info@rra.gov.rw      +250 788185500

GENERAL PROVISION

Legal reference

The trading license tax is governed by:

  • Law No 59/2011 of 31/12/2011 establishing the source of revenue and property of decentralised entities and governing their management especially in its articles from 39 to 47.

Who has to pay

The trading license tax is paid by any person who deals with a profit-oriented activity in Rwanda.

Trading license tax base

The trading license tax is applied to the profit-making activities.

Tariff or tax rate

For the taxpayer registered for VAT, the trading license tax is based to their respective turnovers of the previous year, as follows:

Turnover

Tax due in Rwf

From Rwf 1 to Rwf 40,000,000

60,000

From Rwf 40,000,001 to Rwf 60,000,000

90,000

From Rwf 60,000,001 to Rwf 150,000,000

150,000

Above Rwf 150,000,000

250,000

 

For others not registered for VAT, the trading license tax depend on the type of activity and location, as shown in the table below:

Type of Activity

Rural area
Rwf

Towns area
Rwf

City of Kigali

  • Vendors without shops, small scale technicians who do not use machines
  • Sewing machine

4,000

6,000

8,000

B) Transporters of people and goods on motorcycles

4,000

6,000

8,000

C) Traders and technicians who use machines

20,000

30,000

40,000

D) All other vehicles besides bicycles

40,000 on each vehicle

40,000 on each vehicle

40,000 on each vehicle

E) For transport activities by motor boat

20,000 on each boat

20,000 on each boat

20,000 on each boat

F) Others profit - oriented activities

20,000

30,000

40,000

Exemptions

The Government entities are exempted from trading license tax.

Points to note

The following points regarding the trading license tax are important to note:

  • if a taxpayer operates branches offices, the trading license tax is declared and paid for the head office as well as for each branch;
  • when several activities are carried out by the same company or a individual in the same premises, only one trading license tax is declared and paid;
  • The trading license tax certificate must be displayed clearly at the entrance of the business premises or affixed to the car, boat or any other vehicle for which the tax was paid;
  • in case the taxpayer stops his activities during the taxable year, and if the trading license tax was paid, he must be refunded depending on the remaining months;
  • if taxable activities start after January, the trading license tax must be paid for the remaining months including the one in which the activities started until the end of taxable year;
  • for the taxpayer conducting seasonal or periodic activities, the trading license tax must be paid for a whole tax year.

Practical examples

Example 1
Suppose Bank of Kigali has, apart of its Heardquaters, six (6) branches in Nyarugenge district, five (5) branches in Kicukiro district and four (4) branches in Gasabo district. The following additional information is relevant :

  • the turnover of Bank of Kigali for the year 2011, according to the information provided by RRA, is 6,000,000,000 Rwf;
  • the turnover of each branch is the average from the total turnover.

Required:

  • Calculate the total trading license tax for Bank of Kigali;
  • Calulate the trading license tax belongs to each distrct.

Calculation of trading license tax:
The following table includes the calculation of the total trading license tax for Bank of Kigali and for each district:

Decentralised entity

Trading license tax base

Tariff

Trading tax payable

Bank of Kigali

6,000,000,000

250,000

250,000

Nyarugenge district (6 branches)

400,000,000

250,000

(250,000*6) =1,500,000

Kicukiro district (5 branches)

400,000,000

250,000

(250,000*5) =1,250,000

Gasabo district (4 branches)

400,000,000

250,000

(250,000*4) =1,000,000

Findings:

  • Total trading license tax to be paid by bank of Kigali =(250,000+1,500,000+1,250,000+1,000,000) = 4,000,000 Rwf;
  • Trading license tax to be paid to Nyarugenge district = (250,000+1,500,000) =1,750,000 Rwf;
  • Trading license tax to be paid to Kicukiro district = (250,000*5) = 1,250,000 Rwf;
  • Trading license tax to be paid to Gasabo district = (250,000*4) = 1,000,000 Rwf.

PROCEDURES APPLICABLE TO THE TRADING LICENSE TAX

Legal reference

The procedures applicable to the trading license tax are governed by:

  • Law No 59/2011 of 31/12/2011 establishing the source of revenue and property of decentralised entities and governing their management;
  • Ministerial order Nº 005/12/10/TC of 22/06/2012 determining the modalities for the implementation of law Nº 59/2011 of 31/12/2011.

Tax declaration

The tax declaration is done by filling in a tax declaration form. Thereafter, it is submitted to the concerned decentralised entity not later 31 March of the tax year. If the activity starts after 31st March of the tax year, the tax declaration is filed within 30 business days of the commencement of the activity. The tax declaration form must be signed by the taxpayer.

Note: A tax declaration is required in respect of every premise where a business is carried on except the premises used for storage.

Tax payment

The tax payment is made at the bank as follows:

  • for existing activities or when they start before 31st March of the tax year, the tax must be paid not later than 31st March of the tax year;
  •  in case the activities begin after 31st March, the tax must be paid within 30 business days.

Interest and fines

The interests, fines and penalties have to be applied for the following cases:

  • In case of absence, late submission, or incomplete or misleading tax declaration:
  • 10 % of the tax due, if the delay is less than one month;
  • 20 % of the tax due, when the delay is not more than two months;
  • 30%  of the tax due, in case the delay is not more than three months;
  • 40 % of the tax due, if the delay is more than three months.

In case of incomplete, incorrect or fraudulent information with an intention of evading tax, the offender is subject to a fine of 20% of tax due for one year when it is the first time and 40% of tax due for one year if the offence is repeated.

  • In case of late tax payments (law no 59/2011, article 25):
  • Interest of 1.5% per month calculated from the date the taxes are due up to the date they are paid.
  • Surcharge of 10% of the tax due. However, such a surcharge must not exceed an amount of 100,000 Rwf.

If the taxpyer fails to present the trading license tax certificate is punished by an administrative fine of 10,000 Rwf;

If a trading license tax certificate is lost or damaged, a duplicate shall be issued by the concerned decentralized entity for a fee not exceeding 5,000 Rwf.

Audit and investigations procedures

  • An authorised decentralized entity officer can conduct investigations in order to :
  • be sure on the category of the business;
  • verify if the trading license tax certificate is displayed at business premises.
  • The decentralized entity gets from RRA no later than 31st January of every tax year the information for Value Added Tax of registered companies in order to: 
  • classify the taxpayers in categories according to their respective turnover;
  • cross check the information with self assessed tax declaration.

Tax recovery procedures

The taxpayer, who fails to pay the trading license by the due date, is not allowed to continue his activities.
In case of license tax arrears, the decentralized entity has rights to recovery the unpaid tax trough the following procedures:

  • Warning letter:

The warning letter is sent to the taxpayer with all the details of the unpaid taxes and action planned to enforce the law. If the tax is not paid within one (1) month, the concerned decentralized entity shall pass to other steps.

  • Access to money owed to or held by third parties on behalf of the taxpayer :

If a tax is not paid within thirty (30) days after having received a warning letter, the concerned decentralized entity request officially to any debtors, bankers or other persons who hold money on behalf of the taxpayer or to whom the taxpayer has the legal claim to pay to the decentralized entity the amount due to the taxpayer against the taxpayer’s tax liability. Those third parties have to react within fifteen (15) business days from the date of receipt of the request.

  • Seizure and sale of movable and fixed assets :

If the fixed asset tax remains unpaid,  and after having finished other enforcement mechanisms, the decentralised entity has the right to seize and sell the movable and taxable fixed assets of taxpayer in order to recover the tax unpaid. This right can't be exercised before a period of 3 years from the date of tax payment. The seized assets must only be sold by public auction.  

http://rra.net2typo.com/Appeal procedures

Appeal procedures are the followings:

  • The taxpayer who is not satisfied with the action taken by the decentralized entity against him, he can submit a written and signed objection, within thirty (30) days, to the concerned decentralized entity.
  • The decentralized entity must communicate its decision in writing within sixty (60) days. If not, the objection of the taxpayer is deemed to be valid.
  • If the taxpayer is not satisfied with the decision of the decentralised entity, he can send a written and signed appeal to the competent court within thirty (30) days following the receipt of the decision.  
  • If the taxpayer wins the case, the concerned decentralized entity must pay back the overpaid tax within 1 month after that the decision has been taken.

Note: The appeal shall not suspend the obligation to pay tax, interest and penalties.

Trading license tax forms

See in attachment the trading tax declaration form from the brochure developed by MINECOFIN.

Roles and responsibilities

The decentralized entities are entrusted with implementation of the new legislation regulating local revenues. Specially, concerning the trading License tax, the folowings entities must assume the following responsibilities:

  • every tax year, the  Council of decentralised entity determines which areas are considered as urban or rural;
  • the decentralized entity must issue an official trading license tax certificate showing that the trading license tax for the specified tax year has been paid;
  • When a Taxpayer decides to stop his activities, and the trading license tax is already paid, he must notify the decentralized entity within fifteen (15) business days. The decentralized entity have to refund the tax paid basing on the remaining months of the tax year  without considering the month in which the taxable activity is closed, within ninety (90) days.
  • Not later than 31st January of every tax year, the Rwanda Revenue Authority (RRA) submits the information to the decentralized entity for VAT registered taxpayers, showing their respective turnovers for the previous year.

 

 

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