Other Government Taxes

PROPERTY TAX (4TH BASE): BOATS

History

In earlier times, property tax was based on 6 bases of which the 5th and 3rd bases were abolished, while the 1st, 2nd and the 6th were decentralized to collection at district level. The property tax which is now collected by Government is based on one base only, namely the 4th base which is boats.

The property tax on boats is governed by the  law decree dated 28th December 1973, related to property tax, which was published in the Official Gazette, Number 7/73.

This tax is due from individuals or entities who own boats in Rwanda. Boats owned by persons who do not have a domicile, residence or permanent establishment in Rwanda, are exempt[1].

Registration fees for imported and already registered vehicles

Motor vehicle registration fees have replaced property tax, the fifth tax base and provisional number plate fees[2].

Registration fees on imported motor vehicles are paid to the customs office, during the tax clearing process. Upon payment of the fees, a registration certificate and a number plate is issued[3].

Registration fees for cars registered in Rwanda, from the time when Law n° 14/2009 came into force, are payable only once[4].

[1] Art. 20 of law decree of 28/12/1973.

[2] Art. 1 of law n° 14/2009 of 30/06/2009 determining motor vehicle registration fees.

[3] Art. 2 (paragraph 1and 3) of law n° 14/2009.

[4] Art. 2 (paragraph 1and 4) of law n° 14/2009.

 

.  CONSUMPTION TAXES

Taxable goods and services

Consumption tax is levied on the following locally manufactured products: beers, lemonades, cigarettes, wines, spirits and mineral water made in Rwanda, as well as telephone communications supplied by telephone communication providers operating in Rwanda. These are all liable to Consumption Tax (Excise Duty).

Declaration and payment

Factories making beers, lemonades, cigarettes, wines, spirits, juices and mineral water shall file, for each period of ten days, a statement concerning excisable goods cleared out of the factory for consumer use. For the purposes of implementing the Excise Duty Law, a month is divided into the following three periods:

1 – from the 1st to 10th of every month;  2 -from 11th to 20th of every month and;  3 -from 21st towards the end of the month.

The Declaration, which the taxpayer is required by law to make, shall be accompanied by proof of Payment of the taxes due to the collector of the tax or his representative within five days following the declaration period.

Law Number 26/2006, dated 27th May 2006 for determining and establishing consumption tax on some imported and locally manufactured products provides for penalties to be served on taxpayers who fail to observe the required provisions.

Obligations, penalties and Interest

Any manufacturer of a product subject to consumption tax is required to keep a register of daily inventory of the products manufactured and a sales register. The sales register shall indicate the price and quantity offered to every customer, along with their names and addresses.

A taxpayer who fails to comply with the provisions of the law determining and establishing consumption tax on certain imported and locally manufactured products shall be liable to a fine.

Any taxpayer who fails to remit the tax due within the prescribed period is liable to a fine of five hundred (500) penalty units together with a late payment penalty of ten percent (10%).

Any late declaration of zero rate (0%) tariffs shall cause the taxpayer to be liable to a fine not exceeding five hundred (500) penalty units.

Penalty unit”, as defined by Law 26/2006, means four hundred Rwandan francs (RWF 400) or any such value prescribed by the Minister, through an order;

Without prejudice to the existing laws, any person who makes fraudulent declarations, furnishes fraudulent documents or provides misinformation, or makes a fraudulent written report or commits any other offence shall be liable to a fine not exceeding five thousand (5000) penalty units.

There are other penalties related to specific goods such as Oil and specific activities such as paying or declaring out of time. The student is recommended to read the Law on Consumption tax and subsequent orders issued by the Minister.

  IMPORT DUTIES

Import duties are determined by the East African Community Customs Management Act of 2004[1], the Protocol on the Establishment of the East African Customs Union15and the East African Community Rules of Origin as specified in Annex III to the Protocol16.

Tariffs applicable to all goods which can be imported from outside the East African Community, are not part of this course. But it is worthwhile mentioning that the Partner States established a three band common external tariff with a minimum rate of 0%, a middle rate of 10% and a maximum rate of 25% in respect of all products imported into the Community17.

  THE FISCAL REGIME UNDER THE EAC LAW

Tax and EAC

Under EAC Law, business people will continue to pay VAT, Consumption Tax and Withholding Tax on goods originating from EAC Partner States. East African Community (EAC) Member states have begun implementing the Common Market Protocol. This means that Rwanda, Uganda, Kenya, Tanzania and Burundi have entered into a single market with free movement of factors of production based on the principles of non-discrimination, most favoured nation status and transparency.

These rights include the free movement of goods, persons and labour.

EAC citizens also have rights of establishment and residence as well as the free movement of services and capital.

There has been some misconception among the public that under the Common Market regulations, all goods imported into Rwanda or other member states are exempted from taxes. This is not the case however, as taxes on international trade will remain safe from import duty which remains at 0% on all goods from the community that comply with the rules of origin criteria.

If a trader for example imports iron sheets or soap that are manufactured in Kenya (an EAC member state) and has a valid certificate of origin, the RRA will not collect import duty (a tax levied on goods imported into the country) on such goods as long as it is proved the goods are originating from that region.

In Rwanda, the issuance of certificates of origin has been decentralized to the RRA Gikondo Customs department and all border posts including those at Gatuna (on the Rwanda-Uganda border) and Rusumo (on the Rwanda-Tanzania border). While import duty is abolished for qualifying goods, traders will continue to pay other domestic taxes due on goods including Value Added Tax (VAT) of 18 percent, consumption tax (excise duty) as well as a withholding tax of 5 percent.

However, the withholding tax mentioned above is exempt for those who have a tax clearance certificate (“Quitus Fiscale” – this is a certificate widely used within the French legal system which has now been incorporated into Rwandan law).

                                                                                                                                                      

  • 12 of the protocol.
  • 14 of the protocol.
  • 12 of the protocol.

Free movement of goods under the Common Market rules

The Common Market Protocol stipulates that “The free movement of goods between the Partner States shall be governed by the Customs Law of the Community as specified in Article 39 of the Protocol on the Establishment of the East African Community Customs Union”.

On 1st July, 2009, Rwanda commenced the implementation of the EAC Customs Union rules and began levying zero percent import duty tariffs on goods originating from the Partner States, applying the Common External Tariff and the East African Customs Management Act and Regulations. This was part of a progressive implementation process. Internal tariff elimination on intra-regional trade was introduced progressively between 1st January 2005 and 31st December 2009.

The removal of VAT, Consumption tax (excise duty) and Withholding tax will be effected upon realization of a fully fledged customs union which is yet to materialize. If such a union were to come about, the following might be envisaged; The shifting of borders between Partner States to the periphery of the EAC;

  • The collection of duties and taxes at the point of entry into the Customs Union Territory;
  • Agreements on the revenue sharing mechanisms to be adopted;
  • Establishment of a regional authority to administer the Customs Union
  • The elimination of rules of origin on intra-regional trade. In a fully-fledged Customs Union, goods shipped from Nairobi to Kigali for example will not attract any duties and taxes will be considered in the same way as if the goods were between Huye, Southern Province and Musanze, Northern Province for example.

Harmonization of tax policies and laws

The EAC Common Market Protocol provides that “The Partner States undertake to progressively harmonize their tax policies and laws to remove tax distortions in order to facilitate the free movement of goods, services and capital and to promote investment within the Community”.

Harmonization of domestic taxes is being handled under the EAC Framework by the Fiscal

Affairs Committee (in particular the Technical Committee on tax harmonization) and the Fiscal Affairs Committee has established Technical Working Groups on Value Added Tax, Excise Tax and Income Tax with the aim of developing a harmonized legal framework on tax laws and a roadmap for the harmonization process.

It should also be noted that double taxation agreements and the prevention of fiscal evasion with respect to taxes on income (DTA) was agreed upon by the Partner States and is awaiting legal input from the Attorney Generals before approval by the (The Customs Co-operation Council).

RRA emphasizes that the implementation of the EAC Common Market has not changed the existing fiscal regime and the anticipated changes will progressively be realised as partner states enter into a fully-fledged Customs Union and the harmonisation of tax policies and laws is finalised.

[1] Section 11 of the act.

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