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Rwanda Publishes Ministerial Orders on Residence and Effective Management, Loss Carry Forward, and Others

The Rwanda Revenue Authority has published four Ministerial Orders on residence and effective management, certified financial statements, simplified accounting for small businesses, and requirements for carrying forward losses for more than five years. The Orders were all published in the Official Gazette on 6 May 2019 and are effective from that date, with any prior provisions contrary to the Orders repealed.

Ministerial Order No. 003/19/10/TC on determining a taxpayer's permanent residence and the location of the effective place of management

This Ministerial Order provides that for a natural person, a taxpayer’s home, his or her house, an apartment, a hotel or any other residential quarters in Rwanda where the taxpayer usually stays is considered as his or her permanent residence.

For a taxpayer, other than a natural person, it is deemed to have its place of effective management (and its residence) in Rwanda in one of the following circumstances:

  • its day-to-day control and management are done in Rwanda;
  • its shareholders’ meetings are held in Rwanda;
  • its books of accounts are prepared and kept in Rwanda; or
  • its main shareholders or directors are residents of Rwanda.

Ministerial Order No. 004/19/10/TC on required annual turnover for certification of financial statements

This Ministerial Order provides that any taxpayer with an annual turnover of at least RWF 600 million is obliged to have their financial statements certified by a qualified professional approved by the tax administration. Certain exemptions apply as provided for in the Order.

Ministerial Order No. 005/19/10/TC on the simplified accounting method for small businesses

This Ministerial Order provides that a taxpayer who carries out a small business and opts for paying taxes on actual profit is subject to simplified accounting and is required to keep the following basic records:

  • a record of all daily sales that indicates all daily cash and credit sales;
  • a record of all daily purchases that indicates goods or services acquired by cash and by credit to constitute a stock in trade or constitute necessary operating expenditures; and
  • a record of all money transactions that indicates the cash entries and cash expenditures.

The basic records required are included in an annex to the Order.

Ministerial Order No. 006/19/10/TC on the requirements for authorizing a taxpayer to carry forward loss for more than five tax periods

This Ministerial Order provides that a taxpayer who applies for carrying forward losses for more than five tax periods must:

  • submit a written application to the Commissioner General of Rwanda Revenue Authority for carrying forward the loss for more than five tax periods;
  • submit their application with the declaration of tax for the fifth tax period;
  • present sound reasons that caused the loss for which they are requesting to carry forward and reliable strategies to overcome such a loss;
  • prove that the loss was derived from the investments carried out;
  • submit the certified financial statements of the tax period corresponding to the loss;
  • be a credible taxpayer who declares and promptly pays tax and not guilty of tax evasion in the previous five years; and
  • not have distributed any profits in the previous five years.

The Commissioner General is to respond to request no later than the end of the year of the tax period during which the application was filed. In case that period expires without any response, the loss is considered to have been authorized to be carried forward for one year only. The period for carrying forward the loss cannot be extended for more than five years (i.e., ten years total). Further, the extended carry forward may be withdrawn if the taxpayer does not declare or pay taxes on time, is found guilty of tax evasion, or distributes profits.

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