Understanding the VAT reverse charge in Rwanda

The VAT reverse charge is a mechanism that shifts the responsibility of accounting for Value Added Tax (VAT) from the supplier to the recipient of services. In Rwanda, this mechanism is governed by Law No. 37/2012, which establishes the Value Added Tax. Article 12 of the law specifically addresses the acquisition of foreign services and outlines the implications for taxpayers and the procedures involved.

VAT Reverse Charge Mechanism

Under the VAT reverse charge mechanism in Rwanda, when a taxpayer receives services from a provider located outside the country, the recipient is deemed to have both delivered taxable services and received output tax from the foreign service provider.

Output VAT

According to the law, the recipient of the foreign services is required to account for the output tax on the date of filing the value added tax declaration for the relevant period (on line 45 of the VAT return).

Input Tax Deduction

Recipients of foreign services, which are not available in Rwanda, are permitted to deduct input tax against the output tax. This deduction is made on line 65 of the VAT return. Services are considered “not available” in Rwanda if there are no local providers who can offer identical or similar services on the local market.