MRA raises applicable rate on fringe benefits
The Malawi Revenue Authority (MRA) has raised its applicable rate on fringe benefits from 29.75 to 30 percent.
This only applies on concessional loans, according to a statement released by the tax collector and signed by its Commissioner General John Biziwick.
In an interview on Monday, MRA public relations and communications manager, Steven Kapoloma, said they were only abiding by the provisions of fringe benefits regulations.
“The adjustment is in line with the fringe benefits tax regulations. That aside, we are following market trends.
“It is, however, difficult to say whether this will improve our tax on fringe benefits collection because most employers are opting out of fringe benefits,” said Kapoloma.
Employers Consultative Association of Malawi (Ecam) executive director Beyani Munthali asked for more time to comment on the upward adjustment in applicable rate on fringe benefits.
Although MRA met its October overall tax collection target of K22.59 billion, it missed its targets in fringe benefits and non-resident tax by K31.19 million. But Kapoloma attributed this to changes in employee benefits structure.
He added that some companies are opting to pay their employees in cash as opposed to fringe benefits.
“Employers find it convenient to pay their employees lump sum amounts than fringe benefits. This has reduced the amount of tax on fringe benefits,” he said.
Malawi’s tax benefits regulations stipulates that where an employer provides a loan to an employee at an interest rate lower than the prevailing commercial rate, the resulting interest difference or saving is recognised as fringe benefit.
And for the purpose of determining the fringe benefit under the said regulation the lowest ruling rate on the formal market for loans in the middle of the quarter is deemed to be the commercial rate. In the quarter ended December 31, the lowest ruling rate on November 15 2012 was 30 percent.
In July, the applicable rate was 17.75 percent, raised to 29.75 percent in October before being pushed to the current 30 percent.
