ICT Sector

1. ICT Sector Presented by: ICT Chamber Secretariat Making Rwanda the Leading ICT Driven Society Rwanda ICT Chamber, PSF

2. Bonus on Airtime PROBLEM Telcos give discounts on airtime based on the price paid when buying scratchcards. Bonus airtime is taken as a discount, therefore VAT and excise duty are only imposed on the amount paid. RRA would wish to tax the price paid as well as the bonus provided. Since bonus is not revenue earned by the telecom operators, we believe that VAT should not be payable. • IMPACT • Reduces mobile penetration growth. • Increases cost of usage, limiting the usage incentive that bonus is intended for. • Narrows the tax base because of reduced subscribers and usage. • Art 6 of Law N° 26/2006 of 27/05/2006 stipulates that “while on locally manufactured products, [tax] shall be calculated to selling price”. Telecommunication is a service, not a product. RECOMMENDATION No VAT and Excise tax on discount. Base taxation on the price paid by the client - that is what has been collected by the operator. Bonus practices in the telecom industry have been proven to boost revenues and customer adoption – which eventually lead to additional tax and good top-lines for business.

3. Withholding tax on interconnect, roaming and sattelite services PROBLEM Global agreements of interconnection require that we pay interconnect, roaming or satellites fees to our partners. These are costs payable to foreign telco companies for providing interconnection services to operators’ subscribers who call or roam outside Rwanda. RRA has raised a demand of withholding tax on intl. interconnect, roaming and satellite costs incurred by telecom sector. • IMPACT • Additional costs. The ITU regulations and the Melbourne treaty prohibit Countries from withholding taxes on International traffic. • Withholding tax on interconnection charges would negate Rwanda’s objective to become an ICT hub; and may also send negative signals to investors • Higher costs will lead to migration, where subscribers would opt to use foreign SIM cards when they are outside Rwanda. RECOMMENDATION As international citizens Rwanda respects the provisions of the Vienna Convention and the Melbourne treaty. It is international customary law and binding even if it is not ratified by Rwanda. We recommend the fast tracking of the ratification of the Melbourne treaty process by Rwanda.

4. Fees on advertising billboards and banners Art 19 “Advertising on buildings and vehicles owned by a company shall not be subject to prior authorizations and shall not be charged any fees” Rented vehicles and building should be also included in this article. Wall painting and branding On the same Art 19, it says “The advertising billboard or signpost showing a direction of where a given activity is carried out shall not be charged any fees.” Branding and wall painting should not be charged, as it does not include any commercial message, it only shows where a given activity is carried out. Towers Art 22. towers located on a rooftop should be charged only for their height; if the charge is being done including the height of a house/building where it has been erected, it would signify double payment for the operator, as the landlord pays a tax which indirectly is passed to the user of the tower. Municipal Fees Rwanda ICT Chamber, PSF

5. This makes it cheaper for citizens to afford ICT equipment, which is aligned with Rwanda ICT’s objectives. However the new law does not address the challenge businesses face when they import ICT equipment in pieces rather than as a “system”. The last budget reading left businesses confused as taxes were increased on ICT Equipment, some from as low as 0 to 25% This creates unpredictability for the business community which affects business plans & planning. If Rwanda wants to be an ICT Hub as we believe, the aspect on taxes in the sector should be predictable and clear. New VAT Law on ICT Equipment Rwanda ICT Chamber, PSF

6. Corporate tax quarterly payments The law requires to pay advance corporate tax for the current year based on tax liability of the previous year. This has significant cash flow implications if a company is having a bad current year. Based practice is for the tax payer to pay advance tax based on their current forecasted performance. Penalties are imposed if the tax payer’s actual performance and forecasted vary against an established maximum variance allowable. Corporate and Consumption Tax Consumption tax; The law is not clear whether, for telecoms, excise duty is computed based on sales or usage. Rwanda ICT Chamber, PSF

7. Reverse VAT on imported servicesavailable locally The current law does not allow companies to claim reverse VAT on services construed to be available locally. However, “available locally”, is not defined. Its not clear whether technical ability and capacity are considered when determining “local availability”. Regionally there is no requirement to access the local availability of a service before a company decides to claim reverse VAT. Further this requirement may be considered a non-tariff barrier as it makes it more expensive for deal with foreign service provider. Rwanda ICT Chamber, PSF

8. Advertising Law Advertisement law introduced in 2012 increased the cost of doing business in Rwanda by companies that depend heavily on marketing. This is exacerbated by the fact that local authorities also have powers to institute new forms of taxes further pushing the cost of doing business higher. Promotion of Home Grown Solutions The procurement Law has immensely contributed to transparency. However, the law does not make provision for the promotion of home grown solutions. Young innovators cannot participate in the economic development of Rwanda because they can’t meet most of the criteria set in the law. Implementation of New Laws The implementation of new laws or policies sometimes gives no time for businesses to adjust leading to unwarranted penalties. It is important to get the private sector involved whenever new laws are being discussed, in order to have a more effective implementation. Implementation of Laws Rwanda ICT Chamber, PSF

9. Thank You.Murakoze. Rwanda ICT Chamber, PSF