstanding anything in section 27 of this Act to the contrary shall be deemed to arise from a source in Malawi where— (a) the pensioner retired as a result of the dissolution of the former Federation and was ordinarily resident in Malawi on 3lst day of March, 1964; (b) the pensioner retired as a result of the dissolution of the former Federation, is not ordinarily resident in either Zambia or Zimbabwe and Malawi was his home territory; (c) the pensioner retired prior to the dissolution of the former Federation and he served in the Public Service of Malawi prior to joining the former Federal Republic Service; or (d) the pensioner retires at some future date and he is then serving in the Public Service of Malawi. (2) Pensions deemed under subparagraph (1) to arise from a source in Malawi shall be assessable at the appropriate rate of tax applicable to the individual, which shall be calculated by dividing the total tax payable on his taxable income, excluding any such pension, by that taxable income. [10 of 1983] 2. In the case of an officer who was born in the area of the former Federation of Rhodesia and Nyasaland, his “home territory” shall be the Territory of his birth: Provided that if an officer was serving with the Government of a Territory other than that in which he was born immediately prior to his joining the Public Service of the former Federation of Rhodesia and Nyasaland then that Territory shall be taken as being his “home territory”. 3. In the case of an officer who was not born in the area of the former Federation of Rhodesia and Nyasaland his “home territory” shall be the Territory in which he has had the longest Government service whether in the Public Service of the former Federation of Rhodesia and Nyasaland or in the Public Service of a Territory: Provided that— (a) where an officer’s length of service in two Territories differs by less than twelve months and his service, if any, in the third Territory is less than his service in either of those two Territories he may choose either of those two Territories as his “home territory”; or (b) where an officer joined the Public Service of a Territory before he joined the Public Service of the former Federation of Rhodesia and Nyasaland, he may choose the Territory whose service he originally joined as his “home territory”. 4. In this Schedule “Territory” means Malawi, Zambia or Zimbabwe. [10 of 1983] Thirteenth Schedule Table of rates of graduated tax [deleted by 13 of 2006] Fourteenth Schedule (Section 102A) Withholding tax -rate of deduction Nature of payment Notes Rates of Withholding Tax on gross payment (a) Royalties — 20% (b) Rents 1 15% (c) Payment for any supplies to traders and institutions— (i) foodstuff — 3% (ii) other — 3% (d) Commission 2 20% (e) Payment for carriage and haulage — 10% (f) Payment for tobacco and other farm products — 3% (g) Contractors in the building and construction industries 3 10% (h) Payment for public entertainment 4 20% (i) Payment of K15, 000 for casual labour — 0% (ia) payment in excess of K15, 000 for casual labour — 20% (ib) payment for services — 20% (j) Bank interest of over K10, 000 5 20% (k) Fees 2 10% Notes: 1. Includes rent for moveable and immoveable property, whether paid under a lease or otherwise, but excludes rent payable by an individual whose source of income is only from employment and the rent is payable in respect of property used as a dwelling house and at a rate not exceeding K6,000 per annum. 2. Excludes fees and commissions on which P.A.Y.E. is being operated, but includes technical fees and management fees to the extent they do not relate to reimbursement of expenses. 3. Includes contractors and subcontractors of any category. 4. Includes payment to musicians, radio and television artists, athletes and theatres, but excludes payments to radio and television artists which are subject to P. A. Y. E. 5. Includes— (a) interest payable by an institution registered under the Building Societies Act or the Banking Act on deposits held on accounts with such institution; (b) interest on treasury bills, stock, bonds or promissory notes raised by, or on behalf of, the Government under sections 24 and 26 of the Finance and Audit Act, but does not include— (aa) interest, however arising, payable by any person to an institution referred to in paragraph (a), and any institution registered under the Capital Market Development Act; (bb) interest payable to a person exempt from income tax under the First Schedule; (cc) interest payable to a person, not being a person resident in Malawi, whose income is liable to non-resident tax under section 76A . [1 of 1985; 4 of 1988; 1 of 1990; 7 of 1992; 2 of 1996; 5 of 1997; 10 of 2001; 10 of 2003; 6 of 2005; 7 of 2007; 29 of 2010; 24 of 2011; 17 of 2012] Fifteenth Schedule List of transactions in respect of which a tax clearance certificate is required— 1. Transfer of land and building. 2. Renewal of Certificate of Fitness for commercial vehicles. 3. Renewal of Business Residence Permit. 4. Renewal of professional business licences and permits of medical practitioners or dentists, legal practitioners (lawyers), engineers and architects who are engaged in private practice on his or her own behalf as a private practice or in partnership with another private practitioner. 5. Renewal of a certificate of registration under the National Construction Industry Act. [Cap. 53: 05] 6. Transfer of a company as a going concern. 7. Externalization of funds to non-resident service providers whose source is deemed to be Malawi. 8. Renewal of Temporary Employment Permits. 9. Renewal of business licenses by the Ministry responsible for industry and trade. 10. Renewal of tourism licences by the Ministry responsible for tourism. 11. Renewal, extension or transfer of mining licences, or transfer of mineral rights by the Ministry responsible for energy and natural resources. 12. Renewal of telecommunications licences by the Malawi Communications Regulatory Authority. 13. Renewal of energy licences by the Malawi Energy Regulatory Authority. 14. Change of ownership of a company. 15. Renewal of registration of public transport conveyances by the Road Traffic Directorate. [5 of 1997; 18 of 1998; 14 of 2009; 24 of 2011]