Blantyre — The Malawi Revenue Authority (MRA) is advising all employers that for the quarter that ended 30th June, 2014, the applicable commercial rate for calculating Fringe Benefit Tax on concessional loans provided by employers is 36 percent.
According to a press release endorsed by its former Commissioner General, John Biziwick the Public is reminded that paragraph 5(e) of the Fringe Benefits Tax Regulations to the Taxation Act stipulates that where an employer provides a loan to an employee at an interest rate lower than the prevailing commercial rate, the resulting interest difference or saving is recognized as a fringe benefit.
"For the purposes of determining the fringe benefit under the said regulation, the lowest rate ruling 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. In the current case, the lowest rate ruling on 15th May, 2014 was 36 percent," reads the statement in part.
The revenue collecting body is therefore urging all employers to use this rate to compute taxable value of fringe benefits
"All employers are, therefore, required to use this rate to compute taxable value of fringe benefits on concessional loans for quarter ended 30th June, 2014," says the statement.
The authority further warns that this does not apply to short term emergency loans saying: "Please note that this regulation does not cover short-term emergency loans like advances for rental payments and medical expenses."
Employers are reminded that failure to comply with Fringe Benefits Tax regulations may render them liable to penalties.
Meanwhile, government has fired John Biziwick as Commissioner General of MRA and replaced him with Ralph Kamoto and his deputy Crispin Kulemeka with Rose Mbilizi.