On March 31, Rwanda enacted the new tax procedures law, repealing the 2019 law and all prior legal provisions that are in conflict with it.

The Rwanda Revenue Authority (RRA) has three months to bring the tax management system into compliance with the provisions of the law.

The new law, according to BDO, an international network of professional firms providing audit, tax, and advisory services, brings several changes to the market, including new audit rules and tax penalties.

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The minimum time period for maintaining books of accounts and records has been increased from five to ten years, and it is explicitly required that such records can be accessed and shared electronically.

BDO explained that it is required that persons in the real tax regime submit an annual tax declaration (return) accompanied by the transfer pricing documentation prepared in accordance with relevant legislation for related party transactions.

In regard to records kept by withholding agents, it is added that if payments are made to residents of countries that have concluded a tax treaty with Rwanda, and a reduced withholding tax rate under the relevant treaty is applied, then the withholding agent must keep a tax residence certificate of the payee issued by the competent authority of the other Contracting State, which is submitted together with the related withholding tax declaration.

Notification of change in taxpayer’s address

The new Tax Procedures Law introduced a time limit of 10 days during which taxpayers must notify the Tax Administration of their change of address.

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Under the repealed law, BDO says, there was no timeline for notifying the Tax Administration of the change of address.

Also added are new rules regarding the burden of proof imposed on the tax administration, which is required to provide evidence if it, among others, rectifies tax declaration, demonstrates indicators of prosperity and the valuation method of property, applies to the prosecutor for a search warrant in residential buildings, as well as conduct an audit without notice.

Late payment interest and penalties revised

The new law also revised the rate of interest for late payment reducing it from 1.5 per cent to 0.5 per cent, if the taxpayer has recorded a delay not exceeding six months with respect to the time limit for payment.

One per cent if the taxpayer has recorded a delay of six months in tax payment but not more than 12 months, and 1.5 per cent if the taxpayer has recorded a delay of more than 12 months.

Meanwhile, the administrative fine for failing to submit a return on time, failing to withhold tax, failure to cooperate in an audit, and others, is reduced from Rwf100, 000 to Rwf50, 000 for persons and taxpayers whose annual turnover is more than Rwf2, 000,000 but not exceeding Rwf20, 000,000.

The administrative fine for declaring but not paying tax on time is reduced by five per cent of the principal tax due when the taxpayer exceeds the time limit for payment for a period not exceeding 30 days from the final date of payment (reduced from 10 per cent).

The fine is also reduced by 10 per cent of the principal tax due if the taxpayer paid within a period ranging from the 31st day to the 60th day from the final date of payment (reduced from 20 per cent); and 30 per cent of the principal tax due, if the taxpayer exceeds the time limit for payment by more than 60 days from the final date of payment (unchanged).

Tax recovery

The new law allows taxpayers 15 days from the day their property is seized to apply to the Tax Administration for authorisation to sell the seized property themselves in order to clear tax due.

The taxpayer is granted 90 days, running from the day of receiving feedback on their application, to sell the property and clear the tax due.