Ernest Karasira, Assistant Commissioner in charge of Provincial and Decentralized Revenue Division at RRA, stated that the trading license tax is paid by anyone, who opens a business within a district.
To determine the tax rate, consideration is given to those, who can provide their annual turnover from the previous year and those who cannot.
'We urge all concerned traders to declare and pay this tax not later than the January 31. It is important to remember that filing the declaration today and completing the payment before the last day is crucial, as the main issue often arises from failing to declare, which is the first step,' Karasira said.
Declaration and payment has been made easy for all taxpayers, wherever they are in their businesses, leisure or at home. You can declare through the RRA website on the decentralized taxes section. By entering the TIN and password, a taxpayer can declare and receive a payment reference number.
Declaration can also be made in the palm of your hand with your mobile phone by dialing *800#, go to decentralized taxes, and select the trading license tax.
Payments can be made via MTN Mobile Money, Airtel Money, Mobicash, internet banking and mobile banking.
1. Trading license tax for those able to determine turnover
Between Frw2 million and Frw7 million pay Frw100,000 annually or Frw25,000 quarterly in tax.
Between Frw7 million and Frw12 million is taxed at Frw120,000 annually or Frw30,000 quarterly.
The tax rate increases progressively with turnovers of Frw50 billion and above paying Frw2 million annually or Frw500,000 quarterly, in taxes.
2. Trading license tax for those unable to determine turnover
Other profit-oriented activities not registered for income tax in urban zones are taxed at Frw60,000 annually or Frw15,000 quarterly. In rural areas, the trading license tax is Frw30,000 annually or Frw7,500 quarterly.
Other rates include Frw40,000 annually or Frw10,000 quarterly for individual owned vehicle used in transport; Frw20,000 annually or Frw5,000 quarterly per boat used in transport activities; and Frw8,000 annually or Frw2,000 quarterly for a commercial motorcycle.
3. Annual vs. quarterly payment options
When declaring the trading license tax, the system provides two options; annual and quarter.
'The system is designed so that if a taxpayer selects the first quarter, it means they have opted for quarterly payments. You cannot skip a quarter. If you select the second quarter, it means the first is included. If you select the fourth quarter, it means you are paying for the entire year (12 months) at once. Declaring and paying must be done note later than January 31,' he added.
For those that opt to pay quarterly, the second quarter is due by April 30, the third by July 31, and the fourth by October 31 of the taxable year.
4. Trading license tax for business headquarters and branches
If a taxpayer operates businesses in multiple districts, they must pay the trading license tax in each district. However, if it is a single business with multiple branches within one district, the tax is paid based on the turnover of the headquarters. If they are only branches, the tax is based on the branch with the highest turnover. If the total turnover of a branch is unknown, the tax is calculated based on the headquarters' turnover.
5. Who is exempt from the trading license tax?
Those exempt from the trading license tax include government institutions not engaged in commercial activities and small or medium businesses during their first two years of operation.
Karasira said: 'Those who started business activities at least two years ago, and had exemptions should now be aware they must begin paying the trading license tax.'
If a business activity begins after January, the taxpayer is required to pay a trading license tax proportional to the remaining months of the year, including the month the activity started.
If a taxpayer ceases or modifies their business activity during the taxable year, a refund can be issued after an audit, depending on the remaining months until December 31.
Penalties
The law stipulates a 40% penalty of the tax due for late declarations or submitting false information. Unpaid taxes incur a monthly interest of 1.5% and an additional surcharge of 10% of the tax due. However, the maximum surcharge applicable is capped at Frw100,000.
IGIHE
