Corporate income taxes (CIT) is a direct tax imposed by the RRA on the taxable income of corporations
The tax period is the calendar year, from 01 January to 31 December (except special cases).
Filing deadline is March 31 (or 3 months after the end of tax period) of the following year
There are three primary tax regimes:
Real regime
Lump sum regime
Flat rates
- Real regime:
Under this regime, companies pay 28% of their taxable profits.
- Lump sum regime:
Only small enterprises that have annual revenues between Rwf12-20m can choose this regime (but can also choose to be taxed under the real regime)
Tax is calculated as 3% of the annual revenues
- Flat tax
Micro-enterprises following their annual turnover must pay the flat amount of tax as per the following table
Example #1: A company has annual revenues of 100 million and deductible expenses of 80 million
The company will pay CIT of 5.6 million (20 million profit x 28%)
Example #2: A company has annual revenues of 15 million and deductible expenses of 5 million
The company has the choice of calculating CIT based on its net profit or gross revenues
10 million net profit x 28% = 2.8 million
15 million gross revenues x 3% = 0.45 million
Which regime is favorable to the company?
Note: A small enterprise cannot choose each year. Once in Real regime, they must declare under real for at least 3 years.
Example #3: A company has annual revenues of 10 million and deductible expenses of 5 million
How much should the company pay?
Small enterprises pay a flat tax:
- Some organizations are not subject to any tax, such as NGOs
Income for accounting purposes ≠ income for tax purposes
The RRA allows certain expense deductions and disallows others for tax purposes
The specific allowable/non-allowable deductions are beyond the scope of this lesson
Most companies hire tax consultants to assist with the CIT declaration
As a junior accountant you may be responsible for corresponding with tax experts as they gather support documentation for their analysis.