Rwanda

Rates and scope

The standard VAT rate of 18% applies to all taxable supplies of goods and services that do not qualify for zero-rating or VAT exemption. There is no other higher or lower VAT rate that applies.

VAT is charged on the supply of taxable goods or services made or provided in Rwanda, and on the importation of taxable goods or services into Rwanda.

VAT registration

Compulsory registration

Suppliers of taxable goods and services are required to apply for VAT registration. These include sole proprietors, limited liability companies and corporations.

To qualify for registration, a person must have attained a taxable turnover that exceeds or is likely to exceed, in Rwandan Francs, FRW 20m (approximately USD 20,000) in the previous fiscal year or FRW 5m (approximately USD 5,000) in the preceding calendar quarter.

If a person attains or expects to attain the above threshold, he must apply for VAT registration. 

Failure to register for VAT will lead to retrospective compulsory registration by the Commissioner General from the date the person became due for registration. Further, the person will be liable to a penalty of 50% of the amount of VAT payable for the entire period of operation without VAT registration.

A person who issues a VAT invoice when he or she is not registered for VAT is liable to an administrative fine of one hundred percent (100%) of the VAT indicated in the invoice and payment of that tax as indicated on that invoice.

Voluntary registration

Application for registration

Deregistration

A registered supplier who ceases to make taxable supplies, or whose turnover falls below the registration threshold, is required to notify the Commissioner General in writing within seven days of ceasing to be liable for registration, providing such information as the Commissioner General may require to facilitate deregistration.

Under the new law, a person whose VAT registration is terminated is treated as having sold taxable goods, including taxable raw materials or services, at hand at the time the registration is suspended, but only if the input tax was refunded to the person on acquisition or importation of the goods or services.

The taxation period for a person who suspends registration of the VAT occurs immediately before the registration is cancelled.

Output tax

Calculation of output tax

Output tax is a tax imposed on goods or services made or supplied by a person. Output tax is computed by applying the VAT rate attributable to the supply to the taxable value of the supply.

The VAT rate attributable to the supply will depend on whether it is a standard-rated or a zero-rated supply. Exempt supplies do not attract output tax.

VAT exemption

In order for an industry to be eligible for the VAT exemption on machinery, capital goods and raw materials, the following requirements must be fulfilled:

• The applicant must be registered as a company in Rwanda.

• The applicant must aim at processing raw materials to produce goods for sale, or for mining and quarry exploitation.

• Exemption must only be applied for machinery, capital goods or raw materials appearing on the list established by the minister in charge of industry and approved by the minister in charge of taxes.

• The application must indicate the direct link between the goods for which exemption is sought and the industrial activity that would be carried out.

• The application must be addressed to the Commissioner General in accordance with the procedure established by the Tax Administration, if the exemption applied for concerns machinery, capital goods and raw materials that are locally produced in Rwanda.

• A declaration form must be submitted to the Commissioner for Customs if the exemption is applied for machinery, capital goods and raw materials that are imported.

Exempt supplies

Businesses that deal exclusively in exempt supplies are not required to register for VAT and cannot claim relief from input tax on the goods and services that they consume. The following goods and services are exempt from VAT:

• Services of supplying clean water and ensuring environment treatment for non-profit making purposes with the exception of sewage pump-out services

• Goods and services for health-related purposes:

  • health and medical services

  • equipment designed for persons with disabilities

  • goods and drugs appearing on the list made by the Minister in charge of health and approved by the Minister in charge of taxes

• Educational materials, services and equipment appearing on the list made by the Minister in charge of education and approved by the Minister in charge of taxes

• Books, newspapers and journals

• Transportation services by licensed persons:

  • transportation of persons by road in vehicles which have a seating capacity of fourteen (14) persons or more

  • transportation of persons by air

  • transportation of persons or goods by boat

  • transportation of goods by road

• Lending, lease and sale:

  • sale or lease of land

  • sale of a whole or part of a building for residential use

  • renting or grant of the right to occupy a house used as a place of residence of one person and his/her family, if the period of accommodation for a continuous term exceeds ninety (90) days

  • lease of a movable property made by licensed financial institution

• Financial and insurance services:

  • premiums charged on life and medical insurance services

  • bank charges on current account operations

  • exchange operations carried out by licensed financial institutions

  • interest chargeable on credit and deposits

  • operations of the National Bank of Rwanda

  • fees charged on vouchers and bank instruments

  • capital market transactions for listed securities

  • transfer of shares

• Precious metals: sale of gold in bullion form to the National Bank of Rwanda

• Any goods or services in connection with burial or cremation of a body provided by an Order of the Minister in charge of finance

• Energy supply equipment appearing on the list made by the Minister in charge of energy and approved by the minister in charge of taxes

• Trade union subscriptions

• Leasing of exempted goods

• All agricultural and livestock products, except processed ones. However, milk processed, excluding powder milk and milk-derived products, is exempted from this tax

• Services of agriculture insurance

• Services, agricultural inputs, and other agricultural and livestock materials and equipment appearing on the list established by the minister in charge of agriculture and animal resources and approved by the Minister in charge of taxes

• Gaming activities taxable under the law establishing tax on gaming activities

• Personal effects of Rwandan diplomats returning from foreign postings, Rwandan refugees and returnees entitled to tax relief under customs laws. The period of twelve (12) months required for tax relief for vehicles provided under customs laws shall not apply to Rwandan diplomats returning from foreign postings

• Goods and services meant for Special Economic Zones imported by a zone user holding this legal status

• Mobile telephones and SIM cards

• Information, communication and technology equipment appearing on the list made by the minister in charge of information and communication technology and approved by the minister in charge of taxes.

Zero-rated goods and services

Zero-rated supplies include supplies of the following goods or services:

• Exported goods and services

• Minerals that are sold on the domestic market

• International transportation services of goods entering Rwanda and transportation services of goods in transit in Rwanda to other countries, including related services

• Goods sold in shops that are exempted from tax as provided for by the law governing customs

• Services rendered to a tourist for which value added tax has been paid.

The following goods and services intended for persons of a special category:

• Goods and services intended for diplomats accredited to Rwanda that are used in their missions

• Goods and services intended for international organisations that have signed agreements with the Government of Rwanda

• Goods and services donated to local nongovernmental organisations, which have been acquired through funding by countries or international organisations that have signed agreements with the Government of Rwanda and for being used for agreed upon purposes

• Goods and services intended for projects funded by partners that have signed agreements with the Government of Rwanda.

Input tax

Input tax allowed

VAT incurred by a VAT-registered person in respect of most expenses incurred and services received for business purposes is deductible as input tax. Input tax is not deductible where:

• A valid VAT invoice has not been obtained

• The VAT is non-Rwandan VAT

• The time period for claiming input tax has expired (input tax must be reclaimed within two years of the tax point).

Input tax is directly attributable to exempt supplies where the direct attribution method for recovering input tax is applied in calculating the recoverable element of input tax.

Input tax expressly denied

No input tax is allowed on the following:

• Passenger vehicles, or spare parts or repair and maintenance services for such a vehicle, unless the taxpayer’s business involves the resale or renting of such a vehicle and the vehicle was solely acquired for the purpose of such taxpayer’s business

• Goods acquired or imported for entertainment purposes, unless the taxpayer’s business involves providing entertainment and the entertainment is provided in the ordinary course of that business and was not entrusted to a partner or employee

• Goods acquired for accommodation purposes, unless:

  • The taxpayer’s business involves providing accommodation services and the accommodation is provided in the ordinary course of that business

  • The accommodation was provided to the person while away from their usual residential home for the interest of the business or the employer’s interest

• The acquired goods give any person right to membership of or access to any sports, social or recreational clubs

• Where VAT is paid on business overheads (e.g. telephones and electricity) where private and business use cannot be practically separated, 40% of the VAT paid is allowed as input tax.

Partial exemption

Partial exemption arises where a registered business makes both taxable and exempt supplies. Input tax can be recovered through the following two methods:

• A value-based method requiring the recovery proportion to be calculated in accordance with the ratio of taxable supplies to total supplies

• A method requiring all VAT to be recovered where VAT can be attributed to taxable supplies, and no VAT to be recovered where it relates to exempt supplies. The remaining (residual) VAT is then recovered according to the value of taxable supplies expressed as a proportion of total supplies.

Preregistration VAT

International trade

Imports

Goods

The term ‘import’ in the VAT law means to bring goods into Rwanda from a foreign country. The Commissioner of Customs Services is charged with the responsibility of collecting the VAT on imported goods at various borders of entry into the country. Transit goods are not subject to VAT.

The importation of goods occurs on the date on which the goods enter Rwandan territory under the Customs Legislation.

The basic value of imported goods is the sum of the following:

• The value of the goods for the implementation of customs duty under the customs legislation, whether or not customs duty is payable on the imported goods

• For matters not specified in the previous point:

  • the cost of insurance and freight incurred in bringing the goods to Rwanda, and

  • the cost of services which facilitate the importation of goods

• The amount of customs duty, excise, port charges, or other fiscal charges other than VAT payable in respect of the importation.

If goods are re-imported after being exported for repair, renovation or improvement, and the nature of the goods has not changed, the value of the importation is the amount of the increase in value of the goods as a result of the repair, renovation or improvement.

Importation of taxable goods is subject to VAT at the customs point in accordance with customs legislation.

Services

The importation of services arises where a non-resident person supplies services to a resident of Rwanda in the ordinary course of business carried on outside the country, but where the services are supplied for use or consumption in the country.

Place, time and value of supplies

A local recipient of taxable services from a foreign supplier will be required to account for reverse-charge VAT at 18% of the value of the services procured. The Act further provides that the recipient may not reclaim the corresponding input VAT unless the services so procured are not available in the local market.

This means the cost of any services procured from outside Rwanda will increase by 18% where the reverse-charge VAT is not recoverable. The RRA may deem services to be available in Rwanda even when the actual services procured are of a different specification or quality standard to those available locally.

However, in respect of imported transport services, consumers of such services are allowed a deduction of reverse-charge VAT even if the services are available in Rwanda.

The tax point for imported services is the earlier of the time on which the:

• Performance of the services is completed

• An invoice for the services is issued

• Payment for the services is made.

Exports

Goods

Any goods exported by a registered person or supplied by that person are zero-rated where the registered person holds evidence of exportation.

Services

Services are treated as exported where the service is consumed outside Rwanda.

Refunds to foreigners

Place of supply

The following acts constitute the supply of goods and services: sale, exchange or other transfer of the right to dispose of goods by the owner, and lease of goods under a leasing agreement.

Any act which is done but does not qualify as a supply of goods or money is considered as an act of service delivery. This includes the transfer or surrender of any right to any other person, provision of any means for facilitation, the toleration of any situation, refraining from doing any act and the lease of goods under an operating leasing agreement.

Time of supply

The time of supply of goods and services occurs at the earlier of:

• The date on which the invoice is issued

• The date on which payment of goods and services, including a partial payment is made. However, this paragraph does not concern the advance payment made to the constructors who later reimburse it by deducting it from the invoices presented to the client

• The date on which goods are either removed from the premises of the supplier or when they are given to the recipient

• The date on which the service is delivered

• In the case of electricity, water or any other supplies, goods or services measured by metre or any other calibration, the taxation period shall be the time when the metre or any other calibration reads the number that follows the previous consumption of the supply.

Value of supply

Except where this Law provides otherwise, the taxable value of goods or services is the consideration paid in money by the recipient. The taxable value on goods and services is the fair market value, exclusive of the VAT, if goods or services are supplied for:

• A non-monetary consideration

• A monetary consideration for one part and non-monetary for the other consideration that is less than the market value of the goods or services.

VAT compliance

Returns and payment of VAT

VAT returns are filed on a monthly basis. A taxable person must furnish a VAT tax declaration in the prescribed form for each VAT period within 15 days after the end of the period of the VAT (the tax period is equal to one calendar month), except where the 15th day falls on a Saturday, Sunday or public holiday, in which case the return is due on the preceding working day.

For taxpayers whose annual turnover is equal to or less than FRW 200m, the VAT declaration is quarterly and is submitted with payment of the tax due within 15 days after the end of the quarter.

Voluntary VAT declaration on a monthly basis is, however, still admissible for taxpayers in this bracket.

A taxable person must submit a VAT declaration whether there is output tax to pay or not, even if they are claiming a refund or where the difference is zero. RRA introduced e-filing of VAT declarations, and VAT-registered persons are required to file online.

Payment of any VAT due must be made at the time of filing of VAT returns. Payment can be made in cash or by way of a cheque (at the bank) or a bank transfer.

The VAT payable for an import is due and payable when the imported goods reach the country.

A taxpayer may apply to the Commissioner General for an extension of the deadline for tax declaration if he or she provides valid reasons for not declaring tax on time.

The taxpayer applies in writing to the Commissioner General at least 15 days before the last filing date of the declaration.

The Commissioner General may, in writing, grant to the taxpayer an extension of the tax declaration deadline within ten days from the date the request was received. Extension of a deadline for tax declaration neither affects the deadline for the tax payment nor suspends the accrual of interest.

The amount of VAT that a taxpayer must remit to the tax administration in the taxation period is the tax payable for the period. The tax is calculated by deducting the input tax allowed in the tax period from the total output tax payable.

Interest and penalties

In case of non-filing of VAT return, fixed fines related to such violation are:

• FRW 50,000 if the taxpayer’s annual turnover is more than FRW 2m but not exceeding FRW 20m

• FRW 300,000 if the taxpayer’s annual turnover exceeds FRW 20m

• FRW 500,000 if the taxpayer was informed by the tax administration that they are in the large taxpayers’ category

• If the taxpayer commits the same fault twice in two years, the basic fine is doubled. In case the same violation is committed again within those two years, the fine is four times the basic administrative fine.

In case of non-declaration of VAT return and non-payment on time, non-fixed fines related to such violation are:

• 20% of due tax, when the taxpayer exceeds the time limit for declaration and payment for a period not exceeding 30 days;

• 40% of due tax the taxpayer should have declared and paid, if he or she pays within a period ranging from 31 to 60 days from the time limit for the payment; and

• 60% of due tax, if the taxpayer exceeds the time limit for declaration and payment by more than 60 days.

In case of declaration of VAT return on time but non-payment of tax declared on time, non-fixed fines related to such violation are:

• 5% of due principal tax, when the taxpayer exceeds the time limit for payment for a period not exceeding 30 days from the fixed date of payment

• 10% of the principal tax due, when the taxpayer exceeds the time limit for the payment of a period ranging from 31 to 60 days from the fixed date of payment

• 30% of due principal tax, when the taxpayer exceeds the time limit for payment by more than 60 days from the fixed date of payment.

A person who does not comply with provisions of VAT is subject to an administrative fine as follows:

• An administrative fine of 50% of the amount of VAT output for the entire period of operation without VAT registration, where VAT registration is required.

• An administrative fine of 100% of the VAT indicated in the invoice and payment of that tax as indicated on the invoice, for a person who issued a VAT invoice when he or she is not registered for VAT

• An administrative fine of 100% of the VAT payable if a person issues an incorrect VAT invoice with intention to decrease the amount of VAT payable or to increase the VAT input credit.

A public institution which fails to withhold the VAT or which withheld VAT and failed to pay the tax withheld to the Tax Administration, must pay the Tax not withheld or not paid, fines and default interests as provided for by this Law.

In the event of an audit or investigation, the following penalties arise for the understatement of VAT:

• 10% of the amount of the understatement if the understatement is equal to or more than 10% but not more than 20% of the tax liability the taxpayer ought to have paid

• The administrative fine referred above doubles if the understatement rate exceeds 20% of the principal tax liability the taxpayer ought to have paid.

In case of failure to use the electronic invoicing system by a person registered for VAT, fines apply as follows:

• An administrative fine of ten times the value of the evaded VAT

• In case the fault is repeated within two years, the defaulter is liable to an administrative fine of 20 times the value of the evaded VAT.

A person who fails to comply with obligations of the user of the electronic invoicing system is liable to an administrative fine as below:

• two hundred thousand Rwandan francs (FRW 200,000)

• In case the fault is repeated within two years, the administrative fine is increased to FRW 400,000.

• In case a taxpayer delivers an electronic invoice with an under-valued price or quantity of goods or services, they are liable to an administrative fine of ten times the value of the evaded VAT

• In case the fault is repeated, the administrative fine is increased to 20 times the value of the VAT evaded.

In addition to the administrative fines, late payment of VAT is also subject to late payment interest, calculated using the below rates:

• 0.5% if the taxpayer has recorded a delay of a period not exceeding six months

• 1% if the taxpayer has recorded a delay of a period more than six months but not more than 12 months

• 1.5% if the taxpayer has recorded a delay of more than 12 months.

The interest and penalties are summaries below:

Table 1

Refunds

If, during a particular prescribed taxation period, the input tax exceeds output tax, the Commissioner General shall refund the supplier the due amount to which the supplier stands in credit by reason of the excess, on receipt of the relevant tax return document within 30 days:

• after one day from the expiry of the prescribed period for tax declaration

• after receipt of proof of the last outstanding tax declaration.

However, the VAT paid by registered investors shall be refunded within a period not exceeding 15 days after receipt by the Revenue Authority of the relevant application.

Prior to payment, the Commissioner General may order for verification of the claim for refund or deduction submitted to him/ her. In such a case, the period for the response to be communicated shall not exceed three months from the date of submission of the claim.

Objections and appeals

A person who disputes an assessment made upon him may object to the assessment by notice to the Commissioner General.

The notice must expressly state the grounds of objection to the assessment and must be received by the Commissioner General within 30 days after the date of service of the notice of assessment.

The Commissioner General may amend the assessment or refuse to amend the assessment. Where a person disputes the decision of the Commissioner General on any matter subsequent to an objection they may, upon giving notice in writing within 30 days of being notified of the decision, appeal to the Commissioner-General, provided that:

• The person pays assessed tax not in dispute or such part thereof as the Commissioner General may require. The requirement to pay the tax in dispute may be suspended by the Commissioner General upon a written request during the duration of the appeal, or

• In case of any other dispute, the person, before filing the appeal, must submit all tax returns where applicable, as required, and pay the tax amount shown thereon as being due and payable.

VAT records

Tax invoices

A VAT registered person who sells taxable goods or services must, at the time of the supply, issue the recipient with an original tax invoice. Any registered person who makes a taxable supply must issue a tax invoice immediately when the supply is made. A tax invoice should contain the following requirements:

• The words ‘tax invoice’ in a prominent place

• The name, address and VAT registration number of the supplier

• The name, address and VAT registration number of the recipient (the purchaser)

• The serial number of the invoice and date of issue

• The quantity or volume of the goods or services supplied

• A description of the goods or services supplied

• The selling price excluding VAT, the total amount of VAT charged and the selling price including VAT.

The registered person is required to maintain a copy of all invoices issued.

VAT and non-VAT registered persons are required to use a certified electronic invoicing system (EIS) that generates tax invoices. There are significant penalties for failure to use EIS.

Credit and debit notes

Where it becomes necessary to adjust the original VAT charge on a supply, a credit note may be issued by a supplier or a debit note by a customer or vice versa. In either case, copies must be kept. To be valid for VAT purposes, a credit or debit note must:

• Reflect a genuine mistake or overcharge or an agreed reduction in the value of the supply, and be issued within one month of this being discovered or agreed

• Give value to the customer, i.e. represent a genuine entitlement (or claim) on the part of the customer for the amount overcharged to be either refunded or offset against the value of future supplies

• Be headed ‘credit note’ or ‘debit note’ as appropriate and clearly show the following details:

  • The identifying number and date of issue

  • The name, address and the registration number of the supplier

  • The name and address of the customer

  • The reason for its issue, e.g. ‘Returned goods’

  • A description which identifies the goods or services for which credit is claimed or allowed

  • The quantity and amount of each description

  • The total amount credited, excluding VAT, and the rate and amount of VAT credited

  • The number and date of the original VAT invoice. (If this cannot be done, e.g. if the returned goods cannot be identified with a particular invoice, it must be possible to satisfy the RRA by other means that VAT was accounted for on the original supply.)

Record-keeping

A registered person is required to keep records of all supplies including zero-rated, standard-rated and exempt supplies. These details should be recorded in the VAT return.

Every taxable person must, for the purpose of accounting for VAT, keep the following records:

• Business and accounting records

• The VAT account

• Copies of all VAT invoices issued

• All VAT invoices received

• Documentation relating to importation and exportation

• All credit notes, debit notes, or other documents which are evidence of an increase or decrease in the consideration that was received, and copies of all such documents that are issued.

Specific VAT rules

Post-sale adjustments

Post-sale adjustments arise if:

• Taxable goods and services no longer exist

• If the nature of taxable goods or services is changed or damaged

• If the consideration of taxable goods or services is changed

• If goods or part of the goods are returned to the supplier.

Post-sale adjustment for irrecoverable debts

Where a registered supplier has supplied goods or services for a consideration in money and has paid the full tax on the supply (output tax) to the tax administration, but has not received payment from the person liable, a bad debt VAT refund claim can be made after a period of 24 months from the date of supply.

The VAT-registered person should fulfil the following conditions:

• The debt should have been included as part of taxable value of goods or services

• The debt should be written off in the books

• There should be convincing evidence that the debtor is insolvent and that all possible steps have been taken to pursue payment without success.

Other indirect taxes

Land and buildings

The lending, lease and sale of the following is exempt from VAT:

• The sale or lease of an interest in land

• The sale of a building or part of a building meant for residential purposes

• The renting of, or other grant of the right to occupy, a house used predominantly as a place of residence of any person and his family, if the period of accommodation for a continuous period exceeds 90 days.

Secondhand goods

Warranty repairs

The granting of a warranty under repair is included in the price of goods or services to be provided under that warranty and, on that basis, VAT is accounted for when accounting for the VAT on the taxable goods or services.

If warranty repairs are made without a further charge, the consideration for repair under warranty would be nil.

Import duties

Excise duties

Excise duty is tax imposed on excisable services or excisable goods manufactured in or imported into Rwanda. Excise duty is governed by Law No 025/2019 of 13/09/2019 which replaced Law No. 26/2006 of 27 May 2006 which determines and establishes consumption tax on some imported and locally manufactured goods.

Excise duty must be accounted for on certain manufactured goods, including alcoholic and non-alcoholic beverages, luxury goods, soft drinks, juices, tobacco products, petroleum products, cosmetics, vehicles and mobile cellular phone services.