* Expenses incurred in management of property and payment of provisional tax to be refunded upon being included in annual tax return
* Employees renting residential properties are not allowed to withhold tax when making payments to landlords
By Duncan Mlanjira
The residential rental income has a waiver of K2.04 million as taxable income and and that all expenses that are incurred in the management of the properties, including payment of provisional rental income tax, shall be refunded upon being factored and verified in the property owner’s annual tax return.
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At a media engagement yesterday convened by Corporate Affairs department, Malawi Revenue Authority (MRA) maintained that rental income from residential houses and business premises is taxable as indicated in the Taxation Law under Section 11, which states that; ‘The income of a person shall include the total amount in cash or otherwise, including any capital gain, received by or accrued to or in favour of the person in any year or period of assessment from a source within or deemed to be within Malawi and his assessable income shall be that income excluding any income that is exempt from tax under this Act’.
The call by the MRA advising property owners to get registered in order to pay income tax has drawn a backlash from property owners thinking that the law has just been created by the tax collector, but this has been in the Taxation Law all along that income tax is collected through pay-as-you-earn (PAYE), which is honoured by the employer; withholding tax (paid by the consumer); provisional tax (by the supplier/taxpayer); and advance income tax by an importer.
Thus the MRA, from November last year, has been encouraging all residential and commercial property owners to get register through the Msonkho Online Portal to obtain a tax identification number (TIN) in order to declare rental income in their annual tax return.
The media engagement
This comes after the tax collector took note that some property owners are not registered for tax purposes and thus warns that failure to declare income is an offence under revenue laws. The deadline for registration was set for January 2026 but has been extended to May 2026.
So both residential and commercial landlords are mandated to register for tax in order to submit tax return, pay provisional tax and to settle tax upon receiving a notice of tax assessment from the MRA.
MRA explained that a tax return is a form available in digital format that a taxpayer is required to use for declaration of income that declares income; claims expenses incurred and computes the expected tax liability.
The landlord is thus expected to declare income that was generated at the end of the year, the expenses incurred in the management of the properties, the withholding tax that a tenant paid to MRA on their behalf as well as the provisional tax.
The expenses, once verified by MRA, along with the withholding tax and provisional tax shall then be deducted from the income declared, which becomes taxable but in the event that profit is less than K2.4 million, then it is not taxable and that the withholding and provisional taxes are refunded.
Profit beyond K2.4 million attracts 30% as rental income tax and that all expenses paid and the withholding tax paid by tenants mostly under commercial buildings is credited against income tax charged.
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MRA also explained that since most of the residential buildings are occupied by individuals that are employed, the tenants are not allowed to withhold tax on making payments to landlords as they are not registered at MRA.
But if the house is occupied by a business person, who has an MRA taxpayer personal identification (TIN) number, the tenant is allowed by law to withhold tax.
Rental payment for commercial building — defined as a shopping centre with a collection of independent retail stores, services, and a parking area conceived, constructed and maintained by a management firm as a unit, usually rented by business persons — is thus subjected to withholding tax.
However, the amount withheld is not final tax since the landlord or property owner is allowed to claim it as a credit upon submission of tax return presented in the annual financial accounts.
The commercial property is also subject to value-added-tax (VAT) thus the landlord is expected to charge VAT on invoicing the tenant, who is supposed to have an MRA TIN.
The emphasis is that any income, including that from residential property owners, is supposed to earn tax just like anybody else under employment and it should be taken into consideration by the property owners that their tenants pay tax from their income and so too they are supposed to contribute towards broadening the tax base, whose revenue is meant to provide for better social services such as in health, education and infrastructure.
The MRA will carry out a nationwide exercise in phases to identify property owners and for those who want to register voluntarily to avoid statutory penalties, are encouraged to visit their nearest MRA office or to call toll free number 672 of WhatsApp +265 996 278 690.
MRA also indicated that following the publication of the Value-Added-Tax (Electronic Invoicing System) Regulations, 2025 on January 9, 2026, the tax collector has migrated to the Electronic Tax Invoicing System (EIS) — replacing the Electronic Fiscal Devices (EFDs) for issuing tax invoices.
The electronic invoicing is a system which generates, sends, receives and stores invoices, receipts or tax invoices in digital form, which is integrated with the point of sale (POS).
The reason for implementing the EIS is to improve tax compliance and revenue collection, prevent under-reporting of sales by businesses, reduce VAT evasion and fraud but also ease burden on small businesses since they can use smartphones because there will be no need to buy or replace EFDs.
It is also to improve MRA’s efficiency, accuracy and transparency of operations by getting business sales data in real time which can facilitate quick MRA audits and checks.
