Taxation of benefits in kind, payroll tax exemptions - local perspective

Rwanda income tax legislation defines benefit in kind as a right granted for the personal use of an employee of benefits such as premises including any furniture or other contents, vehicle, board and lodging, and others of a similar nature, not readily available in monetary terms.  Housing allowance given to an employee in cash is taxed fully like all other allowances. When a housing benefit is given in kind, the employer has to value the rental value of the house at 20 per cent of the total income from employment excluding benefits in kind. 
Happy ... Emmanuel with his family
Happy ... Emmanuel with his family

Rwanda income tax legislation defines benefit in kind as a right granted for the personal use of an employee of benefits such as premises including any furniture or other contents, vehicle, board and lodging, and others of a similar nature, not readily available in monetary terms.

Housing allowance given to an employee in cash is taxed fully like all other allowances. When a housing benefit is given in kind, the employer has to value the rental value of the house at 20 per cent of the total income from employment excluding benefits in kind. 

Employer’s vehicles used for personal purposes of employees is valued at 10 per cent of the total employment income excluding benefits in kind, and added to taxable income.  Such benefits evolve when an employer provides an employee with vehicle for both official use and personal use.  This vehicle could be self-driven or chauffer driven.  In either case, 10 per cent of the beneficiary’s total employment income excluding benefits in kind is added to taxable income, termed as gross pay.

The employer keeps a list of the employees that receive housing and other benefits in kind showing the details of valuation.  The list must be attached to the annual declarations submitted to the tax department.  The detail records are presented to the tax department upon request.

The employer values and adds to taxable income all other benefits in kind at market value and keeps detail records of the type of benefits and valuation methods applied.

Medical allowance

Medical allowance is a benefit to an employee. However, the income tax law provides for exemption for this benefit if not paid in cash. Medical expense for the treatment of employees, that is paid by an employer to a licensed medical provider and is universally available to all employees, is not subject to PAYE tax, provided the employer makes available the following to the Rwanda Revenue Authority upon request.

Name, TIN, and complete address of the medical provider, Medical prescriptions signed and stamped by a physician, Signature and stamp of the provider and other supporting documents.

The income tax law states that medical expenses above are exempted from PAYE only if the employee receives his/her treatment in Rwanda unless medical commission approves foreign treatment.

In brief, employment income comprises of wages, salary, leave pay, sick pay, and payment in lieu of leave, fees, commissions, bonuses and gratuities.

It also includes allowances including any cost of living, subsistence, rent, entertainment or travel allowance, any discharge or reimbursement of expenses incurred by the employee or an associate of the employee.

It also comprises payments for the employee’s agreement to any conditions of employment, payments for redundancy or loss or termination of the employment, pension payments, excluding state and national social security payments and other payments made in respect of current, previous, or future employment.

Author is a Tax Manager at KPMG Rwanda

E-mail: amusinguzi@kpmg.com

Tel: +250252579790/0788507675.

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