In Malawi, the following allowances are generally considered taxable and are included as part of

an individual's taxable income for Pay As You Earn (PAYE) purposes:

1. Basic Salary: This is the primary wage earned by an employee and is fully taxable.
2. House Allowance: Any allowance given to an employee to cover housing costs is
considered taxable income.
3. Transport Allowance: This allowance, provided to an employee to cover transportation
expenses, is also subject to tax.
4. Airtime Allowance: If an employer provides an airtime allowance to an employee, it is
treated as taxable income.
5. Leave Allowance: Any leave allowance provided to an employee, including allowances
for sick leave or vacation, is taxable.
6. Overtime Pay: Additional pay received for overtime hours worked is taxable.
7. Bonus Payments: Bonuses or any additional rewards based on performance or any other
reason are taxable.
8. Commission: Any commission earned by an employee, whether related to sales or other
targets, is taxable.
9. Other Allowances (Non-Specific): Any other form of allowance or payment made by
the employer to the employee, unless explicitly exempted by the Malawi Revenue
Authority (MRA), is taxable.

Exempted Allowances:

 Reimbursement of Actual Expenses: If the employer reimburses an employee for

expenses such as travel or meals that are directly related to the work and are supported by
receipts, these may not be considered taxable income.
 Pension Contributions: Contributions made to approved pension schemes are generally
not taxable at the point of contribution.

Important Considerations:

 It is important to keep in mind that allowances are added to the basic salary and
considered as part of total income for tax calculations.
 The Malawi Revenue Authority (MRA) periodically updates tax rules, so it's advisable to
verify the latest regulations, especially regarding specific exemptions or special
allowances.

Example

In Malawi, the Pay As You Earn (PAYE) tax is calculated based on an individual's monthly
income, including basic salary and allowances. As of April 19, 2024, the PAYE tax rates are:

 First MWK 150,000: 0%

 Next MWK 350,000 (from MWK 150,001 to MWK 500,000): 25%
  Next MWK 2,050,000 (from MWK 500,001 to MWK 2,550,000): 30%
 Excess above MWK 2,550,000: 35%

Sample Calculation:

Given the following monthly income components:

 Basic Salary: MWK 150,000

 House Allowance: MWK 150,000
 Transport Allowance: MWK 40,000
 Airtime Allowance: MWK 10,000

Total Gross Income:

Total Gross Income=150,000+150,000+40,000+10,000=MWK 350,000\text{Total Gross

Income} = 150,000 + 150,000 + 40,000 + 10,000 = \text{MWK 350,000}

PAYE Calculation:

 First MWK 150,000: Taxed at 0% = MWK 0

 Next MWK 200,000 (from MWK 150,001 to MWK 350,000): Taxed at 25% = MWK
50,000

Total PAYE Tax:

Total PAYE=0+50,000=MWK 50,000\text{Total PAYE} = 0 + 50,000 = \text{MWK 50,000}

Net Pay:

Net Pay=350,000−50,000=MWK 300,000\text{Net Pay} = 350,000 - 50,000 = \text{MWK

300,000}

Summary:

 Gross Income: MWK 350,000

 PAYE Tax: MWK 50,000
 Net Pay: MWK 300,000

Please note that this calculation assumes no other deductions or exemptions apply. For precise
calculations, it's advisable to consult the Malawi Revenue Authority or a tax professional.

In Malawi, the provision of various benefits by an employer to an employee is considered a

deemed benefit and is subject to taxation. The taxable value of these benefits must be
calculated and included in the employee's total income for tax purposes. Here’s a detailed
breakdown of how each benefit is typically taxed under the Malawi Income Tax Act for the
2024 tax year.

Benefits and Taxable Value Calculations:

Let’s break down each of the benefits provided by the employer and how the tax is calculated for
each one.

1. Housing Provided by Employer (Company Housing)

 Taxable Value: The value of housing is typically calculated as 10% of the annual rent
the employer would pay to rent the property, or a similar amount depending on the
housing arrangement.

For example:

 Monthly Rent (market value): MWK 100,000

 Taxable Value: 10% of MWK 100,000 x 12 months = MWK 120,000 annually or
MWK 10,000 per month.

Taxable Benefit:

 Monthly taxable benefit = MWK 10,000

2. Motor Vehicle Provided by Employer

 Taxable Value: The value of a vehicle provided for personal use is typically calculated
based on the annual cost to the employer for providing the vehicle (i.e., the cost of
purchase or lease, insurance, maintenance, etc.). The exact value depends on the type of
vehicle and the usage.

Example:

 Monthly Lease Payment for Car: MWK 60,000 (assuming the employer leases a car)
 Taxable Benefit: MWK 60,000

Taxable Benefit:

 Monthly taxable benefit = MWK 60,000

3. Airtime Provided by Employer

 Taxable Value: If the employer provides an employee with free or subsidized airtime,
the cost of the airtime is treated as taxable income.

Example:
  Monthly Airtime Provided: MWK 5,000
 Taxable Benefit: MWK 5,000

Taxable Benefit:

 Monthly taxable benefit = MWK 5,000

4. Medical Scheme Provided by Employer

 Taxable Value: If the employer provides health or medical insurance, the value of the
insurance premiums paid by the employer is treated as taxable income.

Example:

 Monthly Premium Paid by Employer: MWK 8,000

 Taxable Benefit: MWK 8,000

Taxable Benefit:

 Monthly taxable benefit = MWK 8,000

5. Pension Contributions Provided by Employer

 Taxable Value: Contributions made by an employer to a pension scheme on behalf of

the employee are generally not taxable at the time of contribution. However, when the
pension is paid out in the future, it will be subject to tax.

Taxable Benefit:

 No immediate taxable benefit (unless it exceeds prescribed limits, which would need to
be checked against specific pension plan regulations).

6. School Fees Provided by Employer

 Taxable Value: The amount the employer pays for the employee’s children’s school fees
is considered taxable income.

Example:

 School Fees Paid by Employer: MWK 50,000 per child per month
 Taxable Benefit: MWK 50,000

Taxable Benefit:

 Monthly taxable benefit = MWK 50,000 (assuming payment for one child).
Total Deemed Benefits for the Employee:

Let’s assume an employee has the following benefits:

 Housing Provided by Employer: MWK 10,000

 Motor Vehicle Provided by Employer: MWK 60,000
 Airtime Provided by Employer: MWK 5,000
 Medical Scheme Provided by Employer: MWK 8,000
 Pension Contributions: No taxable benefit in the short term
 School Fees Provided by Employer: MWK 50,000

Total Taxable Benefits:

Total Taxable Benefits=10,000+60,000+5,000+8,000+50,000=MWK 133,000 per month\

text{Total Taxable Benefits} = 10,000 + 60,000 + 5,000 + 8,000 + 50,000 = \text{MWK
133,000 per month}

Employee's Gross Income Calculation:

Now let’s assume the employee has a basic salary and allowances in addition to the above
benefits:

 Basic Salary: MWK 150,000

 House Allowance: MWK 150,000
 Transport Allowance: MWK 40,000
 Airtime Allowance: MWK 10,000
 Deemed Benefits (as calculated above): MWK 133,000

Total Gross Income=150,000+150,000+40,000+10,000+133,000=MWK 483,000\text{Total

Gross Income} = 150,000 + 150,000 + 40,000 + 10,000 + 133,000 = \text{MWK 483,000}

PAYE Calculation for 2024:

Based on the Malawi 2024 PAYE Tax Bands:

 First MWK 150,000: 0% tax rate = MWK 0

 Next MWK 350,000 (from MWK 150,001 to MWK 500,000): 25% tax rate = MWK
350,000 x 25% = MWK 87,500
 Next MWK 2,050,000 (from MWK 500,001 to MWK 2,550,000): 30% tax rate (not
applicable in this case, as the total income is below MWK 500,000)

Total PAYE Tax:

PAYE Tax=0+87,500=MWK 87,500\text{PAYE Tax} = 0 + 87,500 = \text{MWK 87,500}

Net Pay Calculation:

Net Pay=483,000−87,500=MWK 395,500\text{Net Pay} = 483,000 - 87,500 = \text{MWK

395,500}

Summary of Calculation:

 Gross Income: MWK 483,000 (includes salary + allowances + deemed benefits)

 PAYE Tax: MWK 87,500
 Net Pay: MWK 395,500

Key Points:

 Deemed Benefits are considered taxable and must be included in the employee’s total
taxable income.
 The value of each benefit depends on the cost to the employer and is typically calculated
on a monthly basis.
 The PAYE tax is calculated based on the total income (including both salary and
benefits) according to the tax bands.

This is a general example, and exact calculations might vary depending on specific
circumstances or additional deductions (e.g., pension contributions, insurance). Always consult
with the Malawi Revenue Authority or a tax professional for precise advice tailored to your
situation.