Taxpayers facing financial hardship can seek a waiver of principal tax, late-payment interest or administrative penalties, but new rules require them to demonstrate that their financial difficulties are genuine and that they had previously complied with their tax obligations.
The conditions are contained in a ministerial order signed by the Minister of Finance and Economic Planning on September 24 and published in the Official Gazette on September 25. The new order repeals the 2013 ministerial order governing the use of certified electronic billing machines (EBM).
ALSO READ: Tax evasion: Whistle-blower reward capped at Rwf10m in new rule
The order sets out the circumstances under which tax relief can be considered; the information taxpayers must provide; and the process for handling applications.
Here is what taxpayers need to know:
Financial hardship alone is not enough
A taxpayer seeking a waiver must demonstrate that they were regularly paying taxes before experiencing the financial difficulties that led them to seek relief.
They must also comply with tax laws and procedures and provide evidence and documents issued by competent authorities showing the origin of the financial hardship.
ALSO READ: You are now entitled to better reward if you report tax evasion
This means a taxpayer cannot simply cite an inability to pay as the basis for having a tax liability waived. The application must be supported by evidence explaining the circumstances that caused the difficulty.
Which tax can be waived?
The rules provide for requests involving three categories of tax liabilities: principal tax, interest for late payment and administrative penalties.
However, different conditions apply depending on what the taxpayer wants waived.
Where the taxpayer is seeking relief from late-payment interest or administrative penalties, they must have already paid the principal tax or have an agreement to pay it in instalments.
ALSO READ: Can Rwanda increase domestic revenues without raising taxes?
The rules therefore distinguish between the underlying tax obligation and additional charges that may arise because of late payment or non-compliance.
Principal tax waiver requires Cabinet decision
A request to waive the principal tax is subject to a higher-level approval process. Where the application concerns principal tax, the minister in charge of taxes must submit a report to Cabinet for a decision.
The report prepared as part of the process includes the taxpayer's profile, the amount of principal tax, late-payment interest or administrative penalties involved, the type of tax concerned, the specific problem that prevented the taxpayer from paying and the relevant tax period.
This makes a waiver of the principal tax different from relief involving only interest or administrative penalties.
Taxpayers seeking penalty relief must first clear their principal tax
The rules also provide a route for taxpayers who accept the principal tax liability but are seeking relief from additional charges.
A taxpayer can apply for a waiver of administrative penalties or late-payment interest after paying the principal tax. An approved instalment agreement for the principal tax can also satisfy this requirement.
But payment of the principal tax does not by itself guarantee that penalties or interest will be waived.
The taxpayer must still meet the other conditions, including demonstrating previous tax compliance and providing evidence of the financial hardship where required.
The tax administration examines the application
The waiver process starts with an application submitted using the prescribed procedure.
The application must contain information about the taxpayer, the tax liability concerned and the circumstances behind the request.
The tax administration examines the application and prepares the relevant report for consideration under the rules. Where the request concerns principal tax, the Minister in charge of taxes submits the report to Cabinet for a decision.
The rules therefore place the final decision on principal tax waivers beyond the ordinary application process.
A separate reward applies to tax evasion reports
The same ministerial order also introduces a reward for people whose information leads to recovery of tax evaded by a taxpayer.
The informant receives 5 per cent of the recovered principal tax, or Rwf10 million, whichever is lower.
For example, recovery of Rwf80 million in principal tax would result in a Rwf4 million reward, while recovery of Rwf300 million would result in Rwf10 million.
Payment is made after the administrative appeal process has concluded, where the taxpayer involved has pursued such an appeal.
The order also replaces the previous electronic invoicing rules
The new order also sets out requirements for electronic invoicing, including a provision allowing a buyer to initiate an invoice where a seller is unable to issue one.
Businesses using enterprise resource planning systems to generate invoices must integrate them with the electronic invoicing system in a manner prescribed by the tax administration.
The order also requires taxpayers to notify the tax administration within six hours if an electronic invoicing system is damaged and within 12 hours if it is stolen. Where the business continues operating, a new system must be obtained within five working days.