Consumers could soon enjoy a reward equivalent to 10 per cent of a value-added tax collected on taxable goods and services they buy, and for which they request electronic invoices, once a new provision comes into force.
This is provided for under a Ministerial Order determining the reward based on the Value Added Tax. It was approved by the Cabinet on February 27.
At a Post-Cabinet press conference held on February 28, the Commissioner General of Rwanda Revenue Authority (RRA), Pascal Bizimana Ruganintwali, said the move intends to motivate taxpayers to request receipts issued by electronic billing machines (EBMs) and to increase tax collection, as a result.
"As the number of consumers who request EBM-issued receipts increases, it implies that VAT tax collection will also go up,” Ruganintwali said.
The law of September 5, 2023, establishing value-added tax, introduced a new article that provides for a VAT reward to a final consumer who requests an invoice generated by an electronic invoicing system – such as EBMs – for his/her purchase(s) and then presents it to the tax administration [which is currently the Rwanda Revenue Authority (RRA)].
However, the law did not specify the value (amount) of such an award, but rather, provided that it would be determined by an Order of the Minister in charge of taxes. It added that the Order would also determine the conditions for granting such a reward.
Providing insights into the ministerial order mentioned above, Ruganintwali said that a consumer who requests and is issued with an electronic invoice is eligible for a reward of 10 per cent of the VAT amount shown on the issued invoice.
"For instance, if you purchase construction materials worth Rwf5 million to build a residential house, the VAT charged is Rwf900,000 [18 per cent of the value of taxable goods], you will get 10 per cent of it [which is Rwf90,000],” he said.
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Meanwhile, he said the law provides for penalties against a trader who does not provide EBM receipt for VAT collection purposes.
If a consumer is denied an electronic invoice, and informs the tax administration (RRA), they are eligible for an additional reward equivalent to 50 per cent of penalties paid on that invoice, once RRA officers verify the complaint and find proof that the consumer bought goods or services but they were denied the invoice.
Ruganintwali indicated that the penalties are 10 times the VAT in question, meaning that for the case of Rwf900,000 VAT charged on Rwf5 million purchases, the penalty is Rwf9 million. As such, he said, the consumer will get 50 per cent or Rwf4.5 million of the Rwf9 million, adding that such an amount will go to the account of the consumer in question.
A system to enable the process under development
For that to be possible, Ruganintwali said a system is under development and consumers will be required to register through it.
Identification details required include a consumer’s name, how they want to get the money – whether through their mobile money account (which is their phone number), or bank account, which they have to provide.
He said the money will be disbursed every three months – on the 15th day flowing every quarter, indicating that they have to ensure that the person who is claiming the money is the one who got a receipt [for their purchases], and whether their phone number and mobile money account match the person in question.
The system, which he said "is being developed and is expected to be operational soon”, will enable linking a receipt, the phone number, and the ID number of a consumer.
With the system, he pointed out a consumer will have exclusive access, through their phone, to updates on the availability of funds on their account in relation to the respective number of EBM invoices for their purchases.
He indicated that VAT is an important tax as it accounts for the country.
In the financial year 2022/2023, Rwanda collected Rwf691.1 billion from VAT, which accounts for more than 30 per cent of the total tax revenues that amounted to slightly over Rwf2.25 trillion, according to RRA Annual Report for 2022/23.