Rwanda Revenue Authority (RRA) has simplified the conditions for taxpayers to settle their tax arrears in instalments by removing the requirement of a 10 per cent down payment and a guarantee, that were mandatory for a taxpayer to sign a contract indicating the number of instalments committed and the amount to be paid.
According to the Directives of the Commissioner General No. 001/2024 dated 31/05/2024, taxpayers who cannot pay their tax arrears in full immediately may opt to pay in instalments over a period not exceeding 12 months. The Commissioner General may extend this period by another 24 months based on evidence of financial hardship.
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Jean Paulin Uwitonze, Assistant Commissioner in Charge of Taxpayer Services and Communications Division at RRA, explained that previously, taxpayers had to pay 10 per cent of their debt and provide a guarantee equivalent to the tax owed, except for debts less than Rwf5 million. Both requirements are no longer mandatory.
"A person may find it difficult to provide the 10 per cent or may lack a guarantee, or the guarantee may already be pledged to a bank. These changes enable taxpayers to continue their business and pay off their debt in instalments without many prerequisites," he said.
Now, a down payment prior to signing the contract is no longer obligatory. Once an instalment agreement is signed and the taxpayer complies, other enforcement measures are suspended.
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Patrick Gayawira, Assistant Commissioner in Charge of the Debt Management Division, noted that tax arrears often result from the non-declaration of taxes or failure to pay after declaring, leading to penalties and interest for late payments. Arrears may also be discovered during audits, overwhelming the taxpayer's ability to meet their tax obligations.
"These new conditions allow us to extend the payment period by up to 24 additional months if the taxpayer cannot pay within 12 months. Thus, taxpayers can have up to 36 months to manage their debt," he added.
Payments made towards tax arrears will first be applied to the principal tax amount. However, interest will be applied to the unpaid principal amount throughout the instalments period.
"We will allocate payments to the principal tax first, pausing the accumulation of late interest on that portion. Once the principal tax is fully paid, late interest stops accruing, even if penalties and past interest remain," Gayawira clarified.
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The RRA continues to remind tax defaulters before enforcing measures against those who fail to comply with their instalment agreements.
Uwitonze also mentioned other reforms to facilitate taxpayers and improve service delivery, such as the electronic de-registration of TINs or deactivation of business tax accounts, which can now be completed in less than five minutes. If arrears exist, the system requires payment first.
"We advise taxpayers with arrears who cannot close their TIN to come to us for an instalment agreement. Compliance will result in confirmation that their TIN is closed," he noted.
Another initiative includes waiving penalties for inactive businesses or those that have stopped operating but continue to accrue interest.
The RRA reminded taxpayers to declare the first Income Quarterly Prepayment for 2024, based on sales from January to March, before the June 28 deadline as the fiscal year-end approaches.
Additionally, taxpayers with undeclared taxes from before the 2023 tax period are encouraged to take advantage of voluntary disclosure incentives, allowing them to pay only the basic tax without penalties and late interest. This opportunity ends on June 22, 2024, after three months.
