Africa-Press – Rwanda. As March 2024 draws to an end, the deadline for corporate income tax declaration in Rwanda is approaching. Here’s a quick reminder and guide for all entrepreneurs based in Rwanda on how to comply right and in time, to avoid collision with the law and fines.
Are you a registered business in Rwanda? Do you have a business name with a tin number, or are you in a corporate form with a business name ending with the words “Private limited company” or the letters “Ltd?”; Or is it in a name ending with the words “Public limited company” or the letters “Plc” for public companies?
This update is right for you.
First, the deadline of declaration is March 31, 2024. Declaration of deductible expenses along with taxable income is a legal obligation which helps to prevent entrepreneurs from overpaying tax.
Expenses include general business expenses, and other expenses like salaries, withholding taxes, and tax on imports. These are deductible from revenue and tax will be applied to profits only.
However, declaring your expenses is only possible if you have acquired EBM receipts for the expenses you paid for. You are required to obtain your EBM receipts to qualify for a fair tax charge. Additionally, the government of Rwanda has put in place a law against any business that does not declare its expenses. This implies that for every revenue declared, relative expenses should be declared.
For vendors, we encourage to comply to issuing original EBM receipts upon selling to avoid future bulky penalties that can arise from government auditing. Since the government of Rwanda has put a very effective auditing system in place, avoiding tax will no longer be covered, but lead to fines and losses.
For every fake EBM receipt audited, the consequences shall be faced by both the receiver and the issuer of the receipt. In addition, a vendor is legally obliged to offer an EBM receipt upon selling even without buyer’s request.
Lastly, software companies that offer accounting features like invoicing to businesses are also required to integrate with EBM in order to provide standard EBM invoices, by May 31, 2024.
Wonder about Tax Rates? Let’s dive quickly.
The corporate income tax rates fall into two regimes: The lamp sum and real regime.
Lamp sum regime is for small businesses, and taxed 3 per cent of the total revenue annually.
While the Real regime depends on revenue after subtracting deductible expenses (Expenses legally declared in EBM). The real regime is usually adopted by corporate businesses.
However, a small business can also adopt it for an advantage of loss consideration with Rwanda Revenue Authority. When a business under the real regime encounters losses, Rwanda Revenue Authority waives tax obligation in the next year.
With Real regime, every company carry an obligation to pay income tax at the rate of 30 per cent, whereas the law also states that newly listed companies on capital markets shall be taxed for five years at:
20% if those companies sell at least 40% of their shares to the public;
25% if they sell at least 30% of their shares to the public; and
28% if they sell at least 20% of their shares to the public.
Here’s a Guide on Calculation of Taxable Profits
According to RRA, the corporate income tax rates fall into two regimes: The lamp sum and real regime.
https://taxsummaries.pwc.com/rwanda/corporate/taxes-on-corporate-income
RWF 0–720,000 profit is taxed at a rate of 0%;
RWF 720,001–1,200,000 profit is taxed at a rate of 10%;
RWF 1,200,001–2,400,000 profit is taxed at 20%;
RWF 2,400,0001 and more taxed at 30%.
In conclusion, as March 2023 draws to a close, Rwandan entrepreneurs are reminded of the nearing corporate income tax declaration deadline.
Compliance with the law is essential to avoid consequences such as penalties, and traders are encouraged to issue original EBM receipts to avoid problems in potential government audits.
Source: The New Times
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