PROVISIONAL TAX
INTRODUCTION
Provisional Tax system was introduced
in1988.
This was done to enable the Government
collect income tax in advance from
taxpayers.
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PROVISIONAL TAX
This is an advance payment of income tax in
quarterly instalments
All taxpayers are subject to PT except
taxpayers whose income in the tax year:
1. Does not exceed the tax free threshold.
2. Exceeds the tax free threshold but is all from
employment and or pension and PAYE was
deducted.
3. Exceed the tax free threshold and to include
non-employment and/or non-pension income
of not more than the tax free threshold.
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Provisional Tax (cont’d)
Every taxpayer must make an estimate of
taxable income at the beginning of every
year based on prior year.
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Payment of Provisional Tax
PT is payable quarterly and is due within 25
days of the quarter end except for
taxpayers with seasonal income.
Where the amount of provisional tax for the
relevant year of assessment is based on the
income tax actually paid for the previous
year of assessment in accordance with
section 84A(3)(a), the quarterly instalments
of provisional tax shall be in equal amounts.
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Payment of Provisional Tax
Where the amount of provisional tax for the
relevant year of assessment is based on the
taxpayer’s own estimate of taxable income
for that year of assessment in accordance
with section 84A(3)(b)-
(i) the first quarterly instalment shall be an
amount not less than one fifth of the amount
of provisional tax as initially estimated.
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Payment of Provisional Tax
(ii) the second or any subsequent quarterly
instalment may be varied to an amount
greater or lesser than the amount of the first
or previous instalment in accordance with
variations in the income from time to time
estimated by the taxpayer to be earned for
the year of assessment in question
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Payment of Provisional Tax
For the avoidance of doubt, a taxpayer may,
from time to time during the year of
assessment, review the estimate of provisional
tax made at the beginning of that year or
subsequent thereto and may vary the amount
of his quarterly instalments accordingly
provided that at the end of the year of
assessment the aggregate of the instalments
of provisional tax payable shall be an amount
equal to not less than 90 per cent of the
actual tax liability for the year of assessment
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Payment of Provisional Tax
Every payment of provisional tax instalment
shall be accompanied with a complete
provisional tax payment form in Form PTF 1
set out in the Schedule
In calculating the amount of any instalment
of provisional tax, a taxpayer may make
such calculation in accordance with the
particulars prescribed in Form PTF 2 set out
in the Schedule.
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SEASONAL INCOME: S84A
A taxpayer whose income for the year of
assessment is estimated to include 75% or
more income meeting the definition of
seasonal income must notify the
Commissioner General in writing of the
time(s) within that year of assessment when
he shall pay the provisional tax in whole or
in part.
This notification must be done before the
end of the first quarter of that year of
assessment.
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Seasonal Income (cont’d)
Seasonal income is defined as income that
is ordinarily received from a given source
during any period of six consecutive months
of the year of assessment of the person
receiving such income S84A (4) .
The taxpayer shall determine the
provisional tax payable during the year of
assessment by estimating the current year’s
tax liability, which must not be less than
90% of the actual tax liability for the year.
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Provisional Tax: Example
Panashe Ltd is a company incorporated in Malawi.
Assume that its financial year ends on 31 March.
In April 2025 the company estimated taxable
income for 2025/2026 to be K40,000,000. Show
how provisional tax would be calculated indicating
when each instalment would be due assuming
Panashe decides to pay evenly for the first three
quarters and the actual taxable profits are K38,
000,000 and the rate of tax is 30%.
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PENALTIES
A person who fails to pay any amount of provisional
tax shall be liable to a penalty as follows:
Where the amount of tax unpaid as a percentage of
total tax liability Penalty
1. Does not exceed 10%, Nil
2. Exceeds 10% but does not exceed 50%, 25% of
the unpaid amount of tax
3. Exceeds 50%, 30% of the unpaid amount of tax.
Note: The Commissioner General may reduce or
waive the amount of penalty chargeable if in his
opinion a satisfactory explanation for failure to pay is
given.
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