In this article, I wish to share the requirements to register with tax administration for Pay As You Earn (PAYE) and the basic requirements for this tax.
PAYE is a direct tax paid by a person who is employed. The basic requirement is that any individual who derives income from employment should pay to Rwanda Revenue Authority PAYE tax.
It is the responsibility of the employer to withhold this tax and remit it to RRA every month. The employer has to register with RRA and indicate all the personnel he/she employs on the payroll together with their respective gross salary, tax deducted and net pay.
What is gross salary?
This is the total payment made to an employee. It excludes exempted income as we shall see in subsequent articles. You should however be aware that any payment in cash to an employee is included in the gross salary and is subject to PAYE. We shall also examine how benefits in kind are treated for tax purposes in subsequent articles.
What is basic pay and how is it different from gross pay?
In some cases, employers do not split payments made to employees. They simply pay a lump sum amount to employees and subject the whole amount to PAYE. This may be termed as basic pay and at the same time gross pay. There is no penalty in doing this only that it usually helps an employee to know how much he is earning as housing allowance, transport allowance, hardship allowance, communication allowance, etc.
Do self employed persons pay PAYE?
Yes. Self employed persons are required to register with RRA and remit their monthly taxes to Rwanda Revenue Authority. These must be persons who earn more than Frw 30,000 per month.
What is the Tax Band and how is PAYE Computed?
The Rwandan tax system progressively levies taxes to individuals depending on the amount they earn. Persons who earn between 0 and Rwf30,000 per month are exempted from PAYE.
Those who earn between 30,001 and Rwf100,000 pay 20 per cent on extra Rwf70,000 and those who earn over Rwf100,000 pay 30 per cent on additional amount.
When should PAYE be remit to the tax authority?
An employer or a self employed person is required to pay tax within 15 days after the end of the month. For example, the PAYE for the month of September must be submitted to RRA before or on October 15.
Are there separate forms for PAYE?
RRA has designed forms for PAYE. These can be obtained from RRA office or downloaded from RRA website. You may as well contact your tax adviser on how to compute the tax in the event you are not sure of the amount to include in the gross pay.
Do casual labourers pay PAYE?
Yes. A casual labourer is defined as an employee or worker who performs unskilled labour activities, who does not use machinery or equipments requiring special skills, and who is engaged by an employer for an aggregate period not exceeding 30 days during a tax period.
Casual labours pay PAYE tax at a special rate of 15 per cent and in computing their tax, an income not exceeding Rwf30,000 per month is rated at 0 per cent.
In the next articles, we shall look at benefits in kind and who are exempted from PAYE.
Author is a Tax Manager at KPMG Rwanda