Hospitality sector still far from effectual tax compliances
The tax administration meets with hotels, bars, and restaurants’ business people and recalled them to comply with tax obligations.
In the meeting chaired by Kayigi Habiyambere Aimable, the Commissioner for Domestic Taxes, the main issues highlighted in the hospitality sector that hinder tax compliance include, Complementary services, Staff feeding, Withholding Tax on Agricultural Supplies, VAT reverse charge on imported services.
Complimentary services are free accommodation given to a customer without actual payments being received in return.
While complementary may be used as a marketing tool to attract clients and consider them as allowable expenses, Rwanda Revenue Authority has noticed that many hotels, bars and restaurants abuse that facility, by considering the complementary to their relatives and other purposes not related to the business.
To minimize abuse by the members, the technical team composed of the representatives of the hospitality association and RRA suggested an application of a 1.5% of the turnover as complimentary offers for business improvement. The team also suggested the Commissioner General to develop an official document serving as a guideline for Tax administration purposes and minimize abuse.
1.5% of the turnover will be accepted as deductible expenses for complimentary if sales invoices on all complementary are generated, proper record on beneficiaries of complementary and proof of relationship between them and the Hotel are kept, proof that showing that the beneficiary brought businesses to the hotel in case he is a business partner, the beneficiary of complementary must be on the list of category of people supposed to get it.
Staff feeding is also another issue among tourism and hospitality operators. The main issue about it and which causes high risk in compliance with taxes is that many business owners overestimate the staff meals to reduce the payable income taxes. RRA consider it important as it helps business people manage their staff and be able to run their operations but drawn a conclusion that the expenses upon staff feeding should not exceed 1.5% of their business.
Commissioner for Domestic Taxes, Mr. Kayigi also reminded the business people that they are required to issue the EBM invoices to their clients and make sure they pay properly the withholding taxes.