The parliament has approved a draft law amending Law determining the taxation system which will see a reduction in fines levied on taxes especially delays in tax declaration and exempting tax declaration for businesses with capital below Rwf2 million.
The bill amending Law No. 026/2019 of 18/09/2019 was passed on March 27, 2023 during a plenary session held in parliament- chamber of deputies after being passed in November 16, 2022 and reviewed by the Parliament budget committee from January 10, 2023.
KTPress takes a look at some of the new provisions that will improve the tax regime but also encourage participation in taxation which has been one of the targets for the country to increase its tax base.
In Books of accounts and records the new law provides that a person who carries out taxable activities in Rwanda and has to have an annual turnover not exceeding Rwf2million will not be fined for not declaring the annual taxes, a move that is expected to relieve small business and start up from the duress of declaring taxes every 31st of the month and facing fines for failure.
According to Irembo tax agent, Jean de Dieu Ngabonziza, the fines for not declaring range (differently) but for Domestic taxes, CIT and VAT, one is required to declare it four times (each quarter) in a year, and failure to do so ends in a fine of 100,000 for the first time and if repeated the amounts is added by another 100,000 for each time it is committed.
To the advantage of taxpayers:
The new law also provides (in Article 49) that one can appeal to the Tax administration to not pay taxes that they are not convinced with, pending a review of the taxman.
The same law (Art. 67) also gives a window to taxpayers to auction their own property to pay (in 90days) unpaid taxes instead of the taxman auctioning their property.
Also on Interest for late payment, the interest rate was fixed at 1.5% instead of 1.5% for a taxpayer who fails to pay tax within the 6 month period provided for by the Law requiring one to pay late payment interest on the amount of principal tax.
While on Wrongful acts punished with fixed administrative fine such as failure to declare taxes on time, for small business, the fine was reduced from Rwf100, 000 to Rwf50, 000 to enable taxpayers to stay in business.
Also administrative fines imposed to a taxpayer who declares tax due in the time limits provided by law but who does not pay that tax in the prescribed time limits were reduced to the half to facilitate taxpayers overcome hardships (assuming that the taxpayer faithfully has declared tax on time).
A taxpayer or any other person is subject to an administrative fine if he or she does one of the following- failure to submit a tax declaration on time, except micro-enterprises having an annual turnover below Rwf2M, failure to submit a withholding tax declaration on time; to withhold tax, to provide proofs required by the Tax administration, to cooperate or not to provide information during a tax audit among others.
However, in order to avoid fraud, a new provision was introduced to punish taxpayers who fraudulently claim any tax refund.
A person who carries out taxable activities in Rwanda and has an annual turnover exceeding Rwf12 million but not exceeding Rwf20million must keep books of accounts and records for five years. However the new law has increased the period to ten (10) years.
MP Omar Munyaneza, the Committee chairperson said that this is aimed at aligning the bill with other bills determining company operations, money laundry and terrorism financing, joint business ventures and leveling local laws to international requirements among others.
To promote voluntary disclosure, the line Minister was entrusted with the power to open a voluntary disclosure period, and by a Ministerial Order, to determine modalities and conditions to benefit from voluntary disclosure incentive.