Rwanda: Special Feature – RRA Extends Deadline for Electronic Billing Machines to March 31
23 January 2014
In a bid to ensure that all businesses comply with the installation and use of Electronic Billing Machines (EBM), Rwanda Revenue Authority (RRA) has extended the deadline from December 31 to March 31. The extension is meant to provide enough time for VAT-registered tax payers to purchase machines and also give time to those who would wish to apply for exemptions from the use of machines to do so.
The tax body has increased awareness through a campaign to emphasize the use of Electronic Billing Machines which aim to boost tax compliance as well as ease doing business.
RRA introduced the machines in February last year with a pilot phase that saw over 800 machines distributed for free to selected businesses around Kigali. With the pilot phase successful, RRA began rollout out of the machines to all VAT registered taxpayers.
The tax body says that every business registered for VAT will have to provide a customer with a receipt issued through the EBM for every good or service sold. The groups of taxpayers which must have a special devices installed on its premises to record every sale will be announced by Public Notice, as installation will be carried out in phases. If a business does not have an authorized EBM in place by the announced deadline, it could face a substantial fine.
What is the purpose of EBM?
Besides combating tax evasion and corruption, Electronic Billing Machines will provide a market balance and make equal business opportunities for every entrepreneur.
Rwanda Revenue Authority knows that most businesses are not paying their full taxes, and to prove that fact, auditors often spend countless hours investigating and combing through massive documentation, which disrupts the operations of both honest taxpayers and those who evade taxes on purpose. Thanks to EBMs, VAT paid by the citizens and businesses will be instantly recorded and the audit itself will become much simpler.
The ambition to raise more internal revenue benefits all citizens who will eventually enjoy better social programs, and the money for that will be coming from VAT.
How does Electronic Billing Machine work?
The Sales Data Controller (SDC) records every transaction received from the Certified Invoicing System (CIS), and then ensures that an electronic signature is printed on the receipt. The signature is verifiable by RRA officers using a special decryption tool that is unique for every installed SDC device, thus allowing detection of any falsification. The SDC itself was carefully designed to be secure and tamper-proof. Rwanda Revenue Authority auditors can access any SDC and quickly detect missing taxes.
Electronic Billing Machines are designed to suit every business environment. If taxpayers already own invoice-processing equipment, they must make sure their system is compatible with requirements, as soon as possible. A buyer (registered VAT taxpayer) is required to ask the vendor (distributor of the machine) about the compatibility.
The requirements and the testing method are provided by the SDC, a small electronic device that sits at the heart of the taxpayer’s financial system. Options for its installation depend on the brand and models offered by suppliers. In order to ensure that you are buying a certified machine compliant to RRA’s requirements, users are asked to read information published on each certificate before procuring equipment, as differences exist in the specific options each model has to offer.
Taxpayers must be aware not to buy equipment from those who merely claim to be certified; instead, always look at the source of information. If a taxpayer is still not sure who is authorized supplier, our call center will provide consultations, just dial 3004.
How can you tell if you are buying from a certified supplier?
RRA has already certified three vendors who are currently the only vendors supposed to supply the machines. This is done to ensure that the machines on the market meet the requirements. The taxpayer is responsible for ensuring that the CIS is SDC compatible and that it can communicate with the SDC of your choice. SDC compatible means that CIS has equal connectivity settings, which must be adjusted to meet manufacturer’s installation requirements.
The tax body issues a confirmation of certification that recognizes the compatibility of the CIS with SDC. This applies only to CIS products and this certificate is not a license to sell. Certificate holders that further develop their products are responsible for ensuring that the certificate is listed here and is updated and remains compatible with technical specification. The certificate is only applicable to the product in the configuration that has been evaluated by Rwanda Revenue Authority.
Who is exempted from using the EBMs?
There is a window for exemptions from the EBMs for some of registered taxpayers. To obtain this exemption, the taxpayer must apply to the tax body, specifying reasons for their inability to use EBMs. The Exemption is line with Articles 17, 18, 19 and 20 of Commissioner General Rules n° 002/2013 of 12/09/2013 implementing the ministerial order no 002/13/10/TC of 31/07/2013 on modalities of use of certified electronic billing machines.
Taxpayers eligible to apply for exemption are:
- All VAT registered businesses where the scope of VAT sales is small compared to the company’s total sales. Sales that add up to 75% of the company’s income derived from exempted services.
- All VAT registered businesses whose sales are only conducted during a limited portion of the year. However, any such taxpayer will not be exempted if sales total at least 30 invoices during a calendar year. Such businesses need to apply for exemption.
Penalties and Conditions for not complying
Much as the RRA is asking VAT taxpayers to meet the new deadline for implementing the installation of Electronic Billing Machines, which has been extended to March 31 this year, the tax body says it will withdraw administrative privileges from all VAT registered taxpayers who have not complied with the first deadline of December 31, 2013.
“RRA will immediately withdraw administrative privileges formally granted to compliant taxpayers for those who will not have complied with the set deadline,” said Drocella Mukashyaka, the Deputy Commissioner for Taxpayer Services at RRA.
The penalties and conditions will also affect those who have not obtained exemptions from the use of EBMs as privileged in the law. The tax body says that the assessment is still ongoing and asks taxpayers to take the chance to conform to the rules. Accordingly, the taxpayers who have not met the deadline will lose the privileges that the tax body gives to compliant taxpayers, including Quitus Fiscal, Blue Channel, Gold Card scheme and all installment payments for taxes.
Mukashyaka says that the reason behind the penalties is to enforce the maximum use of EBMs by VAT registered taxpayers as well as discourage dodgy taxpayers from engaging in tax evasion by not issuing tax invoices to their clients using these machines. Non-compliant taxpayers who participate in public tenders will be stripped of the tax clearance certificates and statement of arrears that are important in tendering processes.
To emphasize this measure, Rwanda Revenue Authority has also set up fines for non-compliant businesses that will not have met the March 31 deadline. The fines range from Rwf 5 million to Rwf 20 million. Mukashyaka notes that the privileges are crucial to businesses and therefore, so is the need to install the machines and retain them.
Rwanda Revenue Authority continues to reward consumers
As a way of increasing awareness on the use of Electronic Billing Machines (EBMs), Rwanda Revenue Authority introduced awards that are aimed at rewarding consumers who demand invoices (receipts) issued by such machines.
The Consumer Excellence Award was introduced last year to promote the culture of asking for receipts whenever one purchases a product or a service. The Awards, along other efforts Rwanda Revenue Authority has put in place to boost the use of EBMs, are expected to increase compliance of VAT collection, one of the country’s taxes that boost domestic revenues. RRA believes that including consumers in the efforts to encourage the use of the machines is reaping positive results with more people now opting to buy from businesses that have installed machines, thanks to the awards.
“I want to thank special consumers who have taken heed of our call to ask for invoices and we will continue to reward them for their efforts to support the development of their country through promoting tax compliance,” said Richard Tushabe, the Rwanda Revenue Authority (RRA) Deputy Commissioner General.
25 consumers are awarded cash and other prizes every week in draws that are automatically done in a secure and highly protected electronic way. The 25 lucky winners, who will be walking away with various prizes every week, including a cash prize of RWF 100,000 francs, will be selected from invoices issued by EBMs countrywide. According to Tushabe, the purpose of the awards is to encourage consumers to demand invoices from the EBMs, something that leaves businesses with no option but to use the machines.
“VAT is paid by the consumer, it is your right to ensure that the tax you have paid has been declared by the tax payer so that it can contribute to the development of our country,” the Deputy Commissioner General noted. “If we work together as Rwandans we can reach our target, so we are asking everyone to insist on an EBM invoice.”
Tushabe noted that the campaign will also help the consumer to get in the habit of demanding for an invoice, which can help them in their day-to-day personal lives. “The invoice can also help you to follow up your daily expenses,” he noted.
The use of EBMs has proven to be more efficient and reliable in collecting VAT during the pilot phase, and the tax body has set a deadline for each VAT registered business to have bought such a machine.
“The machines help taxpayers keep records when they have made sales. Secondly, the machines also help RRA to track transactions made by taxpayers,” explained Celestin Bumbakare, RRA Commissioner for Domestic Taxes.
How the winners are selected
To ensure transparency, accuracy and fairness, Rwanda Revenue Authority set up a hi-tech, automated no-human-interference system that selects 25 people every week from thousands of invoices. The system, which records every EBM invoice countrywide, has the capacity using specific calculations to select 25 invoices for awards. Unlike other draws, the machine selects 25 invoices from all the invoices that have been issued for an entire week countrywide without any human interference and then makes a list of 25, something that assures accuracy of the method.
Gakwerere explains that the system is opened publicly by only one authorized personnel with a code that is designed for that particular draw which is obtained by multiplying the date of the draw with month and the year.
“The system then gives us a report in a PDF format, meaning no one can tamper with it. Secondly, the report comes with invoice number, the date and place at which it was issued and cannot be changed or altered,” he explained.
Accordingly, the report is published in print and on the RRA website and on radios and televisions, where people cross check to see if their invoices have been selected for the awards for that week.
“So we are asking people to keep their invoices, because it is the only way they can claim their prizes,” Gakwerere noted.