Rwanda: Relief for taxpayers as new law eases penalties for missed deadlines

It’s a sigh of relief for businesses following the gazetting of a new tax law which eases penalties for failure to comply in time.

The Law on Tax Procedures, N° 026/2019 of 18/09/2019, published in the Official Gazette on October 10, replaces the one of 2005 which provided for much tougher penalties.

Among key highlights of the new law is the amended approach in calculation of penalties and interest in case of late payments of taxes.

In the new tax law, administrative fine for non-declaration and late payment will be determined by the time limit exceeded by a taxpayer.

This is an adjustment of the previous regime where fines for non-declaration and late payment were flat at 60 per cent of the tax one should have declared and paid.

Under the old law, that was the case whether one paid one day or three months late.

Taxpayers told The New Times that the previous regime was somewhat unfair as it lacked fairness and consideration of the extent of the flaw in administering the punishment.

Under the new tax law, if a taxpayer has neither declared nor paid tax within a period of not more than 30 days, the administrative fine is set at 20 per cent of the amount due.

If one has not declared and paid tax within a period ranging from 31- 60 days, they are liable to up to 40 per cent of the amount due.

“If a taxpayer has neither declared nor paid tax in the required time limits provided by law, he or she pays the tax he or she did not declare and pay and is liable to an administrative fine of sixty per cent (60 per cent) of due tax, if the taxpayer exceeds the time limit for declaration and payment by more than sixty (60) days,” article 78 of the new law reads.

The new regime is expected to, among other things, improve the doing business environment.

Angelo Musinguzi, a Senior Tax Manager at KPMG Rwanda, told The New Times that the new penalty regime is fairer to taxpayers as there is a correlation between the fine imposed and the extent of the lateness in payment.

He said the previous penalties were deemed unfair and often too stringent.

However, the noted that it’s not always that taxpayers miss deadlines deliberately, adding that sometimes it’s because the online payment system is overwhelmed.

A Kigali based business operator who spoke to The New Times said that the adjustments are a positive addition to the business regulation noting that, previously, the regime was overly harsh.

“The new law seems to be more considerates,” John Mugiraneza, a wholesaler and retailer said.