Income taxes of companies

Withholding Taxes

Why withhold tax?

Cash flow to RRA

Compliance issue
More cost effective Non resident issue

Definition & general information

Is tax deducted at source on payments to both

resident and non-resident persons

Incomes subject to WHT include interest,

dividends, agency, management, professional and training fees etc

In some cases it is a final tax while in other cases it is an advance tax payment

Withholding taxes on payments

A withholding tax of 15% is levied on the

following payments made by resident individuals or resident entities including taxexempt entities:
dividends, except those governed by Article

45 of income tax law

interests;

royalties;

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 of whether paid directly or through an entity that is not resident in Rwanda;
lottery and other gambling proceeds.

Dividends
Dividends are subject to a flat tax of 15%. If dividend is subjected to WHT, the taxpayer does not pay tax on income (final tax). Dividend income includes income from shares and similar income distributed by companies and other entities.

Dividends and business profits

In the determination of business profits of a

resident company, dividends and other profit-shares received from a resident entity are exempt.

Withholding tax obligations

It is the responsibility of the

withholding agent to:

rate;

Compute and deduct the tax at the relevant Remit the tax so deducted within15 working

days after the tax is deducted; and

File a tax declaration

Withholding tax on imports

A withholding tax of five percent (5%) of the value of goods

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

Withholding tax on Public tenders

A withholding tax of three percent (3%) on the sum of

invoice, excluding (VAT), is retained on payments by public institutions to those who supply goods and services based on public tenders.

Exemptions from withholding tax

those whose business profit is exempt from taxation; those who have tax clearance certificate issued by the Commissioner General (Quitus fiscale).

Penalties and interest

Failure to Withhold Tax - A withholding agent who fails to withhold tax

in accordance with law 25/2005 is personally liable to pay the amount of tax which has not been withheld including penalties and interest on arrears.

However, the agent is entitled to recover this

amount from the payee excluding the associated fines and the interest on arrears.

Records of payments
A WHT agent maintains and makes available for inspection records showing:
payments made to taxpayer; and
amount of tax withheld and paid

A person who pays withholding taxes is required to keep the records for a period of ten years after the

end of the tax period to which the records relate.

Q&A