Cake Palace was registered as a Valued Added Tax (VAT) taxpayer on 5 September 2017. Surprisingly, till now, we have not paid any monthly VAT taxes to MRA.
As soon as a business, whose expenditure exceeds K10, 000, 000 Malawi Kwacha ($13,830 USD) per year, starts running, it is supposed to be registered for VAT tax-payment. Requirements for VAT registration is a photocopy of a business registration certificate, filling an MRA form, and photocopy of an ID. Success of MRA registration is expressed through certification. Ideally, every shop is supposed to hang the certificate on the wall.
For Cake Palace, however, my father registered, and was offered a certificate of tax-payment, almost a year ago. Since then, we were supposed to be paying VAT from every product that we sell. However, to record all the output surtax (the 16% VAT on the selling product), we needed a fiscal electronic device that costs K 350, 000 Malawi Kwacha ($480 USD). By then, we had too many deficiencies in machinery to think about the fiscal electronic device. Unfortunately, till now, we have not yet bought the machine. It is a constitutional violation to run the business without VAT payment, thus Cake Palace should expect a penalty for the year-long negligence we have exposed.
According to my mum, however, MRA is trying as much as possible to recruit all businesses into the VAT payment system. Thus, we should not be daunted by penalties that come with late payment of VAT. All we should do is gather the K350, 000 ($480 USD) the next day, and make sure that we buy the fiscal electronic device. We should just demonstrate commitment of paying tax from now on and explain that it is a start-up, MRA will not try to penalize us. She said that they will actually welcome us.
The fiscal electronic device is used as a machine to produce receipts for every product we sell. Furthermore, the fiscal electronic device can record accurately all daily sales per day, and amount of VAT incurred for the given sales. This functionality will not only help us calculate amount of VAT to pay to MRA, but also aid us in understanding and recording our daily sales. Currently, we can record our purchase records, but sales has been challenging. Thanks to the fiscal electronic device, enough operation records will now be able to be gathered.