Tax laws streamlined to meet EAC standards

PARLIAMENT - The Government of Rwanda has modified several laws on taxation and trade in order to harmonise them with the entire East African Community’s tax System. The new laws, six in total including those previously modified were discussed and passed by the Parliament of Rwanda on Wednesday to be effected in 2009 as Rwanda fully integrates into the EAC.

PARLIAMENT - The Government of Rwanda has modified several laws on taxation and trade in order to harmonise them with the entire East African Community’s tax System.

The new laws, six in total including those previously modified were discussed and passed by the Parliament of Rwanda on Wednesday to be effected in 2009 as Rwanda fully integrates into the EAC.

Addressing the Chamber of Deputies on Tuesday, the Chairperson of the Committee on Budget and National property, Constance Mukayuhi Rwaka, explained that the new laws which were studied and revised by the Rwanda Revenue Authority (RRA), the Ministry of Finance and her committee, are in line with the language of tax laws in the regional bloc.

Rwanda as the EAC’s current chair had to quickly revise the laws as agreed on by the Presidents of the 5 member states.
When completed the new tax laws will come into force early next year after they are published in the official Gazette of the Republic of Rwanda.

The other laws that have been harmonised to EAC standards include the 2005 laws on direct taxes on income, tax procedures, tax on imported sugar and other imported and locally produced commodities.

Rwanda also passed a new law to come into force July 2009 that allows the country to fully adopt the East African Community Customs Management Act of 2005, as agreed by the Heads of State, to form a uniform customs union for the bloc.

Rwanda, like other EAC members revised the tax on Motor vehicles, scrapping the tax initially paid on the car and the number plate, instead introducing Registration fees for all vehicles. Among other things, the new laws will be adopted in English but translated in Kinyarwanda for better local understanding.

The law on income tax was revised such that it removes all the complexities involved in taxing incomes of individuals especially in the business sector since some operate using loans, while in most cases there is lack of transparency as people may not willingly reveal their sources of income, as explained by RRA Commissioner General, Mary Baine.

Finance Minister James Musoni explains tax changes on imports. The revised law on taxation procedures also changed to ease tax procedures especially regarding the documentation process and period which have been very bureaucratic.

The new law will ease the system and procedures in taxation while commodity taxes were changed to ensure uniformity in taxes as required by the EAC Customs Union.

Customs tax on imported sugar will also be removed beginning February next year, while tax adjustments on several imported products have been made to ensure that the Country doesn’t lose revenue in the integration process as the country adopts the Common External Tariff of the EAC.

These include taxes on tobacco which have been raised from 120 percent to 150 percent. Tax on petroleum products excluding Aviation fuel was also raised from 37 % to 76% while consumption tax was imposed on some imported products such as fruit juices (5% tax), Soft drinks (39%), beer (60%), Mineral Water (10%), Wine (70%) while consumption tax on imported alcoholics drinks such as Brandies, liquors and whisky was also increased to 70 percent. Tax on powdered milk was also put at 10% while telephone tax is at 3%. All commodity taxes will be effective beginning July 2009.

Explaining the increments to the Parliament, the Finance Minister, James Musoni said that some of the newly introduced taxes on imported products which can be obtained locally are intended to protect the local industry and market for domestic products.

Tax on vehicles was also revised depending on the engine capacity which varies between 5% tax on vehicles with 1500 cc and 15% on vehicles of 2500 cc engine capacity.

Still on vehicles, the Government adopted a new law of Registration fees paid at the customs during declaration. This replaces the old system of paying tax on the vehicle (property tax) and the number plate.

The Registration fee will also be determined by the Ministry of Finance depending on the engine capacity. However, the law is still pending as Members of Parliament asked Musoni to shed more light on the law, especially regarding the amount of fees paid which MPs fear might be more expensive in this law which if passed will be put into effect as soon as it is published in the National Gazette.

Musoni clarified on the issue saying that the system is easier and allows payment only once.

“You can pay a slightly higher fee but this is done once and you only pay your insurance fees afterwards. No annual payments on the property or the number plate” explained Musoni to the adamant house.

The extra-ordinary session asked the Vice President of the House of Deputies to give it more time to look at the issue.

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