Large taxpayers are selected for audit by the tax authorities on a regular basis. A taxpayer is considered as a large taxpayer if any one of the following conditions is met:

Annual turnover exceeding RWF 1 billion;
Payment of income tax and VAT equal to RWF 100 million or more per year for three consecutive tax periods;
Payment of PAYE equal to RWF 200 million or more per year for three consecutive tax periods;
Payment of withholding tax equal to RWF 1 billion or more per year for three consecutive tax periods;
Losses of at least RWF 500 million or more per year for three consecutive tax periods;
Investment in a new project equal to RWF 5 billion or more; or
Carrying out commercial activities as a commercial bank, insurance company, or telecommunications company.

Audits are generally carried out for 2 tax years which can be extended at the taxpayer’s request. The tax authority informs the taxpayer in writing, at least 7 working days before conducting an audit about the type of audit to be conducted, the place of audit and the possible duration of the audit, any document required to be audited, or any information required and the tax period to be audited. The tax audit can be postponed by a period not exceeding 30 days on a request made by the taxpayer. After receipt of the audit notice, the taxpayer must not change the declarations and information contained in the accounting records at issue in the audit unless authorized by the tax administration.

During the audit, the taxpayer must provide the tax authorities with an appropriate working environment and with its books of accounts and records.

Types of audits:

Comprehensive audit: The tax authorities can conduct a comprehensive audit as a result of a risk assessment, or based on the conclusion of another type of audit, or upon a request by the taxpayer, or for any other reason specified under the domestic law;
Desk audit: The tax authorities can conduct a desk audit if they observe unclear or insufficient information provided by a taxpayer in the tax return or in case of inadequate subsequent replies;
Transfer pricing audit: The tax authorities can conduct a transfer pricing audit to audit controlled transactions between related parties to ensure compliance with the arm’s length principle;
Issue-oriented audit: The tax authorities can conduct an issue-oriented audit when a comprehensive audit is not necessary;
Refund audit: A refund audit is carried out to verify whether the taxpayer is eligible to claim to a refund of excess input VAT over output VAT; and
Audit without notice: If there are serious indications of tax evasion, the tax authorities can conduct an audit without notice.

Audit Procedures:

Effective 1 April 2023, the tax authorities can conduct tax audits as per contradictory or non-contradictory audit procedures.

Contradictory procedure

Where the tax authorities discover a miscalculation, an omission, an understatement, a misrepresentation of a tax, or any other error in the tax declaration or assessment; the taxpayer is issued a draft notice for rectification containing all the elements taken into account for rectification, including penalty details, if any. Taxpayers can make a written submission within 30 days from the date of receipt of the note (reduced to 5 days for issue-oriented audit or refund audit), and an opportunity of being heard may be given. The audit procedures are concluded by the issuance of a final rectification notice providing reasons for rejection or admission of explanations of the taxpayer and indicating the person who has to pay.

Non-contradictory procedure

The tax authorities may apply non-contradictory procedures while conducting an audit without notice in case of tax evasion, or if the taxpayer does not cooperate with tax audit officers, or fails to provide the explanations requested. Under this process, an audit notice need not be issued and contradictory procedures need not be followed. Non-contradictory procedures do not apply to issue-oriented audits.

Burden of Proof

The burden of proof falls on the tax administration if

It rectifies a tax declaration;
It demonstrates indicators of prosperity and the valuation method of property;
It applies to the prosecutor for a search warrant in residential buildings; and
It conducts an audit without notice (added effective 1 April 2023);

The burden of proof falls on the taxpayer if:

The taxpayer proceeds with the rectification of the declaration;
The taxpayer contests the content of a statement made by the tax administration; or
The tax administration conducts a transfer pricing audit (added effective 1 April 2023).

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