As March 2024 draws to an end, the deadline for 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 enterprise in Rwanda, with a business name and a tin number? A private or public company with a business name ending with the words "Private limited company” or the letters "Ltd?” or "Public limited company” or the letters "Plc” respectively?

This update is right for you.

First to note, the declaration deadline is 31st March, 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 tax, and tax on imports. These expenses are deductible from revenue. Tax is only applied on profits.

However, declaring your expenses is only possible if you have acquired EBM receipts for the expenses. This means that 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 comply to declaring its expenses with EBM. This implies that for every revenue declared, relative expenses should be declared.

On the side of vendors, we encourage complying to issuing original EBM receipts upon selling to avoid future bulky penalties that can arise from government auditing. 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 are also required to integrate with EBM in order to provide standard EBM invoices, not later than 31st May, 2024.

Wonder about Tax Rates? Let’s dive quickly:

According to RRA, personal income tax rates fall into two regimes: The lampsum and real regime.

https://taxsummaries.pwc.com/rwanda/corporate/taxes-on-corporate-income

Lampsum regime is for small enterprises whose annual gross revenue ranges from 12 million to 20 million Rwf, and taxed 3% of the total revenue annually.

While the Real regime applies on revenue after subtracting deductible expenses (Expenses legally declared in EBM). The real regime is usually adopted by companies, medium and large-scale businesses.

However, a small business can also adopt this regime 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.

According to RRA, with Real regime, every company carry an obligation to pay Corporate income tax at the rate of 30%, whereas the law also states that newly listed companies on capital markets shall be taxed for five years at:

1. 20% if those companies sell at least 40% of their shares to the public;
2. 25% if they sell at least 30% of their shares to the public; and
3. 28% if they sell at least 20% of their shares to the public.

https://www.rra.gov.rw/en/laws-policies-and-rulings

Enterprises carry an obligation to pay Personal income tax depending on annual profit range at the following rates:

1. RWF 0–720,000 profit is taxed at a rate of 0%;
2. RWF 720,001–1,200,000 profit is taxed at a rate of 10%;
3. RWF 1,200,001–2,400,000 profit is taxed at 20%;
4. RWF 2,400,0001 and more taxed at 30%.

In conclusion, as March 2024 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. Traders are also encouraged to issue original EBM receipts to avoid problems in potential government audits.

The author is a Usability specialist & Technical writer at KudiBooks, a cloud-based accounting software and payment solution.