MCCCI proposes to raise threshold of 10% corporate income tax on business profits to K30 billion from K10 billion

* The K10 billion threshold in all sectors is a barrier to growth and discourages potential investors

* It is one of the primary tax policies currently hindering substantial investment across all sectors

By Duncan Mlanjira

Considering the devaluation of the Malawi Kwacha and the inflation experienced since the introduction of the threshold of 10% corporate income tax on business profits exceeding K10 billion in all sectors, the government has been asked to consider raising the threshold to K30 billion.

This is a suggestion from Malawi Confederation of Chambers of Commerce and Industry (MCCCI) made at the final 2025-2026 national pre-budget meeting in Blantyre, saying the K10 billion threshold “is a barrier to growth and discourages potential investors”.

MCCCI’s Chief Executive Officer, Daisy Kambalame said after actively engaged with members in the business community in developing the the proposals for consideration to be consolidated in the 2025-2025 National Budget, one of the primary tax policies currently hindering substantial investment across all sectors includes the K10 billion threshold.

“We commend the government for actively considering the perspectives and needs of the private sector,” she said. “This collaborative approach is crucial for fostering business environment and resilience in our economy.

Tax stamps

Regarding the implementation of the tax stamp — while recognising the government’s efforts “to enhance revenue collection, ensure compliance and tackle smuggling — the private sector has observed some inconsistencies in the implementation process that require urgent attention.

“One significant issue is the application of a uniform stamp price on products with varying selling prices. This approach creates disparities and imposes an undue financial burden on businesses, particularly those with lower-priced products.

“Such inconsistencies undermine the initiative’s effectiveness and may affect business performance. Therefore, MCCCI respectfully requests a review of the digital tax stamps initiative regarding pricing.

“We propose that the government engage in extensive consultations with all affected businesses and stakeholders to ensure the system is both fair and effective.”

MCCCI also stresses that fostering the growth of the manufacturing sector should be a key priority for the government in the 2025-2026 budget, emphasising that “by stimulating growth in this sector, we can effectively reduce reliance on imports and increasing export basket, thereby alleviate pressure on our foreign exchange reserves”.

On fostering the development of emerging industries, MCCCI proposes that different rates should apply to local fruit wines and imported wines; by reducing the excise rate on local fruit wines from 95% to 10%.

This is “to support the growth of this emerging industry and bolster the livelihoods of domestic small-scale fruit suppliers and additionally, to ensure strict monitoring of imported wines while maintaining the excise rate on these imports at 95% to protect local producers”.

“The local feed industry is experiencing lower demand for wheat bran and soya de-oiled cake, primarily due to their higher prices compared to maize and maize bran.

“This price disparity is largely influenced by value added tax (VAT) applied to these commodities. Removing this tax could significantly benefit the local feed industry by increasing the competitiveness of wheat bran and soya de-oiled cake.”

Manufacturing and processing industries

The government is being asked to implement some tax incentives for manufacturing and processing industries “that utilises a significant proportion of local inputs in their production”.

“The current excise tax rate of 110% on spirits is driving an increase in smuggling activities involving lower-cost spirits from neighboring countries. To align our tax policies with those of the region and effectively combat smuggling, we recommend reducing the excise tax to 60%.”

Given the challenging environment in which businesses are operating, the MCCCI says “it is crucial for them to seek short-term protection through enhanced import substitution strategies”.

Government should impose a surcharge on imported plastic cups and plates to safeguard the local manufacturing industry. Introduce a surcharge on ball point pens as part of promoting industrialisation through import substitution.

“The government should remove the 10% excise tax on Maheu, as the product is not subject to excise in neighboring Zambia and Mozambique, making our local product uncompetitive.

“As a result, a similar product is routinely smuggled into the country, leading to job and revenue losses. It is expected that removing the excise tax and effectively addressing and eliminating smuggling could lead to new investments in the industry totaling, at least, K500 million.

Construction

“The 2023–2024 budget’s increase in the withholding tax rate for contractors and subcontractors in the building and construction industries from 4% to 10%, negatively affected the sector, which functions on narrower profit margins.

“Therefore, the 10% withholding tax should be revised downward. Furthermore, the government to ensure timely payments to contractors, as delays in payments severely disrupt business operations and cash flow.”

On finance, banking and insurance, in order to enhance the availability of capital in Malawi, MCCCI is of the view that “it is essential to implement a range of incentives and establish a supportive regulatory framework”.

“The newly introduced Foreign Exchange Control (2024) regulation is likely to have negative impact on the availability of foreign exchange for the private sector.

Under this regulation, the mandated currency conversions will primarily benefit the Reserve Bank of Malawi (RBM), which will serve as the ultimate buyer of these conversions.

“The Confederation urges the government to provide clarity on the regulation, particularly regarding the mechanisms through which private sector players can access foreign exchange, as the introduced regulations are ambiguous.”

Kambalame further pointed out that the Malawi Stock Exchange (MSE), which currently have only 16 companies that have been listed since its establishment in 1994, “places MSE as one of the smallest in the region in terms of the number of listed companies”.

“There is a need to incentivise firms to enlist on MSE. Introduce a preferential corporate tax of 25% for a period of up to 3 years upon listing when a company raises new capital for the business, i.e., an offer for subscription.

Banking and insurance sector

“There should be a special schedule in the VAT Act providing direction and practice notes on VAT on banking services. Banking services should be properly defined with reference to the practical situation on the ground.

“The theoretical nature in which the amendment has been crafted creates problems of implementation and practice. Provide a schedule in the Taxation Act to deal specifically with the life insurance business and how income, expenditures, and losses would be recognized for tax, rather than using the generally deductible provisions for this highly specialized business.

On ICT, MCCCI says the “Information Age has driven a profound digital transformation across various industries [but] the cost of telecommunications in Malawi continues to be high”.

“This can be attributed to taxes in the sector among many other factors. To improve the sector, government should consider revising the 15% non-resident tax charged on Internet and 10% excise tax charged on data services.

Health

MCCCI maintains that the health sector in Malawi “is experiencing growth and has the potential to attract medical tourists, contributing significantly to the generation of much-needed foreign currency”.

“However, the sector is currently grappling with several challenges, one of which is the inability to import essential medical equipment due to unavailability of foreign exchange.

“To address these challenges, hospitals should be granted a waiver that allows them to accept foreign currency payments from international clients.

Agriculture

The private sector takes cognizance that “expanding irrigated land is a crucial strategy to strengthen the resilience of the agricultural sector against the impacts of climate change” — thus MCCCI recommends the following interventions to enhance agricultural productivity and commercialisation, aligning with the first pillar of MW2063 national vision:

* The Government introduced incentives aimed at promoting agricultural diversification and commercialisation, particularly through the promotion of irrigation farming;

* These incentives include zero import duty, import excise, and import VAT on essential equipment such as PVC, asbestos, and galvanized pipes, just to mention a few

* While these incentives are commendable, it is crucial to ensure a balanced approach that protects the domestic pipe manufacturing industry.

Small and medium enterprises (SMEs)

The government is asked to consider reducing the payment period for SMEs for their services, “which is currently extremely long”, making this delay to cripple them financially and leads to the government facing higher prices, as companies overcharge to compensate for such delays.

Other budget proposals by the MCCCI includes on the taxation system, that it should “allow for advance rulings regarding ambiguous provisions of the tax code or new projects, products, and agreements of taxpayers”.

“These rulings should be binding between the taxpayer and the government of Malawi and should be immune to subsequent legislative changes. Eliminate the requirement for manufacturers’ authorization at the initial stages of public procurement, allowing it to be obtained only at the contracting phase.

“This approach will facilitate greater participation of indigenous companies in Malawi, thereby accelerating their inclusion in the procurement process.”

In her preamble, Kambalame highlighted that “the economic environment in Malawi remains challenging for businesses — primarily due to persistent macroeconomic imbalances that hinder growth and stability”.

Consequently, economic growth forecasts have been revised downward, now projected at a modest 1.8%, down from an earlier estimate of 3.2% at the start of 2024.

“According to survey conducted by MCCCI, 82.9% of the businesses’ capacity utilisation was below 75%. Throughout the year, businesses grappled with a myriad of macroeconomic challenges, including;

1. Limited availability of foreign exchange for businesses caused by negative balance of payment; created challenges in importing essential raw materials for production. Since 2023,  the reserves have been below the recommended three month of import cover

2. High inflation environment in 2024, with headline inflation averaging 32.7% as of November 2024 — driven by food inflation. This situation is further exacerbated by increasing production costs for businesses.

3. Tight monetary policy, characterised by a policy rate of 26%, significantly raises the cost of financing for business operations — limiting private sector growth.

4. Low share of private sector credit: The 2024/2025 Financial Year ’s overall balance was estimated at a deficit of K1.43 trillion, which is 7.6% of GDP.

It was estimated that the deficit will be financed through domestic borrowing amounting to K1.28 trillion representing 89.5%. As a result, low share of credit to private sector — due to crowding out effect caused by government borrowing to finance budget deficit — reduce investments for production.

MCCCI also commended the government for some initiatives factored in the 2024-2025 budget, that allowed the Malawi Defence Force, Malawi Police Service and Malawi Prisons to import duty-free fabrics and accessories for making uniforms.

The government also reduced excise tax on clear beer made from sorghum and maize from 40% to 20% and to safeguard local industries, it has raised the import duty on sacks from 20% to 25%.

The phasing out the electronic fiscal devices (EFDs) in favour of a new electronic billing system was also commended as well as the introduction of 10% surcharge, which has been implemented on sacks used for cement packaging.

MCCCI, whose current president is ICT business guru, Dr. Wisely Phiri, is as an apex body of the private sector in Malawi that exists to advance the interests of businesses in Malawi and ensure the provision of value-added services.

Kambalame stressed that the private sector “serves as the engine of the economy, and it is essential for Malawi to create a dynamic and competitive private sector”.

“This will be supported by a business environment that fosters both foreign and domestic investment, characterised by a government budget that promotes not only growth and development but also fairness and equality.

“The proposals from the private sector focus on stimulating private sector performance, encouraging import substitution, and providing a supportive regulatory framework.”

Other presentations, similar in nature that advocate for an investment budget, were made by Institute of Chartered Accountants (ICA) and Bankers Association of Malawi (BAM) while the floor was also given to other stakeholders.

In his closing remarks, the Minister of Finance said he was impressed with the level of participation at the Blantyre meeting as well as the other two in Lilongwe and Mzuzu and assured that the contributions by the stakeholders — who are drivers of the country’s economy — would be consolidated in the 2025-2026 National Budget.