Businesses decry delays in VAT refund

Traders are concerned over delays in processing value-added tax (VAT) refunds which, they say, affects their financial flows. Traders also requested the Government expedite the refund processes. They pointed out that there are cases where they are asked to pay VAT, yet the Government has not yet refunded the amount it owes them in line with the same tax. This is one of the common issues they disclosed on Thursday, February 23, in Kigali, during a consultative meeting between the members of the Private Sector Federation (PSF) and the Ministry of Finance as well as Rwanda Revenue Authority (RRA). The session focus was on taxes, fees charged by Rwanda Revenue Authority and local government authorities. The same meetings were also held in other provinces of the country. According to RRA, VAT is a tax on the consumption of goods and services. It is indirectly paid by the final consumer of the good or service. However, it is paid on their behalf by taxpayers (businesspeople) on the value added at each stage of production. Tax refund is the reimbursement made when taxes withheld on earnings are more than what a person owes in income taxes for a calendar year – or when a taxpayer pays more than what he/she is required to pay. Also, when an individual or a taxpayer receives a tender from organisations that are exempted from paying value added tax (VAT), he or she deducts the VAT as provided for by the law, then thereafter files in a refund request to RRA. Jean Claude Samunasi, engaged in general trade such as scholastic materials, said when a trader declares VAT, and later requests a refund that he or she is owed, yet even three years sometimes elapse without getting it. “Yet, when you delay to declare VAT, you are charged fines and related interests. Yet, when you claim the VAT refund, you are told that the money is not yet available. This issue should be addressed,” he said. With technology, Samunasi said, “no person can declare VAT tax and claim a refund when the receipts were not issued by an electronic billing machine (EBM), because the system rejects it.” Therefore, he suggested that the amount should be entered into the system so that the trader can start with it while paying taxes, in case the money to reimburse them is not yet available, adding that this should be automatic. Meanwhile, Pascal Ndahiro, Director of HotelTech, said that businesspeople in the hotel industry, often issue receipts for services including foods and drinks, and accommodation to customers from non-governmental organisations (NGOs), public or private entities, before they make payments. “They pay after two or three months, yet when you declare taxes, you have to pay VAT. We are requesting that the VAT be disbursed after customers have paid so that we are not charged VAT delay fines,” he said. Proposed solutions Hajara Batamuliza, Commissioner for Domestic Taxes at RRA, said that VAT refund was necessary and the Government was working on actions to expedite it, but pointed out that doing it automatically was not feasible as there is a need for an audit to find out whether the claimed amount is accurate. ALSO READ: Tax refund fraud to attract 5-year jail term “So, the decision we took is that MINECOFIN increased the amount of money that we have to spend on VAT refund. Also, we are thinking of automatic verification such that the system analyses the tax declaration data to ascertain whether it is accurate,” she said. “If all traders use EBM, the refund won’t be delayed again. If you declare taxes on 15th of a given month, you will be certain that you will get the refund of the amount due on 16th of the following month,” she said, indicating that one of the challenges they faced is that some traders were not issuing EBM receipts to buyers. Data from RRA indicates that the tax body retains 12 per cent of the VAT collected so that it is used for refunds, adding that as of January 11, 2023, it owed over Rwf30 billion to be reimbursed to businesspeople.

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Businesses decry delays in VAT refund