The normal taxable period is between January and December. However, a different tax period can be allowed on approval by the Minister of Finance.
Companies are assessed with reference to accounting periods. This refers to the period for which a company prepares its accounts. However, an accounting period for CIT purposes cannot exceed 12 months, so companies preparing statutory accounts for longer than 12 months need to prepare more than one CIT return.
Rwanda operates a self-assessment regime. Quarterly tax returns are due on 30 June, 30 September, and 31 December (or by the sixth, ninth, and 12th month of the tax period). The annual tax return/declaration must be filed within three months after the tax period. The tax declaration must include audited financial statements as well as any other documents that may be requested by the tax administration.
Payment of tax
Advance CIT is payable in three instalments. Tax payments are due on 30 June, 30 September, and 31 December (or by the sixth, ninth, and 12th month of the tax period). Each instalment is 25% of the tax liability as calculated in the tax return/declaration of the previous tax period. This amount can be reduced by WHT paid during the tax period. The final payment of CIT for taxpayers with a December year-end is 31 March of the following year. In the case of other accounting year-ends, the final CIT payment is due by the last day of the third month following the accounting year-end.
Tax audit process
Large taxpayers are selected for audit by the RRA on a regular basis. The RRA tends to audit two tax periods, but this can be extended on request by the taxpayer. Most audits are carried out onsite. The RRA may conduct a desk audit of the taxpayer's tax affairs where they note discrepancies on tax returns filed by the taxpayer, anomalies with turnover, or any other situations that justify an audit.
Under normal in-depth audits, the RRA is required to issue a taxpayer with a draft notice of assessment following the completion of the field audit. The draft assessment is referred to as a rectification note. The taxpayer is granted 30 days within which to respond. In case the tax issues are not resolved, a final notice of assessment is issued. The taxpayer is allowed 30 days within which to appeal. Once an appeal is submitted to the Commissioner General, the RRA has 30 days within which to respond to the objection. This can be extended by another 30 days but not beyond this period. At this stage, the appeal is handled by the appeal committee, and the taxpayer and the taxpayer's agent are invited for a meeting to provide explanations.
Once the final assessment is issued, the tax due is payable, although the Commissioner General has powers to suspend the payment pending the determination of the appeal.
There is a provision for resolving the dispute through an amicable settlement process. Taxpayers can opt for this approach while at the same time exploring the next stage of the appeal process.
A taxpayer that disagrees with the response on the final assessment can appeal to the high court within 30 days.
Statute of limitations
The RRA has powers to audit a taxpayer for a period going back five years, although this can be extended to ten years in case of fraud. Taxpayers are required to keep their records for a period of ten years.
Topics of focus for tax authorities
Topics of interest for the RRA include:
- Deduction of WHT on payments to non-resident persons and reverse VAT.
- Treatment of capital gains on disposal of assets.
- Recovery of reverse VAT on services that are regarded as being available in the local market.
- Reconciliation of turnover per financial statements to receipts as per taxpayer bank statements.
- Reconciliation of cost of sales to importations.
- Reconciliation of turnover per financial statements to turnover declared in the VAT returns.
- Reconciliation of employment/staff costs per financial statements to staff costs declared in the PAYE returns.
- Transfer pricing arrangements
- Supporting expenses with proper, sufficient documents.
- Carry forward of tax losses.
- Categorisation of business assets for tax depreciation purposes.