Export Allowances

An allowance equal to 30% (increased from 25%, effective 22 November 2019) of taxable income from export of processed goods and 10% of taxable income from export of unprocessed goods is granted with respect to sales of goods that are classified as non-traditional exports. The Commissioner-General has issued a directive providing that the export allowance should be calculated on “taxable” export proceeds less export-related expenses. This remains an area of controversy with much debate surrounding the interpretation of the meaning of “taxable income.” Tea, tobacco, sugar and coffee do not qualify for this allowance.

Exporters in export process zones (EPZs) benefit from the following exemptions for establishing operations in an EPZ:

Custom and excise duties;
Withholding tax on dividends;
Duty or capital requirements on capital equipment and raw materials; and
VAT.

Investment Allowance

Malawi offers investment incentives in the form of allowances, which are the following:

A manufacturing company can claim an investment allowance of 100% on new and unused industrial buildings, plant, and machinery. For used assets, an investment allowance of 40% is available;
An additional training costs allowance of 50% of the cost incurred for an employee's training/education to obtain a degree, diploma, or certificate level (training costs are also fully deductible);
An export allowance of 12% of a company's net export profits is granted for exported non-traditional products; and
100% allowance on expenditures for companies engaged in or preparing to engage in mining operations.

Farming Operation

Farming operations have special tax provisions that tax incentive their activities. They are allowed to deduct 100% of most capital expenditure on the following:

The stumping, leveling and clearing of lands;
Works for the prevention of soil erosion;
Boreholes;
Wells;
Aerial and geophysical surveys; and
Any water control work in connection with the cultivation and growing of rice or sugar.

A farmer who derives taxable income from the growing of timber may elect that such taxable income shall be determined in accordance with the following rules:

The cost of planting the timber shall be carried forward until such time as the timber has reached maturity, and will be allowed as a deduction when the timber is sold;
An annual accumulation of 5% per annum is to be added to the cost of planting timber until the timber reaches maturity, and will be allowed as a deduction when the timber is sold; and
The annual accumulation of 5% will be treated as taxable income in each year of assessment it has been added up.

Mining Operations

A company carrying on mining operations is entitled to a 100% allowance on mining expenditure incurred in any year of assessment. Mining expenditure is defined in the Taxation Act as capital expenditure incurred in Malawi by a company carrying on or about to carry on mining operations in Malawi:

In searching for or in discovering and testing or winning access to deposits of minerals;
In the acquisition of or of rights in or over such deposits other than the acquisition from a person who has carried on mining operations in relation to such deposits;
In the provision of plant and machinery and industrial buildings which would have little or no value to such person if the mine ceased to be worked;
On the construction of any buildings or works which would have little or no value if the mine ceased to be worked; and
On development, general administration and management prior to the commencement of mining operations.

From 1 July 2016, a specific regime is introduced for the mining sector that includes:

The ring-fencing of mining projects in regard to income and expenses for tax purposes, with each mining project required to file a separate tax return;
Mineral royalties are allowable as a deduction for tax purposes;
A preferential non-resident tax at the rate of 10% on payments by a mining project by way of interest, royalty and management fees;
A minimum resource rent tax of 15%;
Separate rules and regulations for the determination of income, deductions and capital allowances; and
Separate rules for the administration of mineral royalties.

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