RRA December 2020 tax update

RWANDA REVENUE AUTHORITY ANNOUNCEMENT:

Expenses not supported by EBM invoices or customs declarations will not be accepted as deductible expenses during income tax declaration for the tax period of 2021.

Visions Africa is waiting for more detailed clarifications to be communicated by RRA in order to get clarity on how the taxpayers can be compliant with this new regulation. Therefore a part II with more details should follow in the coming weeks. 

Possible questions are: 
– If a supplier doesn’t provide an EBM receipt the customer generally has to assume that he needs to withhold 15% (or grossing up effectively). Will this still apply in 2021? If yes (what we assume) it would make it very costly as there is 15% WHT + 30% lost CIT. This would make products and services much more expensive (In the eyes of the tax authorities this will create a win-win situation at first as the businesses will force suppliers to be providing EBM receipts under any circumstance and registering for the EBM usage and if not, the customer will have to pay for using non EBM compliant suppliers. Knowing the environment it will be difficult for some of the businesses to become compliant and implement the usage of EBM). 

We recommend our clients to always request for EBM receipts. If a local supplier cannot provide an EBM receipt then the risk will be that RRA will add back the expense and classify it as a non-tax-deductible expense.