VAT reforms to attract mining firms—Treasury

Treasury has announced plans to amend the value added tax (VAT) Act to encourage mineral exploration as well as allow mining companies in the exploration phase to register for VAT.

Minister of Finance, Economic Planning and Development Goodall Gondwe said on Friday in the proposed 2018/19 budget statement that the amended Act will come into effect at the beginning of the new financial year on July 1 2018.

The minister said government is hopeful that the amendment will provide a conducive environment for mining exploration investments in the country.

He said: “This [the amendment] will ultimately reduce costs as companies will be able to claim their input VAT. Investment in mineral exploration is risky and very expensive; hence, the need for government to provide a conducive environment.”

Gondwe said Treasury will also will revoke a provision under Electronic Fiscal Devices (EFDs) introduced in the 2014/15 fiscal year to allow recovery of the purchasing costs, which has now achieved its intended purpose.

He said VAT operators will still be able to expense the cost of purchasing EFDs under the Taxation Act.

Gondwe, however, said to enhance compliance and collection of VAT, a provision will be introduced under the VAT Act allowing for registration of VAT withholding agents who will be able to withhold the VAT at source and remit to Malawi Revenue Authority (MRA).

“Government will introduce a requirement under Section 34 of the VAT Act for submission of VAT returns to MRA on imported services. This measure will be applicable only to services delivered by non residents who are not registered for VAT and this will be a compliance measure,” he said.

Senior tax consultant at EK Tax Consultants, Emmanuel Kaluluma, said while widening the tax base would be difficult considering the state of the economy, compliance enforcements would be a sure way of improving domestic revenue collection

In its 2018 Economic and Fiscal Policy, Treasury said government is committed to implementing broad-based tax reforms to foster a simple, efficient, transparent and fair tax system.

In the 2018/19 proposed fiscal plan, it is expected that K940 billion will be collected through tax while K112.2 billion will be generated through non-tax revenue. n