Paragraph 5(e) of the Fringe Benefits Tax Regulations stipulates that where an employer provides a loan to an employee at an interest rate lower than the applicable commercial rate, the resulting interest difference (saving) be recognized as a fringe benefit.

For purposes of determining the fringe benefit under the said regulation, the prevalent rate on the formal market for loans in the middle of each quarter (15th day of the second month of each quarter) is deemed to be the commercial rate. The prevalent rate on the 15th August 2020 was 24.6%.

The Malawi Revenue Authority (MRA) has notified all employers that for the quarter ending 30th September 2020, the applicable commercial rate for calculating Fringe Benefit Tax (FBT) on concessional loans provided by the employer to an employee is 24.6%.

All employers should, therefore, use this rate to compute the taxable value of the fringe benefit on concessional loans for the quarter ending 30th September 2020.

The Employer Tax Rate for Fringe Benefit has been amended and the new report template is now available.

Please refer to “What’s new” on your subscription Landing page for more details.

Update 13/11/2020

The fringe benefits tax rate remains 30%; it is not 24.6% as advised above.

The public notice from the Malawi Revenue Authority is referring to the interest rate which the employer will use to compare with the rate they actually give the employees in the calculation of the benefit. Not the tax rate. This interest rate fluctuates every quarter. To view this public notice, please click here.