Transfer pricing - Malawi

Global transfer pricing guide

01 Jan 2025 2 min read

This publication provides a high-level overview of Malawi's transfer pricing rules and outlines who to contact for expert guidance in this area.
Contents

Introduction to transfer pricing in Malawi

  • Malawi enacted the Taxation (Transfer Pricing Documentation) Regulations 2017, as well as the Taxation (Transfer Pricing) Regulations 2017.

  • The TP regulations apply to cross-border transactions between related persons and are based on OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations.

  • Malawi’s TP legislation places the onus on taxpayers to self- assess their TP positions and to be able to demonstrate the arm’s length price applied in the intragroup transactions. Unlike the OECD guidance, the Malawi TP rules includes determination of arm’s length transactions with domestic related parties. 

Transfer pricing documentation

  • The Malawi TP documentation rules require the taxpayer to prepare and file the TP return and the CbC report.

  • There is no specific requirement to prepare and file the TP master file and local file, documentation must be submitted within 45 days after a written request issued by the Commissioner General of the MRA.

  • Transactions conducted with related parties that operate in low tax jurisdictions (tax paradise).

  • Persistent losses in any entity can be a reason of a full tax audit with a risk of potential significant tax adjustment.

  • Tax deductions for intra-group head office charges and interest rates on intra-group loans are capped by tax regulations.

  • Where the Malawi Revenue Authority has requested for documentation, the documentation rules stipulate that "Any person who fails to comply with a notice served on him by the Commissioner General under regulation 5 shall be liable to":

  • an initial penalty not exceeding the Malawi Kwacha equivalent of 1,400 United States Dollars at the prevailing exchange rate; and

  • further penalties not exceeding the Kwacha amount equivalent of 2100 United States Dollars at the prevailing exchange rate to for each period of one month where the failure continues.

Economic analysis and how to demonstrate an arm’s length result

  • The TP legislation is placing the onus on taxpayers to self - assess their TP positions and to be able to demonstrate the arm’s length price applied in the intragroup transactions.

Advance Pricing Agreements (APAs), dispute avoidance and resolution

  • There is no APA program available in Malawi.

Exemptions

  • Generally all entities whose related party transaction threshold is below 135,000 United States Dollars to Malawi equivalent at the prevailing bank lending rate are exempted from a TP perspective but to the satisfaction of the Commissioner General when such transactions are presented to him.

Related developments

  • No specific TP provisions in relation to Covid-19. 

Contact us

For further information on transfer pricing in Malawi please contact:

Hastings Bofomo Nyirenda

T: +265 111 820 744

E : hastings.nyirenda@mw.gt.com

TAGS