Disclosure Requirements

Malawi introduced statutory transfer pricing documentation requirements effective 1 July 2017, with the Taxation (Transfer Pricing Documentation) Regulations 2017. The regulations provide that a taxpayer must prepare documentation to substantiate that its controlled transactions are consistent with the arm's length principle. The transfer pricing documentation is not required to be maintained for transactions between resident-related parties when the annual value of the concerned transactions is less than USD 135,000.

The documentation must be prepared contemporaneously, meaning that it must be available by the tax return due date for the relevant tax year. However, there is no obligation to submit the transfer pricing documentation with the annual corporate tax return. In contrast, the Commissioner-General of the Malawi Revenue Authority may request the taxpayer to submit transfer pricing related information within 45 days of such written request. For a multinational enterprise with multiple entities, stand-alone transfer pricing reports for each entity are required to be prepared.

Standard Documentation

Taxpayers are required to maintain transfer pricing documentation to substantiate their related party transaction prices.

The documentation should include:

An overview of the taxpayer's business operations and organizational chart;
A description of the corporate organizational structure of the taxpayer's group and the group's operational structure;
A description of the controlled transactions, including an analysis of comparability factors;
Details of the functions undertaken and risks assumed by connected parties in relation to the controlled transactions;
An explanation of the selection of the most appropriate transfer pricing method and, where relevant, the selection of the tested party and financial indicator;
Financial statements for the parties to the controlled transaction;
A comparability analysis, including a description of the process to identify comparables, basis for rejection of any comparables, any adjustments made, etc.;
Details of any industrial analysis, economic analysis, budgets, or projections relied on;
Details of any relevant advance pricing agreements or similar arrangements in other countries;
Conclusions as to the consistency of the conditions of controlled transactions with the arm's length principle, including any adjustments made to ensure compliance; and
Any other documentation or information for the determination of compliance with the arm's length principle.

Country-by-Country Reporting

Malawi has not yet implemented the Country-by-Country reporting and has not yet joined the OECD’s Inclusive Framework, membership of which implies a commitment to implement the BEPS minimum standards, including Country-by-Country reporting.

Language of Documentation

The documentation should be kept in English.

Penalties

The documentation should be submitted within 45 days of a request by the tax authority. Failure to submit documentation will be subject to a penalty equal to the MWK equivalent of USD 1,400, plus the MWK equivalent of USD 2,100 for each month the documents remain unsubmitted.

Any person that has been subject to the initial and subsequent penalty may be subject to additional penalties in an unlimited amount as determined by the tax authority.

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