Rwanda Revenue Authority (RRA) has embarked on campaign to address major compliance issues in the area of Information and Communication Technology (ICT) in a bid to enhance tax collection in the sector.
Addressing members of the private sector, specifically from the ICT sector, on Thursday, RRA officials raised undeclared income, overstating purchase invoices and compliance with withholding obligations as the major problems to information and communication companies.
“The revenues generated from the services provided are not declared. Some subcontractors are still working under the informal sector. Invoices of equipments invested are overstated in order to inflate the cost,” RRA’s Niweshuti Ronald said during the stakeholder’s workshop.
The official also observed that several companies import services from outside companies, yet when payment is due no withholding tax is applied. Companies in the ICT sector are required to withhold taxes.
“No Value Added Tax (VAT) reverse charge is charged on import services that are locally available.”
Niweshuti also highlighted poor VAT invoicing as a key issue in the sector, specifically for vatable and non vatable ICT products.
“If a taxpayer exports commodities or services that bring to the country between US$3 and 5 million in a tax period, they are entitled to a tax discount of 3 percent,” Niweshuti said explaining tax incentives for the sector.
However, if a taxpayer exports commodities or services that bring to the country more than US$5 million in a tax period, they are entitled to a tax discount of 5 percent.
Members of the private sector expressed reservations about the provisions of the tax law, specifically regarding taxation of ICT equipment, which they said is unclear on software and flash disks.
According to the business community, there is a gap in the regulation of customs policy for computers because the list of the ICT equipment is not clear.
The private sector also requested RRA to streamline its operations in particular licensing of ICT equipments instead of referring them to RURA.
The workshop is result of recommendation for massive sensitization campaigns of taxpayers regarding tax information following a recent tax issues forum between RRA and the Private Sector Federation.