Register for Employment tax (PAYE)

There are three types of employees concerned by declaring PAYE. These are: permanent employees, casual laborers and employees with more than one employer.

All employees are regarded as permanent employees unless they fulfil the criteria for casual laborers or employees with more than one employer.

A casual laborer is an employee who performs unskilled labor activities, who does not use machinery or equipment requiring special skills, and who is engaged by an employer for not longer than thirty days during a tax period.

If an employee is employed by more than one employer, the first employer is referred as an the one who pays an employee an annual professional income arising from a permanent work or from a longer contract than other employers may offer.

When you are an employer and make available employment income to your employee, you must withhold, declare, and pay the PAYE tax to the Rwanda Revenue Authority within 15 days following the end of the month for which the tax was due.

An employer is personally responsible for keeping proper books of account to prove that the tax has been correctly withheld, paid, and accounted for.

Under circumstances, where the employer is not required to withhold and pay the tax, the employee is responsible for registering, declaring, accounting and paying the tax on his/her behalf.

In case of engaging a casual laborer for less than 30 days during a particular tax year, the employer shall withhold 15% of the taxable employment income of the casual laborer.

An employer who is not the first employer of an employee must withhold PAYE at the marginal top tax rate of 30%.

If you are an individual who receives employment income from more than one employer or who receives incidental employment income such as end of year bonus, you may file an annual declaration if you want to claim a tax refund.

If you are an employee who works for more than one employer, you are obliged to inform your employers specifying which one is your first employer. The employer is obliged to ask the employee and confirm that he/she is the first employer.

Employment income includes all payments paid to an employee by his/her employer in cash or in kind in relation to the work performed. Payments in cash refer to monetary payments in notes or electronically in any currency. Payments in kind refer to non-monetary payments of goods or services. Taxable employment income includes all payments to an employee in cash or in kind such as:

1. Wages, salary, leave pay, sick pay and medical allowance, payment in lieu of leave for an employee who stops working before benefiting from his/her annual leave, sitting allowances, commissions, bonuses and gratuity
2. Allowances relating to the cost of living, subsistence allowances, housing allowances, and entertainment or travel allowances;
3. Any discharge or reimbursement of expenses incurred by the employee or an associate;
4. Payments to the employee working in exceptional conditions of employment;
5. Payments for redundancy or loss or termination of contract;
6. Pension payments;
7. Other payments made in respect of previous, current or future employment.

Benefits in kind received by an employee are included in taxable employment income in consideration of market value as follows:

• Providing an employee with access to and use of a motor vehicle during a tax period is valued at 10% of the employment income, excluding benefits in kind.
• Providing an employee with a loan including advance on a salary exceeding a three (3) months’ salary given to an employee valued at a difference between: the interest on loan, which would have been paid by the employee during the month in which the loan was received, calculated at a rate of interest offered to commercial banks by the National Bank of Rwanda and the actual interest paid by the employee in that month.
• Providing an employee with accommodation during a tax period is valued at 20% of the employment income, excluding benefits in kind.

Employment income that is exempted from taxation includes:

1. The discharge or reimbursement of expenses incurred by the employee or his/her associate: wholly for business activities of the employer, those that are deducted or would be deductible in calculating the employee’s income from all his/her business activities;
2. Contributions made by the employer for the employee to the public institution in charge of social security;
3. Pension payment from the public institution in charge of social security or from a qualified pension fund;
4. Employment income received by an employee who is not a Rwandan citizen from a foreign Government or a nongovernmental organization under an agreement signed by the Government of Rwanda, when the income is received for the performance of aid services in Rwanda;
5. Employment income received from an employer who is not a resident in Rwanda by a non-resident individual for the performance of services in Rwanda, unless such services are related to a permanent establishment of the employer in Rwanda.

Persons that are exempted from employment income tax in Rwanda are the following:

1. A foreigner who represents his/her country in Rwanda;
2. Any other individual employed in any Embassy, Legation, Consulate or Mission of a foreign state performing State affairs, who is a national of that State and who owns a diplomatic passport;
3. A non-citizen individual employed by an international organization.