Rwanda enhances tax compliance with rewarding VAT system and voluntary disclosure incentives

On 29 February 2024 at 12:54

Rwandan shoppers are poised to reap benefits from a newly enhanced Value Added Tax (VAT) system, which encourages the request of Electronic Billing Machine (EBM) invoices.

This improvement is part of broader measures detailed in two ministerial orders aimed at increasing tax compliance and refining business operations within the country. These orders, ratified during a cabinet meeting on February 27, 2024, introduce rewards for consumers who actively participate in the VAT system and offer incentives for voluntary tax disclosure.

Under the new policy, consumers who obtain an EBM invoice upon purchase can receive a reward, which amounts to 10% of the VAT displayed on the invoice. Furthermore, if a request for an invoice is refused and the consumer reports this to the tax authorities, they could be entitled to a 50% share of any penalties levied against the offending business.

This initiative not only incentivizes the use of EBM invoices but also empowers consumers to contribute to tax compliance efforts.

Moreover, the legislation extends an olive branch to individuals and businesses willing to voluntarily disclose unpaid taxes to the Rwanda Revenue Authority (RRA) before any formal notification of tax discrepancies is issued.

These proactive disclosures will lead to the waiver of associated penalties and late payment interests, following a thorough evaluation by tax officials.

This approach is designed to encourage honesty among taxpayers and facilitate the easier resolution of outstanding tax obligations.

In a post-cabinet press conference, the Minister of Finance and Economic Planning, Dr. Uzziel Ndagijimana, together with Pascal Bizimana Ruganintwari, the Commissioner General of RRA, underscored the significance of these orders.

They highlighted how these initiatives are integral to Rwanda’s ongoing reforms aimed at expanding the tax base and alleviating taxpayer burdens.

Dr. Ndagijimana remarked on the country’s progress in tax collection and compliance, attributing it to rigorous reforms.

He emphasized the necessity for continued improvement to enhance tax collection efficiency, ultimately contributing to national economic growth.

These ministerial orders are set to take effect following their publication in the Official Gazette, marking a pivotal step towards fostering a more compliant and transparent tax environment in Rwanda.

Rwanda has enhanced tax compliance with rewarding VAT system and voluntary disclosure incentives.