witholding taxegs

7/28/2019 Witholding Taxegs

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Income taxes of companies

Withholding Taxes


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Why withhold tax?Cash flow to RRA

Compliance issue

More cost effective

Non resident issue

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Definition & general information Is tax deducted at source on payments to bothresident and non-resident persons

Incomes subject to WHT include

interest,dividends, agency, management, professional andtraining fees etc

In some cases it is a final taxwhile in other cases it isan advance tax payment


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Withholding taxes on paymentsA withholding tax of15% is levied on thefollowing payments made by residentindividuals or resident entities including tax-exempt entities:

dividends, except those governed by Article45 of income tax law

interests;

royalties;


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Withholding taxes on payments

contd service fees including management and

technical service fees;

performance payments made to an artist,a musician or an athlete irrespective ofwhether paid directly or through an entity

that is not resident in Rwanda;

lotteryand other gambling proceeds.


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DividendsDividends are subject to a flat tax of15%.

If dividend is subjected to WHT, the taxpayer doesnot pay tax on income (final tax).

Dividend income includes income from shares and

similar income distributed by companies and otherentities.


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Dividends and business profits

In the determination of business profits of a

resident company, dividends and otherprofit-shares received from a resident entityare exempt.


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Withholding tax obligationsIt is the responsibility of thewithholding agent to:

Compute and deduct the tax at the relevantrate;

Remit the tax so deducted within15 workingdays after the tax is deducted; and

File a tax declaration


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Withholding tax on importsA withholding tax offive percent (5%) of the value of goods

imported for commercial use shall be paid on the CIF value.


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Withholding tax on Public

tendersA withholding tax ofthree percent (3%) on the sum of

invoice, excluding (VAT), is retained on payments bypublicinstitutions to those who supply goods and services based

on public tenders.


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Exemptions from withholding

taxthose whose business profit is exempt fromtaxation;

those who have tax clearance certificate issued bythe Commissioner General (Quitus fiscale).


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Penalties and interestFailure to Withhold Tax

- Awithholding agentwho fails to withhold taxin accordance with law 25/2005 is personallyliable to pay the amount of tax which has notbeen withheld including penalties and intereston arrears.

However, the agent is entitled to recover thisamount from the payee excluding theassociated fines and the interest on arrears.


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Records of paymentsA WHT agent maintains and makes available forinspection records showing:

payments made to taxpayer; and amount oftaxwithheld and paid

A person who pays withholding taxes is required tokeep the records for a period often years after theend of the tax period to which the records relate.


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Q & A

witholding taxegs

Documents