Capital gains tax removal excites market investors

Capital market investors and analysts have described the removal of 30 percent capital gains tax as a relief to investors on the 16-counter Malawi Stock Exchange (MSE). They argue that the measure will likely boost investment on the local bourse, which has been on the decline since the introduction of the tax during the Mid-Year Budget Review last November. In the proposed 2026/27 K11 trillion National Budget presented in Parliament in Lilongwe on Friday, Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha announced the removal of 30 percent tax and replaced it with a two percent withholding tax.

He said the withholding tax will be deducted at source by the broker, the MSE or any other person designated under the law. Before scraping off the tax, capital gains tax was applied on all share disposals despite the length they have been held, unlike in the past when shares held for more than one year were being exempted. Following the introduction of the tax, investors felt investing on the stock market was not profitable, resulting in plummeting prices as investors dispose of their stocks.

In separate interviews, market analysts and investors described the removal of capital gains tax as positive, saying it will reactivate the market. Stockbrokers Malawi Limited equity investment analyst Kondwani Makwakwa said in an interview on Monday that the tax was high and frustrated investors on the local bourse. He said: “The new two percent withholding tax may make investing more attractive compared to keeping money in savings accounts.

[paywall]

Stock market investor Brian Kampanje said the two percent withholding tax on sale of shares is straightforward and easy to understand by both the investors and stockbrokers. “This brings certainty which is an important aspect of any tax regime. The government can, therefore, easily reconcile tax due and received from the values of the shares traded on the stock exchange while the investors will know the net to be received,” he said.

Minority Shareholders Association of Listed Companies executive member Purity Chitaro described the amendment as a win and a relief for investors and a boost for the country’s capital market. “This policy U-turn driven by public outcry signals government’s commitment to fostering a vibrant stock market,” he said. When the 30 percent capital gains tax was introduced, investors adopted a cautious approach, resulting in the market opening on a low note in 2026, with the Malawi All Share Index, the overal measure of market performance, declining.

[/paywall]