Rwanda: Supplement – RRA Experts Answer Questions About Electronic Billing Machines

28 APRIL 2013

INTERVIEW

Rwanda has introduced legislation which will help businesses to keep their books properly and also improve tax compliance. The new law is also specifically designed to stop tax evasion and starting this year, every business registered for VAT must provide a customer with certified receipt for every sold good or service.

This will require businesses to install an Electronic Billing Machine (EBM), which keeps records of all the sales. It comprises of two components, a Certified Invoicing System (CIS) and a Sales Data Controller (SDC). The groups of taxpayers which must have the device installed will be announced by public notice, as installation will be carried out in phases.

By end of each phase, this law will apply to every business registered in Rwanda, including every newly registered taxpayer.

The Rwanda Focus talked to Goran Todorov, an EBM consultant hired by RRA, and Charles Kabera, RRA’s head of Risk Management Division in the Domestic Tax Department, who are overseeing the EMB project, to answer questions that taxpayers might have.

Which taxpayers are the EBMs targeting and under which legal mandate?

The EBM initiative is meant to help RRA boast its domestic tax collections and it targets all registered VAT taxpayers, a list of whom we have.

As for the legal mandate for this, reference is made to article 24 of law n° 37/2012 of 09/11/2012 establishing the value added tax which states that ‘Value added tax registered persons are obliged to use a certified electronic billing machine that generates invoices indicating the tax as agreed by the tax administration’.

There are over 7000 VAT registered persons/businesses with the RRA and all these will be required to operate with the EBMs.

How exactly are these EBMs supposed to work?

The Sales Data Controller (SDC) is a small electronic device connected to the taxpayer’s Invoicing system. The SDC records every transaction printed by Certified Invoicing System (CIS) which ensures that every printed certified receipt contains a special electronic signature obtained from SDC in the approved format. The SDC itself is tested and accredited by RRA to be secure and tamper-proof. Rwanda Revenue Authority auditors can access any SDC and quickly detect any missing taxes.

Summary on EBMs

All registered VAT taxpayers are required by the VAT law to install EBMs.
RRA has given out 500 EBMs under a pilot project to help kickstart their introduction.
The RRA commissioner General will announce dates and phases in which all other VAT taxpayers will be required to acquire and install EBMs in their businesses.
The EBMs will help RRA increase efficiency in collecting more taxes to help in the growth of our country.
RRA is creating awareness on the use of EBMs to ensure taxpayers are not found on the wrong side of the law.
RRA will issue a check list which will guide both suppliers and users on the right specifications of the EBM to buy.
If you are a registered VAT taxpayer and plan to acquire an EBM, seek help from your nearby RRA office on the process and what you need.
Once you have the EBM, ensure it’s working well so that all sales reports are filed. Also teach all sales staff on how to operate the EBMs.
Countries that have used EBMs have registered massive success in tax collection, Rwanda can succeed as well.
Customers should henceforth demand an EBM printed receipt whenever they pay for goods or services.

What should taxpayers who already have some form of invoicing system do?

We know there are many in this case but they needn’t worry because EBMs are designed to suite every business environment. However if a taxpayer already owns an invoice processing equipment, they must make sure that their system is compatible with new RRA requirements, as soon as possible.

The requirements and the testing method are provided by RRA.

If taxpayer already has a new invoicing system that meets all the required specifications of RRA, he must check that his agents/business outlets elsewhere are on top of these changes as well and plan to roll out an upgrade in time to comply with EBM rules. Some agents may be reluctant to comply, or even give up on the Rwanda market altogether. The fact is a taxpayer doesn’t want to be vulnerable to fines and penalties from RRA just because a vendor doesn’t want to do the upgrade.

How does the taxpayer find the right Electronic Billing Machine?

Based on other countries experiences which have rolled out similar invoicing regulations, it has proven difficult for the market to get certified systems on time. For this reason, Rwanda Revenue Authority has eased up on the requirements and decided to roll out implementation in phases.

All Electronic Billing Machines must be certified. This means that it is necessary to have a Certified Invoicing System (CIS) and Sales Data Controller (SDC). The RRA is developing a certificate checklist which taxpayers will use as reference to guide them in identifying the devises of their choice.

Also note that the EBMs may come in different versions or types as made or developed by a different manufacturer; that is not a problem, what is important is that whichever model you choose, it must meet the specifications provided by RRA to ensure it is compatible with the reporting system. To ensure that taxpayers buy the right EBM devices, RRA is working closely with the private sector and has already trained members of the ICT chamber which has ICT equipment suppliers, software developers and other traders who might want to supply the market, these are already aware of the requirements and will help taxpayers get along.

Taxpayers can also visit the RRA website where a specially developed page on EBMs has been added which is regularly updated with developments on this project; all are advised to visit www.rra.gov.rw for details. If taxpayer is still not sure who is authorized supplier, our call center will provide consultations, just dial 3004.

How will the use of EBMs by VAT-registered taxpayers benefit all involved?

The use of EBMs is of great importance to the taxpayer, the consumer and the country/government at large.

To the taxpayer:

The system provides a tailor-made book keeping solution where once every sale detail is filed in the device, the data are recorded on the system and immediately communicated to the RRA system.
The EBMs will help the taxpayer to be a better tax complier and help in steering the growth of our country.
The EBMs will promote fair competition on the market. Where in the past some enterprises evaded taxes hence earning illegal profits, the system will ensure everyone earns his due and pays what belongs to the government hence promoting fairness. It will also reduce financial embezzlement in businesses, corruption and other malpractices business owners tend to suffer in their absence.

To the consumer:

Citizens will, thanks to these secure devices, know exactly how much they paid for goods or service and tax burden will be clearly justified. It’s therefore paramount for consumers to insist on a receipt for whatever good or service. All receipts produced have a special electronic signature which can be verified by RRA or the consumer. This again ensures transparency.
To encourage this receipt practice among consumers, RRA will introduce a competition where citizens with the biggest number of locally issued receipts get rewarded. If you demand a receipt it means the seller will have to use the EBM to issue one, it also means the VAT tax, which is compulsory anyway, is deducted, it means as a citizen, you have contributed to national treasury hence growth.

To RRA:

Domestic taxes are important sources of revenue to any country. It’s from these taxes that the government gets money to provide its citizens with public goods and services such as security, health, salaries to government workers and many others. The bigger our domestic tax base, the better our chances of becoming financially independent and reduce on donor aid. While we have thousands of good compliant and honest taxpayers, there are those who are also determined to evade taxes hence leaving the tax burden on a few.
The successful implementation of EBMs will help us curb VAT tax evasion and increase our domestic tax collection by a good percentage.
The system will also improve the relationship between taxpayers and RRA as the tax sales reporting will be straight forward as well as tax deductions.
Finally, it will reduce RRA’s overhead cost of sending dozens of auditors to the field to track down taxes, this will become less expensive.

You can help us achieve all these by cooperating.

Source: Rwanda Focus (Kigali)