Global Tax Alert (News from Indirect Tax) | 19 March 2014

Malawi mandates use of electronic fiscal devices for all registered VAT operators

  • Share

Executive summary

Effective 6 March 2014, the Malawi Revenue Authority (MRA) will implement the required use of Electronic Fiscal Devices (EFDs) for Value-Added Tax (VAT) operators.1 EFDs are an advanced version of electronic cash registers that record all sales transactions and provide indisputable evidence of such transactions to the MRA.

Introduction of the EFDs are a result of amendments made to the Malawi VAT Act in July 2011. The amendments authorize the MRA to introduce the fiscal devices. The amendments make it mandatory for all VAT operators to acquire and use these machines for each sale transaction.

Detailed discussion

Implementation phases

For successful deployment of the EFD program, implementation will occur in phases based on the category of the VAT operators. The groups of VAT operators that must have these devices at each phase will be communicated in the media.

The initial phase began 6 March 2014. VAT operators issuing manual receipts or using ordinary cash registers are now required to acquire and use the EFDs. Ordinary cash registers are cash registers not attached to any computer system or Point of Sale (POS) devices.

The first phase deadline for VAT operators to acquire the devices is 30 June 2014. After this date it will be an offense to issue a “non-fiscal receipt” and the MRA will take strict action against traders issuing non fiscal receipts.

The two categories to follow are those that use POS systems requiring Electronic Fiscal Printers (EFP) followed by those that issue business to business (B to B) invoices required to use Electronic Signature Devices (ESD).

By the end of all the phases, it will be mandatory for every VAT registered operator to use an EFD. This includes any new business that has registered for VAT as of 6 March 2014.

EFD distributors

The MRA has licensed EFD distributors to procure from manufacturers, stock, sell, install commission and service the EFDs. Currently there are four licensed EFD distributors which include: (i) Business Machines Ltd; (ii) Canotech Limited; (iii) Gestetner Ltd; and (iv) Xerographics Ltd.

Cost recovery

VAT operators who procure the requisite EFDs within four months from the commencement of each phase shall recover the entire cost of the EFD from the MRA through the following month’s VAT return. VAT operators who procure the EFDs outside the prescribed time frame will not recover the cost of their purchases.

Implications

The MRA has announced that when the EFD operations commence, it will be mandatory for operators to process all their sales transactions through the EFD units and issue a fiscal receipt/invoice.

Endnote

1. As announced by the Malawi Revenue Authority on 5 March 2014 in the Press Release, Mandatory Introduction of Electronic Fiscal Devices (EFDs) For All Registered Value Added Tax (VAT) Operators in Malawi.

For additional information with respect to this Alert, please contact the following:

Ernst & Young (Malawi), Blantyre Malawi
  • Misheck Msiska
    +265 1 876 476
    misheck.msiska@mw.ey.com
  • Chiku Ghent
    +265 1 876 476
    chiku.ghent@mw.ey.com
Ernst & Young Advisory Services Ltd, Johannesburg, South Africa
  • Folkert Gaarlandt
    +27 11 772 5220
    folkert.gaarlandt@za.ey.com
Ernst & Young LLP, US VAT Practice, New York
  • Narisha Parbhoo
    +1 212 773 4982
    narisha.parbhoo@ey.com

EYG no. CM4274