REGISTRATION
Business or other taxable activities
Any person who sets up a business or other activities that may be taxable is obliged to register with the Tax Administration within a period of seven (7) days from the beginning of the business or activity or the establishment of the company29.
VAT compulsory registration
A taxpayer whose turnover in the preceding tax period or last calendar quarter has reached at least 20, 000,000 (twenty million) or 5,000,000 (five million) RWF respectively, is required to register for VAT[1].
Voluntarily registration
Any person who is not required to register for VAT may voluntarily register with the tax administration for VAT[2].
Business changes
Any changes, whether related to the taxpayer or taxable activities must be notified in writing to the tax administration within seven (7) days from the day that the change comes into effect[3].
Taxpayer identification number (TIN)
The tax administration assigns a taxpayer identification number to registered taxpayers, which will be used for all taxes. All taxpayers are obliged to record this taxpayer identification number on tax declaration documents and on other correspondence mentioned by this law and on other commercial documents and other documents relevant to the tax administration[4].
Cancellation of registration
Any registered taxpayer ceasing to be liable for tax should notify the Tax Administration using a modified registration form within a period of seven days (7) from the date the taxpayer is no longer required to be registered. When the Tax Administration is satisfied that a person is no longer liable to be registered, their registration is cancelled. The granting of a cancellation of registration does not remove the right of the Tax Administration to carry out audits as provided for by the law[5].
TAX DECLARATION (TAX RETURN)
Filing a declaration
The taxpayer makes a declaration to the tax authorities which lays out how much tax is payable for a particular period (self assessment). The taxpayer files a declaration even when no profit was made (e.g. in the case of loss, overpayment or a VAT refund position). Only persons who are specifically exempted by tax laws are not required to file declarations. A declaration is made by completing a form prepared by the tax administration. The period and form of declaration vary according to the type of tax.
The tax administration verifies the declaration when necessary (by audit or assessment by the tax administration).
Filing extensions
A taxpayer who can provide sufficient evidence of valid reasons relating to difficulties faced in filing the tax declaration on time, may address a request to tax authorities before the original filing date expires for an extension of the deadline for filing their tax declaration. The administration may consequently grant an extension of the deadline for filing the tax declaration. This extension neither affects the deadline for the tax payment nor suspends the accrual of interest payments[6]
BOOKS AND RECORD KEEPING
Any person who is required by the law to keep books and records is obliged to prepare, establish and retain them, for any period they may be required by the tax administration and at least for a period of 10 years, this period starting from January 1st, following the tax year in which the taxable transactions were carried out. Books and records are required to be kept in the premises of the taxpayer or any other place located within Rwanda[7].
AUDIT AND INVESTIGATION
The Tax Administration shall audit a taxpayer only once in respect of a certain tax or in a certain taxable period. A new audit may be necessary under one of the following circumstances[8]:
If the tax administration discovers new evidence not revealed during the first
audit;
If there is evidence that the taxpayer and a tax auditor colluded to underestimate the tax;
- If the previous audit was based on forged documents;
- If the previous audit was a partial audit on a given issue and the tax administration now wishes to undertake a comprehensive audit.
Audit notice
In the case of audit, the tax Administration is required to inform the taxpayer in writing with the following information[9][10]:
- Of the fact that the audit is to take place at least 7 days before it is due to be conducted. If the taxpayer is not ready in 7 days, they may then write to the tax administration requesting an extension. This extension should not exceed 15 days and cannot be extended further;
- the place where the audit is to be conducted and the possible duration of the audit; iii) any specific document the tax administration wants to see or any specific information it requires.
In case of a refund audit or an issue oriented audit, the Tax Administration shall be required to inform the taxpayer in writing with the following information[11]:
- Of the fact that the audit is to take place at least three (3) days before it is conducted;
- Of the place where the audit is to be conducted and the possible duration of the audit;
- Of any specific document the tax administration wants to see or any specific information it requires”.
Place of audit and taxpayer’s cooperation
In the case of an audit being undertaken, the taxpayer is required to cooperate with the tax audit team and provide the following[12]:
- To provide the team with suitable premises;
- Too provide the audit team with the books and records referred to in Articles 12, 13 and 15 of law n° 25/2005 (dated 31st December 2008) on tax procedures.
Access to books and records
Upon the request of an authorized officer, the taxpayer is obliged to give access to books and records kept according to this Law, as well as all other related documents[13].
Information given by the taxpayer
Information demanded in writing by the Tax Administration shall be provided to them within a period of 7 working days, beginning from the time that the taxpayer was informed, unless the taxpayer gives sufficient proof of the difficulties faced in preparing and delivering the requested information[14].
Information from third parties
On the written request of the Tax Administration, all public institutions are obliged to provide the tax officer with all the information required and to show all the original registers and other documents of certification of such institutions in their possession without transferring them outside their premises[15].
The Tax Administration has the right to obtain information from other persons in case there is a need to understand the structure and use of the property on the part of the taxpayer. In such cases, it shall send written questions which must be answered within a period of 15 days[16].
Entrance to premises[17] Public premises
An authorized officer can visit and enter the public premises of the taxpayer or of any other person between 7:00 am and 6:00 pm, without issuing any written notification.
Private premises
An authorized officer can also request to enter private buildings which are assumed to be business related. If the authorized officer desires access to private buildings or premises and permission is not given, a search warrant may be issued to the Tax Administration by the relevant Court authorities. Corrective procedures
When the Tax Administration discovers a miscalculation, an omission, a misrepresentation, an understatement of income or any other error in a tax declaration or assessment, it has the right to issue an adjusted assessment.
Rectification note
In the case of the tax declaration form being rectified, the Tax Administration sends a rectification note to the taxpayer. The note contains a draft of the adjusted assessment and all the elements leading to the adjustment. The rectification note includes details of fines determined by the Tax Administration in the case of non-compliance with the relevant tax laws[18]
Reaction of the taxpayer
The taxpayer has the right to their written observations on the rectification note within 30 days. In their reply, the taxpayer may make a request for a hearing[19].
In the case of a refund audit or an issue oriented audit the taxpayer has the right to give their written opinion on the rectification note within 5 days48.
Burden of proof
In the case of any procedure bringing into question the validity of the taxpayer’s submission, the burden of proof rests with the tax administration[20].
Time limitations[21]
The rectification note may be issued within a period of 3 years, this time starting from the day of the filing of the tax declaration. A rectification note has to be issued by at the latest the last day of the 3 years period.
Non applicability of the time limitations
The time limitations on rectification notes do not apply if:
- the taxpayer has been informed that they are to be audited by the Tax Administration within the time period and receive an appropriate audit notice;
- there has been an affidavit concerning a tax offence.
Assessment procedure without notice
The Tax Administration starts an assessment procedure using estimates when[22]:
- – no tax declaration has been made;
- – a tax declaration was filed after the day mentioned in the Law on Taxes and there was no proof given of “force majeure” justifying the delay in filing;
- – the tax declaration was not signed by a competent person;
- – the tax declaration was not accompanied by all necessary documents;
- – the taxpayer was unwilling to cooperate with a tax audit officer or did not provide the information requested;
- – books and records were not kept as provided by law; 7 – there are serious indications of tax fraud”.
Note of assessment without notice
In the event of an assessment being made without notice, the Tax Administration sends a note of assessment without notice to the taxpayer. The note contains all the reasons why the assessment without notice was conducted. It can also contain fines in instances of noncompliance with the tax law. All the evidence available to the Tax Administration can be used to carry out an assessment procedure without notice[23].
Reaction of the taxpayer
The taxpayer has the right to give written observations and remarks to the note of an assessment without notice within a period of 30 days. In the reply, the taxpayer can make a request for a hearing[24].
Burden of proof
In the case of an assessment procedure without notice, the burden of proof is with the taxpayer54.
Time limitations
An assessment without notice can be conducted within a period of 5 years, starting from January 1st following the tax period in question. A notice of assessment without notice has to be issued by at the latest the last day of 5 years period[25].
Immediate assessment without notice
If there are serious indications of tax fraud, the Tax Administration can issue an immediate assessment without notice[26].
Audit wind-up
An audit is concluded by a statement of audit signed by both the taxpayer and the auditor. The statement of audit describes the audit process, any errors discovered, and the books and documents which were not provided by the taxpayer during audit57.
NOTICE OF ASSESSMENT58
A notice of assessment is issued when:
- i) the taxpayer files the tax declaration and pays the tax due on time; ii) the taxpayer files the tax declaration on time but has not paid the tax on time; iii) the Tax Administration applies to the taxpayer after investigations and audit; iv) there are serious indications that the possibilities for effective tax collection are in jeopardy, due to the financial position of the taxpayer or due to the taxpayer’s intention of evading taxation.
The Tax Administration sends a copy of the notice of assessment to the taxpayer. The taxpayer pays the tax due within 7 days from the receipt of notice of assessment, unless the tax has already been paid.
The notice of assessment constitutes the full legal basis for the recovery of tax, interest, penalties and all costs incurred for collection.
INTEREST
Interest paid by the taxpayer
In the event the taxpayer fails to pay tax within the period set forth by the law, the taxpayer must pay interest on the amount of tax due. The interest rate is fixed at the interbank offered rate of the National Bank of Rwanda. Interest is calculated on a monthly basis. Every partmonth involved will count as a complete month[27].
Interest paid by the tax administration60
In the event of the taxpayer being discharged from tax, interest and penalties by an administrative or Judicial decision, or when a refund of excess taxes paid is performed in the time prescribed by the law, the Tax Administration is required to pay interest on the refund due. The interest rate is calculated in accordance with the interbank offered rate of the National Bank of Rwanda and will be set for each current fiscal year with effect from January 1st. Interest is calculated on a daily basis. FINES AND PENALTIES
Fixed amount fines
A taxpayer or any person is subject to a fine in case of failure to[28]:
- file a tax declaration on time;
- file a withholding declaration on time;
- withhold tax;
- provide proofs required by the Tax Administration;
- cooperate with a tax audit;
- communicate regarding their capacity or appointment within the time limits prescribed by the law;
- register as prescribed by the law; viii) Keep books and records as provided by the law; ix) pay within the time limits any profit tax advance payments;
- x) comply with any requirements provided for in the tax laws governing:
- personal income tax;
- corporate income tax;
- withholding taxes;
- value added tax;
- property tax on vehicles and boats.
[1] Art.10 (paragraph 2) of law n° 25/2005; Art. 12 (paragraph 2) of Ministerial Order n° 001 of 13/01/2003 providing for value added tax rules and tax procedure; Art. 15 of Commissioner General Rules n° 002/2007 of 15/06/2007 implementing the law n° 25/2005 of 04/12/2005 on tax procedures.
[2] Art. 10 (paragraph 3) of law n° 25/2005.
[3] Art.10 (paragraph 4) of law n° 25/2005.
[4] Art. 11 of law n° 25/2005.
[5] Art. 12and 13 of Commissioner General Rules n° 002/2007.
[6] Art. 16 of law n° 25/2005.
[7] Art. 12, 13 and 15 of law n° 25/2005.
[8] Art. 21 of the commissioner general rules n° 002/2007 of 15/06/2007.
[9] Art. 20 (paragraph 1), of law n° 25/2005, as modified by art. 1 of law n° 74/2008 of 31/12/2008, in O. G nº 19 of
[10] /05/2009.
[11] Art. 2 of the law n°74/2008.
[12] Art. 20 (paragraph 2), of law n° 25/2005, as modified by art. 1 of law n° 74/2008.
[13] Art. 22 of law n° 25/2005.
[14] Art. 23 (paragraph 1) of law n° 25/2005.
[15] Art. 24 (paragraph 1) of law n° 25/2005.
[16] Art . 24 (paragraph 2) of law n° 25/2005.
[17] Art. 25 of law n° 25/2005.
[18] Art. 27 (paragraph 1) of law n° 25/2005 as modified and completed by article 3 of the law n°74/2008.
[19] Art. 27 (paragraph 2) of law n° 25/2005 as modified and completed by article 3 of the law n°74/2008. 48 Art. 4 of the law n°74/2008.
[20] Art. 44 of law n° 25/2005.
[21] Art. 27 (paragraph 3) of law n° 25/2005 as modified and completed by art. 3 of the law n°74/2008.
[22] Art. 28 of law n° 25/2005 as modified and completed by art. 5 of law n° 74/2008.
[23] Art. 29 (paragraph 1) of law n° 25/2005 as modified and completed by art. 6 of law n° 74/2008.
[24] Art. 29 (paragraph 2) of law n° 25/2005 as modified and completed by art. 6 of law n° 74/2008. 54 Art. 45 of law n° 25/2005.
[25] Art. 29 (paragraph 4) of law n° 25/2005 as modified and completed by art. 6 of law n° 74/2008.
[26] Art. 29 (paragraph 5) of law n° 25/2005 as modified and completed by art. 6 of law n° 74/2008. 57 Art. 20 (paragraph 2) of law n° 25/2005 as modified and completed by art. 1 of law n° 74/2008. 58 Art. 18 of law n° 25/2005.
[27] Art. 59 of law n° 25/2005. 60 Art. 39 of law n° 25/2005.
[28] Art. 60 (paragraph 1) of law n° 25/2005 as modified and completed by art. 9 of law n° 74/2008.
Late payment fine
If the amount of tax shown on a tax declaration or the amount of tax which is the result of an adjusted assessment by the Tax Administration is not paid on time, the taxpayer is subject to a fine that is 10% of the tax payable. The taxpayer is not subject to this fine if an extension for filing the tax declaration has been granted. The late payment penalty applies to the principal tax payment only (it does not apply to any administrative fines and interest payments)[1].
[1] Art. 61 of law n° 25/2005.
Value added tax violations
The following administrative fines are imposed on persons who do not comply with the legal provisions regarding Value Added Tax[1]:
| Fine | Violation |
| 50% of the amount of VAT payable for the entire period of operation | operation without VAT registration |
| 100% of the amount of VAT for the invoice or on the transaction involved | i) incorrect issuance of a VAT invoice resulting in:
A) a decrease in the amount of VAT payable; B) an increase of the VAT input. ii) failure to issue a VAT invoice |
| i) pay the VAT as indicated on invoice; ii) 100% of VAT indicated on the invoice | issuing a VAT invoice by a person who is not registered for VAT |
Tax fraud[2]
Administrative fine
A taxpayer who commits fraud is subject to an administrative fine of 100% of the evaded tax
Imprisonment (imposed by a competent court)
If the taxpayer voluntarily evades tax, using false accounts, falsified documents or any other act punishable by law an investigation will be undertaken. The Tax Administration will refer the case to the Prosecution service. In the case of a subsequent conviction, the taxpayer can be imprisoned for a period of between 6 months and 2 years.
Withholding taxes violations
Failure to withhold a tax
A withholding agent, who fails to withhold a tax, is personally liable to pay the amount of tax which has not been withheld including penalties and interests on arrears.
However, the agent is entitled to recover this amount from the payee, though this amount excludes any associated fines and any interests on arrears69.
Failure to pay tax withheld[3]
Administrative fine
A person, who intentionally fails to deliver the tax withheld to the Tax Administration, is subject to a fine of 100% of the unpaid tax.
Imprisonment (imposed by a competent court)
In addition to the administrative fine, the Tax Administration may refer the case to the Prosecution service. In the case of a subsequent conviction, the taxpayer can be imprisoned for a period of between 3 months and 2 years.
Additional penalties
Any person who commits the above mentioned tax offences may be subject to the following additional sanctions71:
Additional penalties pronounced by the Commissioner General:
- The closure of business activities for a period of 30 days;
- The sentence may be published in national newspapers.
Additional penalties pronounced by a competent court (in accordance with the gravity of the offence):
- The guilty party may be barred from bidding for public tenders;
- The individual may be withdrawn from the business register.
Tax fraud[4] Administrative fine
A taxpayer who commits fraud is subject to an administrative fine of 100% of the evaded tax.
Imprisonment (imposed by a competent court)
If the taxpayer voluntarily evades tax, using false accounts, falsified documents or any other act punishable by law an investigation will be undertaken. The Tax Administration will refer the case to the Prosecution service. In the case of a subsequent conviction, the taxpayer can be imprisoned for a period of between 6 months and 2 years.
Withholding taxes violations Failure to withhold a tax
A withholding agent, who fails to withhold a tax, is personally liable to pay the amount of tax which has not been withheld including penalties and interests on arrears. However, the agent is entitled to recover this amount from the payee, though this amount excludes any associated fines and any interests on arrears73.
Failure to pay tax withheld[5] Administrative fine
A person, who intentionally fails to deliver the tax withheld to the Tax Administration, is subject to a fine of 100% of the unpaid tax.
Imprisonment (imposed by a competent court)
In addition to the administrative fine, the Tax Administration may refer the case to the Prosecution service. In the case of a subsequent conviction, the taxpayer can be imprisoned for a period of between 3 months and 2 years.
Additional penalties
Any person who commits the above mentioned tax offences may be subject to the following additional sanctions75:
Additional penalties pronounced by the Commissioner General:
The closure of business activities for a period of 30 days;
The sentence may be published in national newspapers.
Additional penalties pronounced by a competent court (in accordance with the gravity of the offence):
The guilty party may be barred from bidding for public tenders;
The individual may be withdrawn from the business register.
TAX RECOVERY
Warning
If the taxpayer does not pay the tax due within 7 days after receiving the notice of assessment, the Tax Administration sends a warning letter, indicating the amount of tax, interest and penalties to be paid and the legal action that will follow if the tax, interest and penalties are not paid within 15 days from the delivery of the warning letter. The 15-day period may be ignored in the case that there is a risk of being unable to collect tax.[6].
Seizure and public auction
When tax is not paid within 15 days, the Tax Administration can seize any movable or immovable property of the taxpayer, whether this is held by the taxpayer or any other person. The property seized is sold by public auction within 8 days of the taxpayer being notified by the affidavit[7].
Third parties
If a tax is not paid within fifteen (15) days, the Tax Administration may require any debtors, bankers and other persons in possession of a taxpayer’s funds to pay the amount due to the taxpayer. This payment will be offset against the taxpayer’s tax liability78.
Liability for subcontractors
A taxpayer who subcontracts with another person other than a regular employee in whatever capacity is required to inform the Tax Administration in writing within 7 days from the time that the subcontract is signed. Such information must be accompanied by a copy of the subcontract made between the two parties. A taxpayer who fails to do so is liable to pay all taxes due from the sub-contractor79.
Guarantees of the Public Treasury
Priority rights
Tax debts have priority over other debts when a taxpayer has been declared insolvent[8].
Special lien
The Tax Administration holds a lien on the income and all the movable property of the taxpayer, wherever it may be located, for the recovery of tax, interest, fines and other costs due as a result of the collection process[9].
Legal mortgage
The Tax Administration holds a legal mortgage on the immovable property of the taxpayer, wherever it may be located, for the recovery of tax, interest, fines and costs due as a result of the collection process[10].
Payment in instalments
The taxpayer may apply to the Commissioner General to make payment in instalments in the period over which instalments are paid cannot exceed one year. The subsequent failure of the taxpayer to pay under the conditions of the instalment plan results in an immediate obligation to pay the remaining amount due[11].
Waive of tax liability
The taxpayer can apply in writing for a waiver of tax liability, interest on late payments and administrative fines in the case of substantial hardships facing the taxpayer that indicate an inability to clear the tax liability. However, a waiver cannot be granted to persons who are proved to have commit offences regarding the understatement or evasion of taxes[12].
The waiver is applied for in the note sent to the Commissioner General. If the tax administration finds that the request of the taxpayer is based on reasonable grounds, it makes a report to the Minister of Finance. This report is transmitted to the Cabinet so that a decision may be made[13].
Time limitations
When taxes are not paid within a period of 10 years starting from the time that it was due, the tax cannot be paid[14].
DISPUTES RESOLUTION
Administrative appeal[15]
A taxpayer who is not satisfied with the contents of their tax assessment notice may appeal in writing to the Commissioner General within 30 days of receipt of the assessment notice.
The Commissioner General makes a decision on the appeal within a period of 30 days. The Commissioner General may extend this period for another 30 days and inform the taxpayer accordingly. When no decision is taken within this period, the appeal is assumed to have a reasonable basis. The appeal does not suspend the obligation to pay tax, interest and penalties. Upon written request by the taxpayer, the Commissioner General can suspend payment of the disputed amount of tax for the duration of the appeal.
Judicial appeal
A taxpayer who is dissatisfied with the decision of the Commissioner General can make a judicial appeal before a competent court (commercial courts) within 30 days of the receipt of the Commissioner General’s decision[16].
[1] Art. 63 of law n° 25/2005 as modified and completed by art. 11 of law n° 74/2008.
[2] Art. 64 of law n° 25/2005 as modified and completed by art. 12 of law n° 74/2008. 69 Art. 53 (paragraph 1) of law n° 16/2005.
[3] Art. 65 of law n° 25/2005 as modified and completed by art. 13 of law n° 74/2008. 71 Art. 67 of law n° 25/2005.
[4] Art. 64 of law n° 25/2005 as modified and completed by art. 12 of law n° 74/2008. 73 Art. 53 (paragraph 1) of law n° 16/2005.
[5] Art. 65 of law n° 25/2005 as modified and completed by art. 13 of law n° 74/2008. 75 Art. 67 of law n° 25/2005.
[6] Art. 46 (paragraph 1) of law n° 25/2005.
[7] Art. 48 (paragraph 1) of law n° 25/2005.
+78 Art. 49 (paragraph 1) of law n° 25/2005 as modified and completed by art. 8 of law n° 74/2008. 79 Art. 55 of law n° 25/2005.
[8] Art. 50 of law n° 25/2005.
[9] Art. 51 of law n° 25/2005.
[10] Art. 52 of law n° 25/2005.
[11] Art. 47 of law n° 25/2005.
[12] Art. 69 (paragraph 1) of law n° 25/2005.
[13] Art. 69 (paragraph 2) of law n° 25/2005.
[14] Art. 46 (paragraph 1) of law n° 25/2005.
[15] Arts 30, 31 and 32 of law n° 25/2005.
[16] Art. 38 of law n° 25/2005 as modified and completed by art. 7 of law n° 74/2008.
