UNIT 4: CUSTOMS AND 4 CONSUMPTION TAX
- Key unit competence: Compute the Customs and consumption taxes
Mr. KAMARI, an importer located in Musanze District, imported Irish
potatoes from Uganda Kabare District and had a consignment with vehicle
RAC 407P for bringing 3 tons When he reached Kisoro district near Cyanika
border the vehicle got a mechanical problem which required a spare partfrom Nairobi-Kenya.
1. From the above picture which things are you seeing?4.1: EAC origin, objectives
2. Considering Mr. KAMARI’s scenario, what do you think Mr. KAMARIwill present to border for his.
Learning Activity 4.1
Many years ago businessmen from Rwanda traded with people from
Uganda, Congo, Kenya and Tanzania but due to security and tax policies
and international relations most of their companies were operating at a
loss and some time they lost their products while crossing from Rwanda
to these countries and they even faced the problem of not getting trade
facilities while getting to the frontiers. These problems affected not only
the Rwandan side, but almost all countries in the region. For the above
scenario, what things have been done in this country to solve the aboveproblems?
4.1.1: EAC customs union origin
1. Meaning of the East African Community Customs Uniona) The East African Community (EAC) Customs Union
Meaning of customs union
The Customs Union is the first Regional Integration milestone and critical
foundation of the East African Community (EAC), which has been in force since
2005, as defined in Article 75 of the Treaty for the Establishment of the EastAfrican Community.
It means that the EAC Partner States have agreed to establish free trade (or
zero duty imposed) on goods and services amongst themselves and agreed on
a common external tariff (CET), whereby imports from countries outside theEAC zone are subjected to the same tariff when sold to any EAC Partner State.
Goods moving freely within the EAC must comply with the EAC Rules of Origin
and with certain provisions of the Protocol for the Establishment of the EastAfrican Community Customs Union
The East African Community (EAC) Customs Union is formed of Kenya, Tanzania,Uganda, Burundi, Rwanda, Democratic Republic of Congo and South Sudan
b) Trade related aspectsRules of Origin are the laws, regulations and administrative procedures which• Rules of Origin
determine a product’s country of origin.
The protocol provides that trade within the EAC will be conducted in accordancewith agreed East African Rules of origin.
- National treatment:
treatment that they give to domestic or “national” products, i.e. there should be
no discrimination. In this respect, Partner States agreed not to enact legislation,
or apply administrative measures, which directly or indirectly discriminate
against the same or similar products of other Partner States.- Anti-dumping measures:
exported) at less than the normal value of the merchandise, i.e. a price that is
less than the price at which the merchandise is sold in its home market. PartnerStates recognized the challenges dumping imposes on the domestic market.
- Subsidies:
competition are required to notify the other Partner States in writing.- Countervailing measures:
levied on any product of any foreign country imported into the Customs Union.
- Safeguard measures:
is a sudden surge of a product imported into a Partner State, under conditionswhich cause or threaten to cause injury to domestic producers.
- Restriction and prohibitions to trade:
involving: the application of security laws and regulations; the control of arms
and ammunition; the protection of human life, the environment and natural
resources, public safety, public health and public morality; the protection of
animals and plants It was agreed that goods to be restricted and prohibitedfrom trade be specified in the Management Act..
- Re-exportation of goods:
exempt from the payment of import or export duties.
- East African Community Committee on Trade Remedies:
matters relating to the rules of origin, anti-dumping measures, subsidies and
countervailing measures and any safeguarding measures that are provided forunder the East African Community Customs Union.
2. The main features of EAC Customs union
.A shared set of import duties applied on goods from countries outside
the EAC. This is referred to as the Common External Tariff (CET)Zero rate of import duty, and no quotas, applied on goods from countrieswithin the EAC with valid certificate of origin.Shared procedures, safety measures, valuation methods, trade policyand terminology governed by the EAC Customs Management Act
(CMA).
Rwanda is also a member of the Common Market for Eastern and
Southern Africa (COMESA) free trade area.
4.1.2: Objectives of EAC Customs union
The objectives of the East African Community are broader and cover almost all
spheres of life. The main objective of the Customs Union is formation of a single
customs territory. Therefore, trade is at the core of the Customs Union.
It is within this context that internal tariffs and non-tariff barriers that could
hinder trade between the Partner States have to be eliminated, in order to
facilitate formation of one large single market and investment area
Customs Union focuses on facilitating trade on the following:
Removal of tariff on goods from partner states;
• Application of a Common External Tariff;
• Removal of other barriers to trade;
• Customs Union focuses on trade facilitation through:– Removal of non-tariff barriers;documentation;
– Simplifying and standardizing trade formalities and customs– Exchange of customs/ trade information;
– Adopting and implementing international best practices in customs
and trade;– Common and uniform application of Customs laws.
Application activity 4.1
1. Define the terms “rules of origin and mention types of rules of4.2: Description of customs duties
origin
2. True or false question on the features of EAC Customs union
a) A shared set of import duties applied on goods from countries
outside the EAC. This is referred to as the common External Tariff
(CET)
b) Zero rate of import duty, and no quotas, applied on goods from
countries within the EAC with valid certificate of origin
c) Removal of other barriers to trade
3. Explain the purpose of rules of origin
4. In East African Community (EAC) rules of origin criteria, goods
shall be accepted as originating in a Partner State where the goods
are wholly produced in the Partner State among others.
For the purposes of rules of origin, what products that shall beregarded as wholly produced in a partner state?
Learning Activity 4.2
The student from Munezero girls’ schools were on a study tour in Dar -Es
-Salam being hosted by Institute of Tax Administration (ITA) in collaboration
with Tanzania Freight Forwarders Association (TAFFA). Initially students
had planned to visit Dar-Es-Salam port and discuss customs issues with the
team on the part of TAFFA, during the visit, head of the delegates asked the
following questions that need your answers as S5 student who are studyingtaxation.
Q1. What is Customs Duties?
Q2. With research, explain the exemption of customs tax for products usedin export processing zones
4.2.1: Definition of customs duties and the person who can import or export1. Definition of customs duties
Customs duties are defined as all taxes, duties, levies and fees that are required
to be paid to Revenue Authority like Rwanda Revenue Authority (RRA) in
Rwanda on imported or exported goods.
Customs duties ensure that local and foreign business can compete fairly, by
ensuring a level playing field (VAT and Excise Duty), encouraging intra-regional
trade (Import Duty), ensuring compliance of Income Tax (WHT 5%), funding
beneficial projects (IDL, SRL and AUL) and supporting domestic manufacturing
industries (Export Duty on Raw Hides and Skins).
2. Meaning of importation and exportation and the person who can
import or export
a) Meaning of importing and exporting
• Importing is when goods are brought into Rwanda from an external
country.
• Exporting is when goods are taken from Rwanda into an external
country.b) The person who can import or export
Any taxpayer may import or export goods. No additional registration is required,
but individuals or businesses without Taxpayer Identification Number (TIN)
must register with RDB or RRA as normal.
The majority of importing and exporting procedures are carried out by licensedcompanies called Clearing Agents on behalf of the taxpayers
4.2.2: Types of Customs duties
1. Taxes paid on imports that are also paid on domestic goods• Value Added Tax (VAT)2. Taxes that are specifically paid on imports
• Excise Duty• Import Duty
• Withholding Tax of 5% (WHT 5%)
• Infrastructure Development Levy (IDL)
• Strategic Reserves Levy (SRL)• African Union Levy (AUL).3. Taxes that are specifically paid on exports• Export Duty on Raw Hides and Skins4. Small fees on imports and exports• Computer Processing Fee4.2.3: Valuation of imported and exported goods• Quality Inspection Fee (QIF)
Imports are valued as Cost, Insurance and Freight (CIF). This is equal to the cost
of the goods, the cost of any insurance paid on the goods and the freight costs
of transporting the goods transport the consignment to the first point of entry
of the EAC. Exports are valued as Free On board (FOB). This is equal to the cost
of the goods only. Whether using the CIF or FOB valuation, the declared value
must be supported by commercial invoices, as well as insurance and freightinvoices where applicable.
If goods have been purchased in a foreign currency, declare the value in the
currency of the invoice. Rwanda electronic Single Window (ReSW) system then
uses the National Bank of Rwanda (BNR) exchange rate to convert this into
Rwandan francs.Example
Rukundo is importing a consignment of mobile phones from Japan. The cost
of the mobile phones was USD 30,000 (thirty thousand US dollars). He paid an
additional USD 400 (four hundred US dollars) to transport the consignment to
the first point of entry of the EAC, in this case, the port of Mombasa in Kenya.
He also paid USD 150 to insure the goods during transportation to the port
of Mombasa. On the day of declaration, the exchange rate is USD 1: FRW 850.
Therefore, the CIF value of his import declaration is:
CIF = (USD 30,000 + USD 400 + USD 150) * 850 = FRW 25,967,500.
4.2.4: The documents required when importing or exporting
The importing or exporting taxpayer must provide the Clearing Agent withvalid documents proving the value and authenticity of their consignment.
A. The mandatory documents that taxpayers importing goods originating
from within the EAC must provide are:
1. Commercial Invoice or equivalent document
Showing the value and description of all goods within the consignment.
2. Packing List
Lists the goods being transported within the consignment.
B. There are two additional mandatory documents that taxpayers
importing goods originating from outside the EAC must provide to RRA:1. Freight Invoice
Showing the cost of transport and insurance for the consignment, if not includedin the commercial invoice.
2. Bill of Lading / Airway Bill
A contract between the owner of the ship / plane transporting the consignmentand the importing taxpayer.
C. The only mandatory document that taxpayers exporting goods must
provide to RRA:
Commercial Invoice or equivalent document showing the value and descriptionof all goods within the consignment.
Additional documents that taxpayers may be required to provide when
importing or exporting depend upon the type of goods and their origin. Clearing
Agents are trained to inform taxpayers which documents are necessary for
their consignment. Without the required documents, Customs Officials will
not permit the goods to be imported or exported. Examples of goods that may
require additional documents include:– Goods produced within the EAC or COMESAThe documents required to prove that goods being imported were
– Agricultural goods and inputs including food
– Chemicals and cosmetics
– Medical equipment and pharmaceuticals– Worn clothes
produced in the EAC or COMESA?
Imported goods that are produced within the EAC or COMESA can be subject to
exemptions. In addition, imported goods that are produced within the EAC only
are granted automatic access to the pre-clearance facility
These benefits require a Certificate of Origin delivered by the exporting country.
The EAC Rules of Origin document explains the criteria that goods should meet
to be considered as originating from EAC partner states.Other important points:
a) The way Rwandan exporters certify that goods being exported
were produced in Rwanda
Rwandan exporters can apply for a Certificate of Origin through their Clearing
Agent. The Clearing Agent applies on the Rwanda electronic Single Window
ReSW) and provides the required evidence at any Border Post or Dry Port.
There are different fees and requirements depending upon the country to
which the goods are exported. There is also a Simplified Certificate of Origin
available for smaller value consignments
There are many incentives that Rwandan exporters can benefit from, depending
on the country being exported to. This includes EAC, COMESA, the EuropeanUnion (EU) and the United States of America (USA).
ion (EU) and the United States of America (USA).
b) The different Customs channels
After import or export declarations have been submitted and paid, the Rwanda
electronic Single Window (ReSW) system assigns the consignment to a Customs
channel. The Customs channel refers to the level of verification from Customs
Officers required for that consignment.
c) Harmonized System (HS) Codes
Harmonized System (HS) Codes is an internationally standardized to classify
traded products. The taxpayer provides a description of the type of goods to
the Clearing Agent, who is trained to select the correct HS Code. Selecting the
correct HS Code is important for ensuring the correct amount of tax is declaredand paid.
Application activity 1.2
Q1. State the types of Customs Duties
Q2. What is the Rwanda electronic Single Window (ReSW)?
Q3. Briefly explain why the government imposes tax on importation?
Q4. XYZ enterprise is a business that offers customers a wide variety
of products at inexpensive prices. Customers can buy from the shop on
the online website. Owner, KAMANZI, employs more than 2000 people.
The business had humble beginnings, but today it sells fruits, flowers,
vegetables and meat to both the local market and abroad.a) Does XYZ enterprise sell to the local market or regional market?4.3: The taxes that are specifically paid on imports
Explain your answer.
b) List the advantages of selling products to the local market
c) Which challenges do you think that KAMANZI needs to overcome
to sell fresh flowers to other countries?
Learning Activity 4.3
Analyze the photos above and answer the question that follow:
Q1. With research, give the different Import Duty rates or Common External
Tariff (CET) rates allow for certain types of goods to be prioritized.4.3.1: Import duty
1. Meaning of import duty
Import Duty is a tax paid specifically on imported goods originating from
outside of the EAC.
The EAC Customs Union ensures a zero (0%) rate of import duty on all imports
on goods originating from within the EAC
The EAC customs union means that the rates of import duty are agreed in the
common external tariff (CET).
The different import duty rates also allow for certain types of goods to be
prioritized. In general, CET rates are:– Capital goods and raw materials = 0%The amount of import duty to be paid is calculated as follow:
– Intermediate goods = 10%
– Finished goods = 25%
– Sensitive Goods = Varying rate
Import Duty = CIF * import duty rate- Handling fees (HF)
calculations. HF is calculated by: Handling fees (HF) = Gross weight (kg) * FRW
10
Gross weight (kg) refers to the weight of the goods in the consignment inkilograms, including the weight of the containers or transporting equipment.
4.3.2: Withholding tax of 5% and infrastructure development levy1. Withholding Tax of 5%
WHT 5% is a tax paid specifically on imported goods.
WHT 5% is paid by all taxpayers except for taxpayers with a valid Quitus Fiscalcertificate
Quitus Fiscal is a privileged status available, upon request to taxpayers who
have a good compliance record with RRA. Quitus Fiscal certificates are proof ofthis status. There are two types of Quitus Fiscal, for withholding tax on public
tenders of 3% (WHT 3%) and for withholding tax on imports of 5% (WHT 5%).
Taxpayers with Quitus Fiscal certificates are not required to pay WHT 5%, or
have WHT 3% withheld and paid on their behalf, depending upon the type ofQuitus Fiscal certificate.
2. Infrastructure development levy
Infrastructure development levy (IDL) is a tax paid specifically on imported
goods from outside of the EAC.
IDL contributes to regional trade facilitation infrastructure projects. IDL is paid
on all imported goods, with the exception of those detailed in Article 5 of Law
N°34/2015 of 30/06/2015, including:– Goods originating from within the EAC4.3.3: Strategic reserves levy and African union levy
– Reproductive animals and plants
– Pharmaceuticals
– Veterinary products
– Medical equipment
– Industrial machinery
– Solar energy equipment
– Duty remission products
– The IDL to be paid on imported goods is calculated by: Infrastructure
development levy (IDL) = CIF * 1.5%
1. Strategic reserves levy
SRL is a tax paid specifically on imported fuel and petroleum products.SRL
funds the purchase and safe maintenance of greater reserves of fuel. The SRL
is paid at a specific rate per litre of fuel, calculated by: Strategic reserves levy
(SRL) = FRW 32.73 per litre of fuel
2. African union levy (AUL)
AUL is a tax paid specifically on imported goods. AUL contributes to the financing
of African Union activities.The AUL paid on imported goods is calculated as
follow: African union levy (AUL) = CIF * 0.2%
4.3.4: Motor vehicle registration fees (MVF) and Road Toll
1. Motor vehicle registration fees (MVF)
MVF are paid specifically on imported motor vehicles. MVF must be paid
regardless of the type of vehicle or the exemptions available to the importing
taxpayer.
MVF vary depending upon the engine capacity of the vehicle as measured in
cubic centimeters (cc):Engine Capacity (cc)
The special engine category includes semi-trailers, construction vehicles and
other very heavy vehicles.
2. Road toll
Road toll is a fee paid specifically on foreign registered trucks entering Rwanda.
Road toll contributes to the road maintenance fund (RMF) in Rwanda.
It is important to note that the road toll is paid per truck entering Rwanda, not
per declaration. Therefore, this is paid separately to other customs duties.
The road toll has two different rates, depending on the size of the trucks. The
road toll must be paid by trucks every time they enter Rwanda. The rate of road
toll is:– $76 USD for simple trucks4.3.5: Fuel levy and export duty on raw hides and skins– $152 USD for heavy commercial trucks
1. Fuel levy
Fuel levy is a tax paid specifically on imported fuel and petroleum products.
Fuel levy contributes to the road maintenance fund (RMF) in Rwanda. The fuel
levy is paid at a specific rate per litre of fuel.
The Fuel Levy to be paid on imported fuel is calculated by:
Fuel Levy = FRW 115 per litre of fuel
As with the Fuel Levy, Road Toll is referred to as ‘FER’ in import declarations
and assessment notices
2. Export duty on raw hides and skins
Export duty on raw hides and skins is paid on all exports of unprocessed hides
and skins to outside of the EAC. The rate of export duty on raw hides and skins
is either:– 80% of FOB, or $0.52 per Kg, whichever is higher. In export declarations4.3.6: Computer Processing Fee, Quality inspection fees (QIF)
and assessment notices, Export Duty on raw hides and skins is referredto as code ‘EX1’.
and warehousing fees
1. Computer processing fee
The computer processing fee is a fee paid for every import or export declaration
that is submitted.
The computer processing fee is:– FRW 3,000 per regular declaration2. Quality inspection fees (QIF)
– FRW 500 per simplified declaration
Quality inspection fees (QIF) are fees paid on specific imported products.
Rwanda Standards Board (RSB) is the institution which both designates which
products are required to be inspected and carries out the inspections.
RRA collects QIF on behalf of RSB. The QIF to be paid on imported goods is
calculated by:
Quality Inspection Fees (QIF) = FOB * 0.2%
In import declarations and assessment notices, QIF are referred to under code
‘QIF’
3. Warehousing fees
Warehousing fees are paid when storing consignments in warehouses. It is
important to note that these are paid directly to the warehouses and not to
RRA. Rates may vary according to the warehouse, the size and weight of theconsignment and how long it has been stored for.
Application activity 4.3
Q1. Rukundo is importing a consignment of mobile phones from Japan. The
cost of the mobile phones was USD 30,000 (thirty thousand US dollars).
He paid an additional USD 400 (four hundred US dollars) to transport the
consignment to the first point of entry of the EAC, in this case, the port
of Mombasa in Kenya. He also paid USD 150 to insure the goods during
transportation to the port of Mombasa. On the day of declaration, the
exchange rate is USD 1: 850 FRW. Find the CIF value of his import declared
Q2. Mugisha bought different products from England valued 6,000
pounds. He pays transport cost of 1000 pounds up to MOMBASSA port
and assurance of 300 pounds. He also paid 25% of import duty. If these
goods weight 500kg, determine the amount of VAT that RRA will tax Mr.
Mugisha at the entrance border of RUSUMO. (The exchange rate is 1 Pound= FRW1400)
4.4: The excise duty (consumption tax)
Learning Activity 4.4
The Government of Rwanda has implemented some tobacco control
measures, including regulations to protect passive smokers from exposure to
second-hand smoke; use of warning label on every cigarette pack’’ Smoking
is harmful to your health’ “that is intended to reduce smoking and provide
information about the danger of smoking. Additionally, banning tobacco
advertising in electronic media in order to discourage smocking especially
among the youth; establishment of no-smoking areas in public places like
government and business offices, hospitals, restaurants and buses but
these efforts too have been slow in reducing smoking consumption.
In July 2015, government changed the tax policy for the Excise on Tobacco
where the policy change was expected to maximize revenue collections
and minimize tobacco consumption in Rwanda.
Excise taxes should be designed according to those costs or risks as a way
to account for the negative externality. Thus, a good excise tax accounts not
for the value of a product, but for the costs of the externality. For alcohol
products, this means that the alcohol content determines the tax. This,
fortunately, is common practice across the Organization for Economic Cooperation
and Development (OECD an excise tax aimed at reducing vehicle
emissions should be targeted at heavier pollutants a practice which is not
common for taxation of motor fuel. This principle is well-established in
some countries where cigarettes are taxed at higher rates while other less
harmful products are taxed at lower rates. Some governments, however,
tax all tobacco products at equal rates despite their different harm profiles.
Suppose that YXZ Ltd produce and sell wine from the local input and as
Taxation student, answer the following question;a) Which type of tax YXZ should pay?
b) Give the rate of excise duty for this product4.4.1: Definition of excise duty and the person required to register for excise duty
1. Definition of excise duty
Excise duty is a tax applied to specific products. This means that it is able to
discourage consumption with negative social impacts. This can reduce the
costs of healthcare and policing, whilst raising significant revenues for further
government spending. As excise duties are charged on the consumption of
certain products, it is also referred to as a ‘consumption tax’.
2. The person required to register for excise duty
Any manufacturer of a product that is subject to Excise Duty is required to
declare and pay Excise Duty. There is no threshold on company size for Excise
Duty. A taxpayer who manufactures taxable products must declare and payExcise Duty regardless of the size of the business.
4.4.2: The obligations of excise registered taxpayers and valuation methods of excise duty
1. The obligations of excise registered taxpayers
The obligations of excise duty registered taxpayers are detailed in Section 2 of
Law N° 26/2006 of 27/05/2006. Excise duty registered taxpayers must:- Submit an excise duty declaration and pay tax due within 5 days after the end of the tax period
The inventory register shall indicate the quantity exported, sold for
domestic consumption, and destroyed, discarded or burnt, so that
at any time, the quantities within the factory can be established and
verified.
• Keep a register of the sales of all taxable products manufactured.
The sales register shall indicate the price and quantity sold to every
customer as well as the customer’s name and address.
. Keep a register of raw materials to be used in manufacturing of taxableproducts.
• Keep a register of the activities of the manufacturer. The activities
register shall indicate the date and time of starting and ending work,
the type names and the nature of the equipment used, the type and
quantity of the raw materials used and the batch number of production,
the quantity of the goods produced.
. Notify RRA of any changes to business premises.
• Notify RRA, within ten (10) days, of any interruption to manufacturing
activities• Attach appropriate products with a tax stamp
2. Valuation methods of excise duty
The rates of excise duties can be charged on a ‘specific’, ‘ad valorem’ or ‘mixed’basis.
A specific excise duty charges a certain amount of tax per unit of the product.
For example, Excise Duty is charged on premium oil in Rwanda at a rate of FRW
183 per litre
An ad valorem excise duty charges a percentage of the taxable value of the
product. For example, excise duty is charged on beer in Rwanda at 60% of the
taxable value.
A mixed excise duty charges both a certain amount of tax per unit and as a
percentage of the taxable value of the product. For example, excise duty is
charged on cigarettes in Rwanda at a rate of 36% of the retail price in additionto FRW 130 per pack of 20 individual cigarettes.
4.4.3: Identify the taxable products, rates of excise duty andCompute Excise duty
1. Identify the taxable products, rates of excise dutyThe tax rates for Excise Duty vary depending upon the product.
The taxable products and tax rates are:
The taxable base for ad valorem excise duty on locally manufactured products
is calculated according to the selling price, excluding all other taxes.
Note: The rates of excise duty are the same for both domestic and imported
products.
2. Compute Excise duty
The excise duty to be paid on a specific basis is calculated by an amount of tax
per unit of the product. The excise duty to be paid on an ad valorem basis is
calculated by:
Excise duty = (CIF + Import Duty + HF) * Excise Rate
In import declarations and assessment notices, excise duty is referred to undercode ‘E’, for example ‘E01’.
Example:
1. Ubumwe produces cigarettes. In one tax period he manufactures and
sells 400 packs (of 20 cigarettes) for a pre-tax selling price of FRW 300
each
Required:a) Total taxable sales during that tax periodSolution
b) Excise Dutya) Total taxable sales during that tax period = 400 packs * FRW300 =FRW2. Lucie produces banana wine using ingredients sourced in Rwanda.
120,000
b) Ubumwe must pay mixed Excise Duty of: (FRW 120,000 * 36%) + (400* FRW 130) = FRW 95,200.
Inone tax period she manufactures and sells 200 bottles for a pre-tax
selling price of FRW 850
Required:a) Total taxable sales during that tax periodSolution
b) Excise Dutya) Total taxable sales during that tax period = 200 bottles * FRW 850=FRW4.4.4: The exemptions for excise duty
170,000
b) Lucie must pay ad valorem Excise Duty of: FRW 170,000 * 30% = FRW51,000
The following goods are exempt from Excise Duty– Goods for charitable organizationsNote: Should Excise Duty be paid on exports?
– Vehicles assembled in Rwanda
– One personal vehicles of a returning Rwandan diplomat
– One vehicle of a Rwandan refugee returning from a foreign country as
which the individual has personally owned and used for at least twelve
months
– Vehicles intended for the purpose of passenger (more than 14 people),
goods transport, tourist transit, and those designed for the transport
of disabled people
– Products which are specifically manufactured for export
– Products which are sold to duty free shops
Taxable products are exempt from Excise Duty if they are exported outside
Rwanda. However, proof is required that the products were actually exported.
In terms of the declaration, exports are included in the ‘Tax Due’ calculation but
then refunded in the ‘Tax Payable’ calculation. This is an implied refund, on the
presumption that proof of export will be provided.
4.4.5: The deadline to declare and pay excise duty
1. The deadline to declare excise duty
For the purposes of Excise Duty declaration, each month is divided into three
tax periods:– Tax Period 1 – From 1st to 10th of each monthExcise Duty must be declared and paid within five days of the end of each tax
– Tax Period 2 – From 11th to 20th of each month
– Tax Period 3 – From 21st to the end of each month
period. This means it must be declared and paid by the 15th, 25th of that monthand 5th of the following month.
For example, declarations concerning the tax period between March 1st and
March 10th must be declared to RRA and paid by March 15th. Then declarations
concerning the tax period between March 11th and March 20th must be declared
to RRA and paid by March 25th. Then declarations concerning the tax period
between March 21st and March 31st must be declared to RRA and paid by April
5th and so on throughout the year.
4.4.6: Excise duty penalties and fines
The penalties and fines for Excise Duty are similar to other domestic taxes,
This includes penalties and fines for:• Late declarationExcise Duty has an additional set of penalties and fines, which are applied for
• Late payment
• Declaring less than the correct tax due
violations to the law concerning tax stamps.
Note: Meaning of tax stamps
A tax stamp is a sign affixed on a product subject to Excise Duty to show retailers
and consumers that tax has been paid. The products requiring tax stamps are
cigarettes (each pack of 20 cigarettes), wines and liquors (each bottle). Tax
stamps can be purchased (at cost price) from RRA.ps can be purchased (at cost price) from RRA.
- The penalties for failing to keep a tax stamp register
– Stamp registers, records or related documentsIs subject to an administrative fine between one million Rwandan francs (FRW
– Stamp reconciliation statements
1,000,000) and two million Rwandan francs (FRW 2,000,000).
• Things for domestic producer or importer of products who
applying incorrectly tax stamps– Does not affix tax stamps to appropriate productsApplication activity 4.
– Does not affix tax stamps incorrectly
– Affixes tax stamps to products in a manner contrary to rules set
forth by the Authority
– Defaces tax stamps
– Submits an incorrect or incomplete tax stamp reconciliation
statement
– Applies tax stamps to products for which they are not intended
– Sells products which are subject to excise duty without tax stamps
Is, upon conviction, subject to a fine of between one million Rwandan francs
(FRW 1,000,000) and two million Rwandan francs (FRW 2,000,000) or to
imprisonment for a term of six (6) months to one (1) year.
Q1. Amahoro produces natural fruit juice. In one tax period she
manufactures and sells 10,000 small bottles for a pre-tax selling price
of FRW 400 each for a total taxable sale during that tax period of FRW
4,000,000.
Which amount Amahoro must pay ad valorem excise duty?
Q2. Outline the valuation methods of excise duty
Q3. Mr. Mugisha bought different products from England valued 6,000
pounds. He pays transport cost of 1000 pounds up to MOMBASSA port and
assurance of 300 pounds. He also paid 25% of import duty. If these goods
weight 500kg, determine the amount of VAT that RRA will tax Mr. Mugishaat the entrance border of RUSUMO. (Exchange rate 1POUND = FRW1400)
Skills Lab Activity 4
Through internet or after visit to RRA for customs officer, students are
required to compute customs duties and excise duty (consumption tax)for imported liquor from France.
End of unit assessment 4
Q1. Define the followinga) Rules of originQ2. Mary imported wines from France and the CIF to Mombasa was 50,000
b) Certificate of origin
c) Country of origin
d) Risk management
e) Customs offence
f) Import duties
USD. The exchange rate was 1USD = FRW880
Required: Compute the excise tax; assume the import duty of 25%
Q3. Sportsman limited produced 2,000,000 packets of cigarette. The factory
price is 700 and the retail price is 1000 per packet. Compute the excise tax.
Q4. List at least three example of certificate of origin
Q5. Identify the six categories of economic integration
Q6. How do you relate customs union from common market?
Q7. Discuss reasons why rules of origin are needed
Q8.a) List six different types of duties and fees with their corresponding
rates collected by RRA’s Customs Service Department on
importation of goods?
b) Provide a computation of import taxes assuming value of goods
imported (i.e. Cost Insurance and Freight) is equivalent to FRW
100,000. Assuming also a 25% import duty, 5% consumption tax,
18% VAT, 5% Withholding Tax, 1.5% Infrastructure Development
Levy, 0.2% Quality Inspection Fees and Africa Union Levy are
applicable on the imported goods.
c) Explain the features of the East African Customs Union.
d) Define rule of origin and explain the nature of goods that are
accepted under the rule of origin.