RRA, freight forwarders lock horns over VAT

Freight forwarders, have petitioned Rwanda Revenue Authority (RRA) protesting Value Added Tax (VAT) foreign registered transporters are charged.

Freight forwarders, have petitioned Rwanda Revenue Authority (RRA) protesting Value Added Tax (VAT) foreign registered transporters are charged.

They are worried that the VAT will encourage smuggling which will impact negatively on the manufacturing sector.

The demand has placed RRA between the proverbial rock and the hard place. The tax body either has to scrap the VAT or continue collecting it, but to the chagrin of freight forwarders.

The forwarders however fear that if the tax body remains adamant and continues collecting the 18 percent VAT, foreign transporters may pass the costs to cargo owners, who will then pass them on to consumers.

They describe the VAT as a tariff barrier being created, contrary to the objectives of the East African Community (EAC).

"The imposition of an additional VAT on foreign trucks results in imposing a further VAT on a transaction to which VAT was charged when the truck delivered a consignment and tax were imposed on CIF values," the Freight forwarders wrote in a petition to the Commissioner General of the RRA.

But RRA is not about to scrap the taxes arguing that they have not flouted any laws. The tax body also says that international transporters are rendering services in Rwanda. The current VAT law compels anybody who renders a service in the country to pay VAT.

The law states: "….payment of tax for imported services shall be made by a consumer by reverse charge."

Addressing the top 100 investors, during a business community dialogue organised by RRA on May 23 last month at Hotel de Mille Collines in Kigali, Mary Baine, the Commissioner General of RRA, explained that the VAT was introduced after some local transporters complained that foreign trucks were out-competing them.

"They would not pay VAT. Importers were preferring trucks from Uganda, Kenya and the Democratic Republic of Congo leaving the Rwandans who pay taxes without work," a junior RRA official who asked to remain anonymous said.

Freight forwarders do not buy RRA’s defence saying freight services from or to Rwanda, including trans-shipment are not taxed.

"If a truck is paid $1000 as freight from Mombasa to Kigali, only the proportion of freight in Rwanda, should be liable to tax because the other service was rendered in Kenya and Uganda or Tanzania as the case may be," the memorandum reads in part.

Laws RRA is applying:

(1) Subject to any other provision made by or under this Law or any other Law in relation to accounting, tax on a supply of goods and services is due and payable by the supplier, his agent or partner, at the time of supply.

(2) Subject to the provisions of articles 9 (d), 10 (2) and any other provision of this Law, Payment of tax for imported services shall be made by a consumer by reverse charge. It shall be due and payable at the time specified under article 20 of this law. The Commissioner General may issue an administrative rule, in relation to any particular case or class of cases to ensure effective application of the provisions of this paragraph.

(3)Value added tax due from any person, shall be recoverable as a debt due to the Government of Rwanda.

(4) Where an invoice shows a supply of goods or services as taking place with value added tax chargeable on it, there shall be recoverable from the person who issued it, an amount equal to that which is shown on the invoice as value added tax, or, if VAT is not separately shown, to so much of the total amount shown as payable as is to be taken as representing VAT on the supply.

(5) Sub-article (4) above shall apply whether or not:

a) the invoice is a VAT invoice issued in pursuance of article 65 below; or

b) the supply shown on the invoice actually takes place or has taken place, or the amount shown as VAT, or any amount of VAT, is or was chargeable on the supply; or

2.The VAT on reverse charge applying on imported services as provided under article 29 of the of the law, shall not be treated as deductible input tax on account of the consumer of such services.

Ends

 

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