5 key facts about the incentives awaiting taxpayers who voluntarily disclose tax liabilities

The Ministry of Finance and Economic Planning informed taxpayers of a one-time limited opportunity to voluntarily disclose their tax liabilities for the tax periods before 2023. This will allow them to pay only the disclosed principal tax, free of penalties and interest for late payment.

These incentives are effective only from March 22, 2024, to June 22, 2024, and are available to individuals, companies, and organizations, after providing all necessary information regarding the undeclared taxes.

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According to Rwanda Revenue Authority (RRA) Commissioner General Pascal Bizimana Ruganintwali, this decision was taken as part of various tax reforms aimed at enhancing tax compliance and bringing human face to taxation.

"In those reforms, the government has provided that a one-time period may be opened so that anyone can voluntarily disclose any undeclared tax and pay it without being punished. When we talk about punishments, we mean penalties and interests for late payment," he said.

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However, the voluntary disclosure does not give the right to any VAT refund or tax credit, or loss.

1.Why you should disclose voluntarily

This is a unique opportunity for taxpayers who didn�t declare their taxes but want to comply with their obligations before the Tax Administration informs them about an impending audit.

According to the RRA Commissioner General, it is a one-time opportunity that taxpayers need to seize, as the institution is deploying different IT systems to collect and analyze data, making it easier to identify non-compliant individuals and companies. This is all aligned with RRA�s broader plan to become a data-savvy organization, supported by data science and analytics teams to analyse and match the data to guide decision-making in taxation.

Since Rwanda signed agreements with other countries regarding sharing information in taxation, RRA has been benefiting from the exchange of information on request (EOI) with international tax jurisdictions.

The country is also progressing with a system of automatic exchange of information (AEOI), to be implemented by early 2025. This system will avail financial information on taxpayers, especially multinational companies, and prevent tax evasion, profit shifting, or money laundering.

On the other hand, the government continues to sign agreements to eliminate double taxation. This will contribute to discovering non-compliant businesses.

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2. Who is eligible?

This opportunity is available to anyone who has conducted a taxable activity, whether registered or not, but has undeclared taxes related to any tax period before 2023.

To be eligible, the taxpayer has to voluntarily declare and pay tax before being notified of an imminent audit.

Also involved are taxpayers who have submitted their declarations but need to revise submitted tax returns to increase the tax amount.

RRA emphasizes that these incentives concern all domestic taxes such as income tax, immovable property tax, value-added tax, withholding taxes, gaming taxes, tax on minerals, and others, except Customs duties.

Taxpayers who have been audited can still disclose additional tax liabilities beyond what the audit discovered.

A taxpayer also retains the right to disclosure at any time following the prescription of the audit powers.

3. Who is not eligible?

A taxpayer loses the right to incentives from voluntary disclosure on a certain tax if they have received an audit notice.

These incentives are also not applicable on any tax liabilities related to the fiscal year 2023.

4. How to apply for voluntary disclosure

RRA announced that it simplified the process for taxpayers who need to use this opportunity through its website. (https://etax.rra.gov.rw/landingPage).

The related request must clearly indicate the relevant tax type and period, the tax amount, in addition to uploading related supporting documents. This information must be complete and accurate.

The Minister of Finance and Economic Planning officially announced that taxpayers who want to disclose must apply from March 22, 2024, to June 22, 2024. This means that after this period has elapsed, there will be no more incentives. RRA will use the information available and its powers to recover all the taxes from taxpayers who did not seize the given opportunity.

The Commissioner General assesses the taxpayer�s application for voluntary disclosure of undeclared taxes and responds within 30 days from the date of receipt of the application.

5. How to pay the disclosed tax

Ministerial Order n� 001/24/03/TC of 08/03/2024 determines that a taxpayer who is granted the voluntary disclosure incentives pays the total amount of principal tax disclosed within 30 days from the date of approval.

However, the Tax Administration may allow the taxpayer to pay in instalments if they present valid reasons.

A taxpayer who discloses and pays 50 % of the total amount of tax disclosed in the first month of opening of the voluntary disclosure, is eligible for a five instalments payment plan for the remaining amount of tax not paid.

When the taxpayer discloses and pays 50 % in the second month, he or she is eligible to pay the remaining amount in three instalments; whereas those who disclose and pay 50% in the third month will be eligible for a single instalment payment plan.

These granted incentives can be revoked if the taxpayer either fails to pay the disclosed tax, fails to respect the payment plan granted, or submits false or incomplete information that leads to the payment of understated tax.