Trading License
Legal Reference:
The trading license tax is governed by Law nº 048/2023 of 05/09/2023 determining the sources of revenue and property of decentralized entities.
Person liable for the trading licence tax
The trading license tax is paid by any person that opens a business activity within a district.
Tax period for the trading license tax
The tax period for the trading license tax starts on January 1st and end on December 31st. If taxable trading activities start after January, the taxpayer pays trading license tax equivalent to the remaining months of the year including the one in which the activities started. For the taxpayers conducting seasonal or periodic trading activities, the trading license tax is paid for a whole year, even though the taxable trading activities do not occur throughout the whole year.
Trading license tax rate
The trading license is calculated based on the turnover of the previous year. For other business oriented activities which are not registered on income tax, the trading license is determined based on the location (urban or rural) as illustrated in the below table:
I. Profit-oriented activities basing on their tax on turnover | |||
Turnover | Tax due | ||
From | to | Per year | Per quarter |
50.000.000.000 | And above | 2.000.000 | 500.000 |
25.000.000.000 | 50.000.000.000 | 1.500.000 | 375.000 |
1.000.000.000 | 25.000.000.000 | 1.000.000 | 250.000 |
200.000.000 | 1.000.000.000 | 500.000 | 125.000 |
20.000.000 | 200.000.000 | 280.000 | 70.000 |
12.000.000 | 20.000.000 | 160.000 | 40.000 |
7.000.000 | 12.000.000 | 120.000 | 30.000 |
2.000.000 | 7.000.000 | 100.000 | 25.000 |
II. Other profit-oriented activities | |||
Profit-oriented activities not registered on income tax, in urban zone | 60.000 | 15.000 | |
Profit-oriented activities not registered on income tax, in rural zone | 30.000 | 7.500 | |
Individual transport activities by vehicle | 40.000 | 10.000 | |
Transport activities by boat | 20.000 | 5.000 | |
Transport activities by motor cycle | 8.000 | 2.000 |
The district Council or the Council of the City of Kigali determines annually the rural or urban areas as provided by the law.
Date of trading license tax declaration
Any taxpayer files a tax declaration to the tax administration not later than 31st January of the year that corresponds to the tax period.
Trading license tax declaration for the head office and operating branches
If a taxpayer has a head office and branches in districts, a trading license tax declaration is required for the head office as well as for each branch of his or her business activities basing on the turnover of the previous year for the head office and for each branch.
In case a branch does not have or cannot determine its turnover, the trading license tax is declared based on the turnover of the head office.
However, if all the branches are located in the same district as the head office, the taxpayer pays the trading license tax according to the turnover of the head office. If the branches are located in a district other than that of the head office, the trading license tax is unique and calculated basing on the turnover of the branch with the highest turnover.
Trading license tax declaration basing on different business activities
If a taxpayer carries out different business activities in different buildings, he/she files a trading license tax declaration for each business activity. When a business activity is comprised of various activities carried out by one person in the same building, all of them are subject to a single trading license tax calculated basing on the general turnover of those business activities.
A vehicle registered in the name of a taxpayer engaged in various activities and used in the business of that taxpayer is not separately subject to the trading license tax. The taxpayer pays the trading license tax in accordance with the provisions of this Law.
However, the transport business activity is subject to the trading license tax as follows:
- Company that uses vehicles is subject to a trading license tax calculated basing on the turnover of each of its offices in different districts;
- An individual pays a trading license tax in accordance with the provisions provided for under the table annexed to this Law.
Trading license tax declaration for business in more than one district
In case a business activity is spread across more than one district, the taxpayer files his/her declaration of trade license tax in each district where he/she operates.
Trading license tax payment
a. The trading license tax assessed by a taxpayer himself/herself is paid to the tax administration not later than 31st January of the tax year.
b. If the trading license tax is not paid by the due date, the taxpayer is not allowed to start or to continue his/her business activities without having paid such tax.
c. Business activities undertaken while the taxpayer is in arrears with the payment of his/her trading license tax are illegal. The tax administration has the power to stop such activities.
Trading license tax exemption
The following persons are exempted from the trading license tax:
a. Non-commercial public institutions;
b. Micro-enterprises and small businesses during the first two years following their establishment.
Issuing a trading license tax certificate
After consideration of the trading license tax declaration and proof of payment of such tax, the tax administration issues a trading license tax certificate showing that the trading license tax for the tax year specified on the certificate has been paid by the taxpayer.
Refunding of trading license tax
In case the taxpayer terminates or changes his/her business activities during a tax year, he/she is, after an audit, refunded the paid trading license tax depending on the remaining months until 31st December of the tax period.