The issue of delays in refunding due value-added tax (VAT) to traders is expected to be solved by the end of 2024, Prime Minister Edouard Ngirente said on December 22 at the 21st Taxpayers Appreciation Day ceremony held in Kigali.

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He was reacting after the issue of VAT refund delays was once again highlighted by the private sector at the event.

As of January 11, RRA owed over Rwf30 billion to be reimbursed to businesspeople, according to information from the tax body. While data from RRA indicates that it retains 12 per cent of the VAT collected so that it is used for refunds, it was not enough for that purpose.

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On April 20, the Cabinet approved a decision to increase VAT retention rate by 3 percentage points to 15 per cent. The Premier indicated that the government was aware of the problem, adding that it was discussed for a long time, and a decision to address the problem was approved by Cabinet.

"What delayed is the implementation of a Cabinet decision on VAT refund,” he said.

"I would like you to understand that we did not forget you as taxpayers, it (the Cabinet decision) is going to be implemented soon. We agreed with the Ministry of Finance and Economic Planning on what must be done. I hope that when we convene here next year, the issue will be over,” he told the business community.

According to the September 2023 law establishing value added tax, if the input tax exceeds output tax, the surplus tax is refunded to the taxpayer as provided for by the law.

Indeed, when traders buy VAT taxable goods or services to use in their business, they pay input tax – which is different from output VAT that is levied on goods and services (subject to such a tax) that they sell to their customers.

The Private Sector Federation’s acting Chairperson, Jeanne Françoise Mubiligi, said that VAT refund delays were one of the issues related to tax which have sometimes become a hindrance to doing business.

The private sector, she pointed out, proposed a solution to that problem, consisting of using the amount owed to a trader to pay tax for the following period.

This, she said, could help traders in their business and get rid of some of their challenges.

"It was observed that some of them are unable to repay bank [loans] as is required, others fail to get investment capital, while others cannot bulk-buy as it should,” she said of the effects of VAT refund delays.