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2023 Income Tax Declaration: What Taxpayers Need to Know

Rwanda Revenue Authority (RRA) held a workshop with certified accountants and tax advisors to discuss key changes introduced in the 2023 income tax declarations, specifically for taxpayers registered under the real regime.

The session was held as taxpayers are going through a period of declaration and payment of income tax returns for the year 2023, until the deadline of March 31, 2024.

Victor Uwayezu, Director for Performance Management and Business Analysis Unit, reminded that for corporate income tax, deductible expenses on taxable income to be accepted by tax systems, they should be supported by EBM receipts for local purchases, customs declarations for imported goods, and withholding tax declarations for withheld taxes.

However, an exception has been made for expenses on goods and services in seven categories available on the Ledger account annexure. They include purchases from small agriculturalists or pastoralists or from individuals not registered as businesses, company internal expenses, services purchased while abroad, financial expenses or services purchased from public entities that do not conduct business.

"For this ledger annexure, we considered the information that there are some goods and services for which it is not possible to obtain an EBM invoice, and those are 100 percent acceptable. However, for other expenses not supported by EBM invoices, customs declarations, and withheld taxes declarations, the Ledger will have to be reviewed and approved by the Tax administration. We have enough tools to do that as fast as we can," added Uwayezu.

According to the law on tax procedures, every person who carries out any taxable activity issues an invoice generated by an electronic invoicing system certified by the Tax administration. However, this hasn't been fully applied yet.

Initially, justifying their expenses, some businesses used to claim that they made certain business overheads without supporting receipts. Upon further investigation, it was found that they were not related to their businesses. They could do that to prove that they have registered a loss or to devalue the taxable income to evade taxes.

Some others could even declare that they are paying interest on a bank loan, but during an audit, it was found that they have no bank loan.

Other changes covered during the session include that for businesses with a turnover of over Frw 600 million, they are obliged by the law to certify their financial statements. They must disclose, through the system, the company that will certify the financial statement and the cost of the service. The disclosed certifying firm, after auditing the financials, will have the obligation of submitting audited financials to their client through the ETAX portal.

Pierre Damien Bazimaziki, a tax advisor who attended the workshop, commended RRA's efforts in communicating new changes in 2023 income tax declarations, in order to ease the process for taxpayers and their advisors.

Straton Nyirindekwe, Managing Director of FinHouse Partners Ltd, a financial consulting firm, stressed the vital role of tax advisors in helping taxpayers make precise declarations, thus ensuring the payment of the correct amount of tax owed.

"Compared to last year, people should fill in their overheads not supported by EBM as they wish, but now RRA, through their system, will have to review and approve those expenses before they should be considered in declarations. This workshop was invaluable for us as individuals who assist taxpayers with their tax assessments. With accurate submissions, taxpayers can fulfill their tax obligations appropriately," he said.

Mukasekuru Marie Rose, a tax advisor from Rusizi district, Western Province, urged her peers to encourage taxpayers for early declarations and payments, to avoid last-minute pressures that may cause unintended delays and penalties.

Besides businesses with a turnover of over Frw 600 million, Law Nº 027/2022 of 20/10/2022 establishing taxes on income stipulates that those exempted, as per article 45, are required to submit their financial statements to the tax administration not later than March 31, 2024. 

These include the City of Kigali, the district, the National Bank of Rwanda, international organizations or agencies of technical cooperation, qualified pension funds, public institutions in charge of social security, Development Bank of Rwanda, and others.

The Law establishing taxes on income gazetted since September 14, 2023, reduced the corporate income tax rate from 30 percent to 28 percent. However, because it was through the the year, the income tax for the year 2023 was put into two categories: For the period from January 1 to September 13, 2023 (256 days), it will be taxed at a rate of 30%, and for the period from September 14 until December 31, 2023 (109 days), it will be taxed at 28%.

Participants were also reminded to encourage taxpayers to consistently utilize EBM and to ensure timely filing and payment of taxes, including local government taxes such as trading license tax and immovable property tax.

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