Law firms tasked on VAT
The Malawi Revenue Authority (MRA) has approached several law firms in the country, warning them of the consequences for failure to remit value added tax (VAT) and use of the Electronic Fiscal Devices (EFDs) as mandated under the VAT (Electronic Fiscal Device) regulations.
MRA’s action comes after Parliament amended the VAT Act which, among others, indicated that businesses which do not issue EFD receipts in an attempt to evade tax would be punished with K500 000 minimum fine.
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Although there is no indication from MRA of how many law firms were visited, two law firms confirmed that MRA came to their offices to check if the companies were EFD compliant and found that they were not.
According to the VAT (EFD) Act, businesses which fail to account for or remit VAT or fail to use the EFD face penalties such as a minimum K500 000 and maximum K1 million fine and imprisonment for two years.
MRA targeted the law firms which had an annual capital of K10 million and above for VAT compliance.
“Yes, it is very true that MRA came. It is a requirement that as businesses, we should register for VAT, but most as you can tell were not aware. The visit was a matter of informing us of our tax obligations and we will comply,” said one lawyer.
Another source indicated that it was the intervention of Malawi Law Society (MLS) which bailed out the law firms from being closed or incur hefty penalties for not complying with the law.
But while not confirming the visit to the law firms, MLS honorary secretary Khumbo Soko said the EFDs were a matter of legal requirement for those who have registered with MRA for VAT.
“Our members know this and are taking steps to fully be compliant with the law. VAT payment is for those who have registered for VAT. Firms need to project their revenue or profit in a year and if you make more than that [requirement], MRA requires you to register for VAT,” Soko said.
Law firms which register for VAT are expected to purchase the machine from suppliers such as Gestetner before programming it with codes pertaining to the financial transactions that the business carries out on a day-to-day basis.
The EFD is connected to the MRA system and transmits daily transactions through a GPRS link.
MRA did not respond to a questionnaire sent on Thursday to MRA deputy director (corporate affairs) Steven Kapoloma and communications and marketing manager Wilma Chalulu. n
