Malawi's Finance Minister has unveiled sweeping tax reforms effective from 1 April 2026, doubling the mandatory VAT registration threshold from MWK 25 million to MWK 50 million while introducing new taxes on foreign digital services from Netflix, Facebook, and YouTube. The budget also implements a 2% withholding tax on listed share transactions and introduces excise duties on hybrid vehicles and luxury goods.
Malawi’s Minister of Finance, Economic Planning and Decentralisation has presented the 2026-27 Budget Policy Statement to the National Assembly of Malawi. On 27 February 2026.
Framed under the theme of “Driving Economic Recovery and Sustainable Growth through Impactful Reforms and Fiscal Consolidation,” the budget outlines a significant overhaul of the nation’s tax landscape. While the Customs and Excise measures took effect at midnight on the day of the speech, the Taxation and Value Added Tax (VAT) changes are slated for 1 April 2026.
The key tax measures are as follows:
Income tax and corporate adjustments
The government is moving toward a more streamlined and simplified tax regime to encourage compliance and investment.
One of the most notable changes is the replacement of the existing Capital Gains Tax on the disposal of listed shares with a final withholding tax of 2% on gross proceeds. This move is intended to simplify transactions within the financial and capital markets.
- Targeted sector reforms: In the gaming and lotteries sector, the administration has moved away from taxing winnings directly. Instead, they are introducing a 10% final withholding tax on wagered amounts for casinos and a 15% final withholding tax on withdrawals for lotteries and sports betting. Additionally, to support agricultural modernisation, the construction of dams and farm water infrastructure will now be treated as a deductible expense, mirroring the provisions for rice and sugar farming.
- Property and rental changes: Residential rental income tax is also being simplified with a final withholding tax of 15%. It is important to note that rental income from commercial properties remains under the existing framework without changes. Furthermore, the government is rewriting the supernormal profit tax to ensure better clarity for corporate entities.
VAT and the digital frontier
A major shift in VAT policy aims to protect small businesses while ensuring foreign digital giants contribute to the local economy. The mandatory VAT registration threshold is being doubled from MWK 25 million to MWK 50 million in annual turnover. This change exempts smaller enterprises and cross-border traders from the Electronic Invoicing System (EIS).
- Taxing global tech and exports: To level the playing field for local businesses, Malawi is introducing VAT on digital services provided by foreign companies such as Netflix, Facebook, and YouTube. This ensures that locally generated value from digital ads and streaming is captured within the tax net. On the export front, sugar exports will now attract VAT, which will be refunded only upon proof of the repatriation of export proceeds back into Malawi.
- Claiming refunds: Taxpayers should also note that the period for claiming tax refunds under both the VAT Act and the Tax Administration Act is being harmonised to a consistent six-month window.
The VAT proposals will become effective on 1 April 2026, pending parliamentary approval and enactment of the VAT (Amendment) Bill.
Customs, excise duties, and industrial protection
The budget places a heavy emphasis on the “Buy Malawi Strategy” by introducing import surcharges on a variety of goods that are already produced domestically. These surcharges vary significantly by product, including 30% on dressed poultry and eggs, 40% on vegetables and toothpicks, and 25% on matches and diapers.
- Excise duties and luxury goods: New excise taxes are being introduced to discourage the consumption of unhealthy products and to capture revenue from luxury items. A 20% excise tax has been placed on powdered soft drink flavours. Additionally, luxury goods such as wristwatches, perfumes, and video game consoles will now attract excise duties.
- Green energy and transport: While fully electric vehicles remain exempt from duties, the government is introducing excise taxes on hybrid motor vehicles:
- 10% excise tax for engines between 1501cc and 2500cc.
- 20% excise tax for engines 2501cc and above.
The proposed amendments to customs and excise tax measures took effect on 28 February 2026.
Administrative measures and compliance
The government is tightening its grip on tax administration and financial oversight. A critical change for corporate entities is the extension of transfer pricing audits, which can now look back as far as 9 years.
- Automation of public fees: Effective 1 April 2026, the government will begin automating the collection of non-tax revenues, such as police fees and fines, to eliminate cash transactions and reduce leakages. This will be rolled out first with the Malawi Police Service before expanding to other agencies.
- Combating vandalism: To protect national infrastructure, an export duty on scrap metal is being introduced. This measure is specifically designed to deter the vandalism of telecommunications cables, railways, and bridges, which are often targeted for their metal content.
