rwandan taxes
TRANSCRIPT
Taxation Basics for
Entrepreneurs
JALI PARTNERS LTD
P.O Box: 3372
Kigali- RWANDA
1JALI PARTNERS LTD
Agenda
• Welcome and Introductions (15 min)
• Today’s Topics (75 min)
• Overview of JALI PARTNERS
• Company classification
• Taxes administered by the RRA
• Tax incentives for investment and trade
• Tips for visionary entrepreneurs
• Questions & Answers (30 min)
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Overview of JALI PARTNERS Professional service firm founded in 2013 by two
partners with proven experience in accounting,
taxation and management consultancy
Dedicated to supporting SMEs in advancing
Rwanda’s vision for private sector-led economic
development
Our services include:
Tax compliance
Accounting
Management consultancy
Tender facilitation
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Company ClassificationThree types of companies in Rwanda: private
companies, public companies, and individual
enterprises
These are further divided into 4 categories:
Private companies limited by shares;
Private companies limited by guaranties
Private companies limited by both share and
guaranties
Public companies limited by shares
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Company ClassificationThe tax law and other special laws emphasize a third
classification combining both size and ownership:
Corporations
Limited liability companies
Partnerships
Cooperatives
Sole proprietorships
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Taxes Administered by the
RRA
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Income Tax Tax levied on profit making activities. There 2 options
for calculating income tax:
1. Real regime: calculating tax based on real profits
within a specific period of time
The Corporate Income Tax (CIT) rate is 30%
Personal Income Tax (PIT) rate is based on table below
Any size of enterprise is eligible for this method.
Annual Taxable Income (Rwf) Tax Rate
From to
0 360,000 0%
360,001 1,200,000 20%
1,200,001 And higher 30%
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Income Tax (Continued) 2. Lump sum regime: Enterprises that earn less than
50,000,000 Rwf in annual turnover can pay the flat
amount of tax as per the table below:
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Annual turnover (Rwf) Annual flat amount of tax
From 2,000,000 to 4,000,000 60,000
From 4,000,001 to 7,000,000 120,000
From 7,000,001 to 10,000,000 210,000
From 10,000,001 to 12,000,000 300,000
From 12,000,001 to 50,000,000 3% of annual turnover
JALI PARTNERS LTD
Value-Added Tax
Enterprises are required to register for VAT if:
Their turnover is above 20 millions Rwf for any
period of 12 months or
Their turnover is above 5 million Rwf in three
consecutive months in the last quarter
The last consumer pays the tax, not the
person registered for collecting and paying
VAT to RRA
The VAT rate in Rwanda is 18%
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Withholding tax
Some taxes are to be withheld, declared and paid
by the company or the employer and later be
deducted from the income tax. These are:
1. PAY AS YOU EARN (PAYE): Employers must
withhold, declare, and pay PAYE tax to RRA
within 15 days following the end of the month for
which the tax was due.
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Withholding tax (continued)
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PAYE rate
For casual laborer the tax rate is 15% on all earnings
exceeding Rwf 30,000 on which rate is zero.
Monthly salary Rwf Tax rate
From To
0 30,000 0%
30,001 100,000 20%
100,001 higher 30
JALI PARTNERS LTD
Withholding tax (continued)
2. Withholding tax of 5% on Importation of goods at
customs: this is levied on the values of goods at
importation in customs
3. Withholding tax of 3% on public tender: Any
taxpayer who wins a public tender is withheld 3% on
their earning.
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Consumption Tax
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Levied on various goods and services locally
manufactured or imported, including: beers, sodas,
cigarettes, wines spirits, mineral water and
telecommunication services
Consumption tax rate goes from 5% to 150% of the
production cost or purchasing cost of imported
goods
JALI PARTNERS LTD
Customs Duties
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Customs duties are taxes charged on imported goods
Products imported from the East African Community
with a certificate of origin are exempted from
customs duties
PRODUCTS RATE
Finished goods 25%
Unfinished goods 10%
Raw Material 0%
JALI PARTNERS LTD
RWANDAN TAX RATE COMPARED TO
OTHER EAC COUNTRIES
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COUNTRY VAT INCOME
TAX
(HIGHEST
RATE)
CONSUMPTI
ON TAX
(HIGHEST
RATE)
CUSTOMS
DUTIES
(HIGHEST
RATE)
FROM
EAC
RWANDA 18% 30% 150% 25% 0%
UGANDA 18 % 30% 130% 25% 0%
KENYA 16% 37.5% 135% 25% 0%
BURUNDI 18% 35% 100% 25% 0%
TANZANIA 18% 30% 30% 25% 0%
JALI PARTNERS LTD
Tax incentives granted to investors
Training and research expenses: Training and
research incurred for promotion of business
activities are deductible from taxable profits
Loss Carried forward: If the determination of
the result turn to be a loss in a tax period, the
loss may be deducted from the business
profit in the next (5) tax periods
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Tax incentives granted to investors
Income Tax Discount for creating jobs: A registered
investor is entitled to a profit tax discount of:
(2%) if employing between 100-200 Rwandans;
(5%) if employing between 201-400 Rwandans;
(6%) if employing 401-900 Rwandans;
(7%) if employing more than 900 Rwandans.
This discount is only granted if the investors maintains
the employees for at least 6 months during a tax
period
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Tax incentives granted to investors
Income tax discount for exporters: Taxpayers can
receive a tax discount for exporting large quantities
of commodities and services:
3% discount for exporting between $3-5 million USD in a tax period
5% discount for exporting more than $5 million USD in a tax period
Companies that carry out micro finance activities
approved by authorities pay corporate income tax
at the rate of zero percent for a period of 5 years
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Reforms to promote commerce and
facilitate tax compliance E-tax system: e-filing and e-payment where taxpayers are declaring an
paying tax returns online.
Electronic Billing Machine (EBM): automated machines that help taxpayers
in real time issuance of VAT invoice
Electronic Single Window System (ESWS): Allows all parties involved in
trade and transport to lodge standardized information and documents (RRA,
RDB, RBS, MAGERWA, Ministry of Health) with a single entry point
Other facilitation reforms:
• Reduction of import related documents;
• Pre-clearance system
• Simplified Certificate of Origin;
• Mobile cargo scanners
• Bleu and Gold channels
• Modern software ASYCUDA and RADDEX
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Our Tax Tips for Visionary Entrepreneurs
Know your company structure and industry:
A common mistake is to set up a business without
understanding the tax side of it first
For example private company limited by share can
work better to your business than sole
proprietorship.
Rights and responsibilities are not the same to
different industries; for example, energy companies
are exempted from VAT but must pay 1% of their
turnover to RURA.
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Our Tax Tips for Visionary Entrepreneurs
Separate yourself from your business:
Once you begin a business, you must also open a
separate bank account and credit cards and
make sure business income and expenses come
out of the business account
Pay yourself as an employee and have the
company reimburse you for business expense that
you paid out of your pocket and vice versa.
This is critical for keeping your business organized
and staying in compliance with tax law and
accounting
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Our Tax Tips for Visionary Entrepreneurs
Maintain good bookkeeping: reviewing your
financial statements regularly is the best tool
to remain in compliance.
Never lose a single expense invoice
Good bookkeeping is the best defense against an
audit
Hiring employees vs. hiring subcontractors:
for some projects, consider hiring a
freelancer in order to save money, PAYE and
Income tax.
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Our Tax Tips for Visionary Entrepreneurs
Know all tax deductions applicable to your
business and take advantage of them
Claim depreciation
Promptly adapt to reforms: Laws and
regulations change frequently. Keep track of
changes and adapt your business quickly to
save your business from negative measures
of non compliance and to take advantage
of the positive side.
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Our Tax Tips for Visionary Entrepreneurs
Never cheat your business plan:
Even though many entrepreneurs don’t feel the
significance of having a written business plan until
they are looking for new funds, it’s always good to
plan and to focus
New ideas can raise up along the way, it is good to
think twice and integrate them slowly into the
business plan. This will save your business from
different unplanned issues including taxes and
other liabilities.
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CONCLUSION
As Rwanda develops a private sector based
economy, our country seeks the creation of at least
200,000 jobs every year through SMEs like yours.
Small enterprises have help RRA to achieve its target
in tax collected against the budget since 1998.
If you are getting equipped with such financial
literacy, it is now for you to go out there and kill two
birds using one stone by building your country and
achieving your passion.
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What questions do you have?
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