Malawi has formally enacted its 2026–27 Budget legislation, introducing sweeping tax reforms that take effect from 15 April 2026 — most notably requiring foreign digital service providers such as Netflix, YouTube, and Facebook to charge and remit VAT at the standard 17.5% rate for the first time, alongside tighter transfer pricing rules, new levies on hybrid vehicles and motor insurance, and relief measures for small businesses.

RF Report

Malawi has enacted the legislation implementing the 2026–2027 Budget, which was published in the Official Gazette on 14 April 2026 and entered into force on 15 April 2026.

This follows after Malawi’s Minister of Finance, Economic Planning and Decentralisation presenting the 2026-27 Budget Policy Statement to the National Assembly of Malawi on 27 February 2026.

The package includes several key tax measures.

VAT on digital services

The key measure is that the Malawi Revenue Authority has confirmed the implementation of new VAT rules requiring non-resident suppliers of digital services to charge, collect, and remit VAT in Malawi at the standard 17.5% rate.

Foreign non-resident suppliers of digital services—such as video and music streaming, cloud computing, software subscriptions, online advertising, and e-books—are now required to register for VAT regardless of their turnover. The rules apply not only to direct suppliers but also to intermediaries and electronic marketplace operators. No input tax credits may be claimed in respect of these supplies, and the place of supply is determined based on the customer’s residence or place of establishment, irrespective of where the contract is concluded or payment is processed.

Introduced through the VAT (Amendment) Act 2026 and effective from 15 April 2026, the measure brings foreign-supplied digital services into Malawi’s VAT regime for the first time, with registration now open and enforcement aligned with existing compliance systems, including the Electronic Invoicing System (EIS).

Other notable measures include:

  • Corporate income tax clarification: The 40% corporate income tax rate is confirmed to apply to companies earning profits of MWK 5 billion or above.
  • Indefinite document retention for transfer pricing audits: Once a taxpayer receives a transfer pricing audit notice, they must retain all relevant documents indefinitely until the Commissioner General confirms in writing that the audit is closed.
  • Increased transfer pricing penalty: The penalty for failing to submit required transfer pricing documentation has increased from MWK 1 million (1,000 currency points) to MWK 40 million (40,000 currency points).
  • Mobile money & bank transfer levies: Any levy paid on mobile money or bank transfers is explicitly not an allowable deduction for income tax purposes.
  • Expanded VAT exemptions. A new zero-rated VAT category has been introduced covering laundry soap, passenger buses with a seating capacity of 45 or more (including the driver), and building materials used directly in the tourism industry.
  • Mineral royalty payment schedule: The payment and remittance of mineral royalties has shifted from a quarterly to a monthly basis.
  • Motor vehicle insurance levy: A new 3% levy on motor vehicle insurance premiums will be collected by insurers at the time a policy is issued or a premium is paid.

The budget also introduces changes to:

Income tax 

  • Capital gains tax on listed shares replaced by a flat 2% withholding tax on gross proceeds.
  • Gaming/lotteries are taxed on wagered amounts (10% for casinos, 15% for lotteries/sports betting) rather than winnings.
  • Residential rental income simplified to a 15% final withholding tax; commercial rentals unchanged.
  • Dam and farm water infrastructure is now deductible, supporting agricultural modernisation.

VAT

  • VAT registration threshold doubled from MWK 25 million to MWK 50 million, relieving small businesses.
  • Foreign digital services (Netflix, Facebook, YouTube, etc.) will now be subject to VAT.
  • Sugar exports attract VAT, refunded only on proof that export proceeds return to Malawi.
  • Tax refund claim window standardised to 6 months. Changes take effect 1 April 2026.

Customs & excise duties

  • Import surcharges were introduced to protect local industries (e.g., 30% on poultry/eggs, 40% on vegetables).
  • New excise duties on unhealthy/luxury goods: powdered soft drinks, wristwatches, perfumes, and video game consoles.
  • Hybrid vehicles are now taxed (10–20% excise); fully electric vehicles remain exempt. Took effect 28 February 2026.

Administration & compliance

  • Transfer pricing audits extended to a 9-year lookback period.
  • Non-tax revenues (fines, fees) to be automated starting 1 April 2026, beginning with the Police Service.
  • Export duty on scrap metal was introduced to deter infrastructure vandalism.