Rwanda Revenue Authority (RRA) has warned business owners who possess dormant Electronic Invoicing Systems, known as EBM, and those engaged in unfair trade practices of doing multiple cancellation of EBM invoices.  

RRA has identified a growing concern where numerous business owners intentionally issue invoices that have matching discrepancies compared to the amount received from their clients.

Others have been issuing valid invoices but later cancel them in their systems, when they know that the recipient is not a registered taxpayer who can claim the VAT charged. RRA officials emphasize that refund invoices  should only be initiated in cases the seller has made a genuine mistake with verifiable evidence.

Rwiririza Gashango, Director for Compliance monitoring Unit at RRA, shared insights after meeting taxpayers in the hospitality sector, including hotels, bars and restaurants. He said the assessment has revealed that this sector exhibits a notable lack of compliance with electronic invoicing.

At times, they create unnecessary hurdles for clients requesting invoices by demanding purchase codes, which are not mandatory for the final consumer. 

“The law clearly stipulates that anyone engaged in taxable activities must use an electronic invoicing system certified by the Tax administration. Failure to use an EBM invoice understates the taxes collected both in terms of VAT that is paid by the final consumer and for income tax," Gashango said.

He emphasized that individuals resorting to the illegal refunds overlook the fact that unsold products should be reconciled in their physical inventory. 

"Engaging in invoice refunds without adhering to legal provisions constitutes a penal offense. We urge all individuals involved in taxable activities to remember that invoice refunds should only be sought through legitimate means, and not as a way to underestimate taxes," he added.

Ndizeye Claude, Deputy Chief Accountant at GVA Rwanda, pledged to enhance their invoicing system practices to avoid penalties related to ignorance.

"Every Rwandan now understands the role of taxes in our country's development, so it is not right to reduce the value of invoices, as this directly impacts the taxes owed. Instead, we should do everything possible to increase tax collection, thereby fostering the development of our country," he emphasized.

Recent RRA data reveals that out of all business owners with EBMs, over 260 have processed excessive refunds, while more than 5,800 EBM systems remain dormant.

Under article 88 of the new tax procedures law, individuals registered for Value Added Tax (VAT) who fail to issue electronic invoice are subject to an administrative fine equal to 10 times the evaded Value Added Tax. Once repeated within two years, the penalty increases to 20 times the evaded Value Added Tax.

Additionally, article 87 stipulates that those who intentionally issue incorrect VAT invoices to decrease tax liabilities or inflate input credits will face an administrative fine equivalent to 100% of the Value Added Tax payable.

RRA introduced EBM in 2013, initially targeting VAT-registered taxpayers. In 2020, it extended EBM requirements to encompass all businesses. 

To date, more than 94,000 businesses have adopted EBM systems in Rwanda.