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MALAWI
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Malawi Payroll and Employer of Record: Employment Contracts
When entering Malawi, all foreigners must have a passport valid for at least six months beyond their anticipated departure date. Citizens of certain countries, such as the United States and Japan, do not require a visa to visit Malawi for tourism purposes, thus not everyone will need one. Individuals who require a visa can apply for one upon arrival at the Embassy of the Republic of Malawi. Most visa applications are processed within three working days in this nation. Foreigners must also get a visitor’s permission (VP) or a business visit (BV) that permits them to stay for 30 days or fewer, with the possibility to extend the permit for up to 60 days.
PAID TIME OFF
Annual Vacation
Employees who work a six-day workweek are entitled to 18 days of paid annual leave (excluding weekends and public holidays) after 12 months of employment, whereas those who work a five-day workweek are entitled to 15 days (excluding weekends and public holidays). If an employee works for less than a year, the yearly leave should be proportional to the time spent on the job during that year. By mutual agreement, yearly paid leave can be postponed and accumulated, and collective bargaining agreements can expand annual leave to up to 30 days per year.
Sick
After 12 months of work, employees are entitled to 12 weeks of sick leave every year, providing they show a medical certificate. For the first four weeks, employees are paid in full, then for the next eight weeks, they are paid half.
Maternity
For every three-year duration of employment, female employees are entitled to eight weeks of fully compensated maternity leave. For pregnancy-related conditions, this leave can be extended.
Paternity
In Malawi, paternity leave is not a legislative benefit.
Family
Parental leave is not mandated by law.
National Holidays
Malawi has a total of 13 public holidays which are paid.
Other Paid Time Off
In Malawi, there is no other type of statutory leave.
STATUTORY EMPLOYEE BENEFITS
Unemployment
Unemployment insurance and benefits are not covered by the law.
Workers Compensation
The Workers’ Compensation Act, Cap 55:03 of Malawi’s Laws, is the department’s mandate. The Act’s major goals are to give compensation for injuries or diseases contracted by workers while on the job, as well as to offer compensation for mortality caused by such injuries or diseases. Second, unlike the current system of Individual Employer Liability, which pays a lump sum regardless of the extent of permanent incapacity one suffers, it is for the establishment and administration of a Workers’ Compensation Fund so that compensation is paid periodically and during the period of contingency out of the Fund.
Social Security
Employees contribute a minimum of 5% of their pensionable earnings to the National Pension Scheme (NPS), while employers contribute at least 10% of the employee’s pensionable earnings.
Retirement
The retirement age is set at 50 years old (minimum) and 70 years old (maximum), with no indication of whether this limit applies to men or women. At least 20 years of service/contribution are necessary to qualify for an old age pension. Every company must make sure that their employees are enrolled in the National Pension Scheme, which was established under the Act. Employers must contribute 10% of their payroll to the National Pension Fund, while workers must contribute 5%. There is just a brief mention of qualifying conditions, which state that a person may be eligible for pension benefits if they have worked for one company for a minimum of twenty years. There are no limitations on the amount of pension that can be paid.
Health
Medical Aid is a private option and is based on an employee voluntary basis to sign up or for the employer to offer it.
PRIVATE EMPLOYEE BENEFITS
Workers Compensation
Private workers compensation is available in Malawi.
Retirement
Private retirement/pension schemes are available in Malawi.
Health
Private healthcare is available in Malawi.
Insurance
Private life insurance is available in Malawi.
PERSONAL INCOME TAX
Tax Year
Malawi’s fiscal year runs from April 1 to March 31.
Tax Tables
Non-residents’ total income is taxed at a flat rate of 15%.
Taxable Income | Rates of Taxes |
0 – 1 200 000 | 0% |
1 200 000 – 12 000 000 | 25% |
12 000 000 – 36 000 000 | 30% |
36 000 000 – 72 000 000 | 35% |
72 000 000 + | 40% |
Taxation Method
Taxes are levied on income earned during the calendar year. The tax will be assessed on the income received for the year in the case of irregular income. The taxation method is progressive in Malawi.
Double Taxation
Malawi has multiple double taxation agreements.
Residence Requirements
If an employee is resident or expects to be resident in Malawi for an aggregate period of not less than 183 days in a year, or receives either a business residence permit, an employment permit, or a temporary residence permit, the employee becomes resident for Malawi tax purposes.
Payroll Calendars
- Employees are not required to be paid on a set schedule.
- Payrolls can be done weekly, biweekly, fortnightly, or monthly.
Rebates & Tax Credits
Individuals in Malawi are not eligible for any additional substantial tax benefits or incentives.
Health Insurance
In Malawi, the public, private for profit (PFP), and private not for profit (PNFP) sectors all provide health services. In the public sector, health services are provided free of charge at the point of use. The health system in Malawi is divided into four levels: community, primary, secondary, and tertiary. Through a well-established referral system, these many levels are linked to one another. District councils are responsible for community, primary, and secondary level care. The District Health Officer (DHO) is in charge of the district’s health-care system and reports to the District Commissioner (DC), who is the district’s Controlling Officer.
Community level
Health surveillance assistants (HSAs), health posts, dispensaries, and maternity clinics offer health services at the community level. Each HSAs are responsible for a catchment area of 1,000 people, and there are now 7,932 HSAs on the job, with 1,282 Senior HSAs supporting them. Door-to-door visits, village and outreach clinics, and mobile clinics are how HSAs primarily deliver promotive and preventive health care (Ministry of Health, 2011).
Primary level
Health services are provided at the primary level via health centers and community hospitals. Outpatient and maternity services are provided through health centers, which are designed to serve a population of 10,000 people. Health centers are smaller than community hospitals. They do minor treatments and provide outpatient and inpatient care. They have a bed capacity of up to 250 beds.
Secondary school
District hospitals and CHAM hospitals with similar capacity make up the secondary level of treatment. Secondary level health care facilities account up 9.5 percent of all health care institutions, according to Table 6 in the HSSPII. They provide referral services to health centers and community hospitals, as well as outpatient and inpatient treatments to their surrounding communities.
Tertiary education
Central hospitals make up the tertiary level. They should ideally provide regional specialized health services as well as referral services to district hospitals in their area. In practice, however, due to a lack of a gate-keeping mechanism, roughly 70% of the services they provide are either primary or secondary services (Ministry of Health, 2011).
Unemployment
Unemployment insurance and benefits are not covered by the law.
Social Security
Employees contribute a minimum of 5% of their pensionable earnings to the National Pension Scheme (NPS), while employers contribute at least 10% of the employee’s pensionable earnings.
PAYROLL ELEMENTS
Income
Salary, earnings, bonuses, overtime pay, taxable benefits, allowances, and certain lump sum perks are examples of remuneration (revenue from employment). Profits or losses made by a company or trade. Income or profits derived from an individual’s status as a trust beneficiary.
Bonuses
Bonuses are added to an individual’s monthly income. Gratuities paid as a result of a termination, severance, settlement, or mutual agreement must be taxed at a rate determined by the authority in accordance with a tax directive.
Allowances
Capital allowances, which are available to companies and individuals in business, are allowed as follows:
- Industrial and farm buildings, hotels and docks
- Staff Housing
- Plant, Machinery and Equipment
- Furniture and fittings
- Vehicles
- Computers
Benefits in Kind
Any asset, service, or other in-kind benefit offered by or on behalf of an employer to an employee that includes an element of personal benefit to the employee is considered a fringe benefit. FBT must be paid by the employer who provides these benefits. FBT is calculated at a rate of 30% of the taxable amount.
Housing fringe advantages are assessed. The greater of I 10% of pay if the house is unfurnished, (ii) 12 percent of income if the house is furnished, or (iii) the rental value determines the taxable amount of a housing fringe benefit. The taxable value of the house occupied by the employee is lowered by 50% if the residence is owned by the employer. The FBT on motor vehicles is only applicable to vehicles that are assigned for use by employees and does not apply to pool cars or automobiles that are entirely commercial in character. The taxable value of the car is 15% of its original cost.
Fees for school (for children and dependents)
Where payment is made directly to the educational institution, 50% of the cost to the employer for school fees is a taxable benefit. Employee education allowances are not subject to FBT since they are considered part of their regular compensation and are taxed as such. Utilities, home supplies, vacations, travel, and domestic services are all examples of domestic services.
The overall cost to the employer is the taxable value of utilities (e.g., electricity, water, and telephone expenditures), home products, vacations, travel, and domestic services (e.g., gardener, cook, house boy, guard, nanny). The expense of a gardener, security guard, or watchman, save for a residence owned by the employer, is not a taxable benefit.
Investment Income
Capital Gains
The cost of the asset is adjusted by the appropriate consumer price index to determine the tax basis for capital gains (inflation index). The taxable gain is then subject to corporation tax at the rate that applies to the specific entity. Capital gains from the sale of personal and domestic assets that are not utilized in the course of business are free from corporation tax. Capital gains from the sale of shares traded on the Malawi Stock Exchange that have been held for longer than a year are not taxed.
Dividend
Dividend income is free from corporation tax; nevertheless, dividends received from Malawi sources are subject to a final tax of 10% dividend WHT. Although the term ‘final’ has not been defined, it is understood to suggest that dividend WHT cannot be used to offset an income tax due. Within 30 days after the declaration, a return for dividends must be submitted with the tax authorities, and the WHT must be remitted within 180 days of the declaration.
Interest is added to the other types of income and taxed at the rate that applies to the individual who earns the money. Unless the earner is exempt, any interest earned is subject to WHT. Any interest-free loans and balances are subject to considered interest. For the lender, the considered interest is taxable income.
Royalties
Royalty income, with the exception of mining royalties, is added to other income and taxed at the rate that applies to the individual who earns it. When a non-resident receives royalties from a mining project, they are taxed at a rate of 20%.
Retirement Funding
The retirement age is set at 50 years old (minimum) and 70 years old (maximum), with no indication of whether this limit applies to men or women. At least 20 years of service/contribution are necessary to qualify for an old age pension. Every company must make sure that their employees are enrolled in the National Pension Scheme, which was established under the Act. Employers must contribute 10% of their payroll to the National Pension Fund, while workers must contribute 5%. There is just a brief mention of qualifying conditions, which state that a person may be eligible for pension benefits if they have worked for one company for a minimum of twenty years. There are no limitations on the amount of pension that can be paid.
Health Insurance
In Malawi, the public, private for profit (PFP), and private not for profit (PNFP) sectors all provide health services. In the public sector, health services are provided free of charge at the point of use. The health system in Malawi is divided into four levels: community, primary, secondary, and tertiary. Through a well-established referral system, these many levels are linked to one another. District councils are responsible for community, primary, and secondary level care. The District Health Officer (DHO) is in charge of the district’s health-care system and reports to the District Commissioner (DC), who is the district’s Controlling Officer.
Risk Insurance
N.A
Taxable Income
Individuals will be taxed solely on Malawi-sourced income, not on passive foreign income, regardless of where they live. All remuneration, including allowances, is taxed under the pay-as-you-earn system (PAYE). The capital gain is calculated by subtracting the cost (adjusted for inflation) from the sale profits. Capital gains from the sale of shares traded on the Malawi Stock Exchange that have been held for longer than a year are not taxed. PIT rates are applied to investment income.
Allowable Deductions
- Expenses that are not related to your business are not deductible.
- Personal allowances are not available in Malawi.
- Allowable deductions for income from business operations are those costs that are not capital in character and are expended entirely, exclusively, and necessarily in the creation of the income.
PAYROLL TAXES AND EMPLOYER CONTRIBUTIONS
Payroll Taxes
Employees contribute a minimum of 5% of their pensionable earnings to the National Pension Scheme (NPS), while employers contribute at least 10% of the employee’s pensionable earnings.
Unemployment
Unemployment insurance and benefits are not covered by the law.
Social Security
Employees contribute a minimum of 5% of their pensionable earnings to the National Pension Scheme (NPS), while employers contribute at least 10% of the employee’s pensionable earnings.
Workers Compensation
The Workers’ Compensation Act, Cap 55:03 of Malawi’s Laws, is the department’s mandate. The Act’s major goals are to give compensation for injuries or diseases contracted by workers while on the job, as well as to offer compensation for mortality caused by such injuries or diseases. Second, unlike the current system of Individual Employer Liability, which pays a lump sum regardless of the extent of permanent incapacity one suffers, it is for the establishment and administration of a Workers’ Compensation Fund so that compensation is paid periodically and during the period of contingency out of the Fund.
ADMINISTRATION
Income
Monthly pay-as-you-earn (PAYE) returns must be filed by employers within 15 days after the end of the month. The employer is responsible for PAYE remittance and annual reconciliation for employment income. If employment is the only source of income, the employee does not need to file a tax return. Annual tax returns for business income must be filed within 180 days of the end of the fiscal year, accompanied by financial statements.
PAYE is paid on a monthly basis in the case of employment. Provisional tax is paid on a quarterly basis by enterprises. The total tax payments made during the four quarters should not be less than 90% of the total tax burden for the year, with the remaining 10% paid when the return is filed. In Malawi, tax can be paid electronically through commercial banks.
Payroll Taxes
Employees contribute a minimum of 5% of their pensionable earnings to the National Pension Scheme (NPS), while employers contribute at least 10% of the employee’s pensionable earnings.
Unemployment
Unemployment insurance and benefits are not covered by the law.
Social Security
Employees contribute a minimum of 5% of their pensionable earnings to the National Pension Scheme (NPS), while employers contribute at least 10% of the employee’s pensionable earnings.
Workers Compensation
The Workers’ Compensation Act, Cap 55:03 of Malawi’s Laws, is the department’s mandate. The Act’s major goals are to give compensation for injuries or diseases contracted by workers while on the job, as well as to offer compensation for mortality caused by such injuries or diseases. Second, unlike the current system of Individual Employer Liability, which pays a lump sum regardless of the extent of permanent incapacity one suffers, it is for the establishment and administration of a Workers’ Compensation Fund so that compensation is paid periodically and during the period of contingency out of the Fund.
Statutory Benefits
Malawi has a public healthcare system that is free of charge for its citizens. It also has a social security fund that offers a pension contribution. Employers could, however, provide additional health benefits or provide employees with a monthly stipend to help them obtain their own health care.
Employee Benefits
Many benefits are likely to be included in employment contracts, it is highly recommended to start with the benefits that are legally guaranteed. Malawi has 13 paid public holidays and employees are entitled to these days. There are also 16-18 paid leave every year dependent if the employee works a 5 or 6 day week. Women are also entitled to 8 weeks of fully compensated maternity leave. There is currently no mandatory paternity leave in Malawi.
LEGISLATION
- Employment Act 2000
- Labour Relations Act
STATUTORY BODIES
- Health Regulatory Authority.
- Kachere Rehabilitation Centre.
- Lilongwe University of Agriculture and Natural Resources.
- Malawi Broadcasting Corporation.
- Malawi College of Health Sciences.
- Malawi Communications Regulatory Authority.
- Malawi Council for the Handicapped.
