Legal Notes – Volume VII Issue No.2 November 2010
Author: Augustin Mabushi
2009 marks a turning point in Burundi’s fiscal legislation by the promulgation of two laws, one relatingto Value Add Tax (VAT) and the other relating to the creation of the Burundi Revenue Authority (OBR in French, for Office Burundais des Recettes).
As of July 1st 2009, the law n° 1/02 of February 17, 2009 relating to VAT (the “VAT Law”) became operational. VAT replaces the old Transaction Tax (TT) which had been into force for several decades. Before its implementation, the VAT law was preceded by several sessions which were held to explain to all stakeholders the necessity as well as the merits of VAT.
The law n° 1/11 creating the OBR was enacted on July 14, 2009 and came into force on the same date.
The promulgation of the two laws is part of the long term process initiated by Burundi and aimed at two major purposes: the harmonization of the national legislation to the East African Community regulations and, the amelioration of the climate of business in order to promote investment and boost the economy.
The VAT law
The principle of the VAT law is to apply a general tax on all goods and services, which is proportional to the price effectively paid, without having regard to the number of operations carried out in the process of production and distribution occurred before the taxation date.
All sales of goods and services as well as importations of goods and services are taxed and all persons performing such operations whose turnover exceeds BIF 10 millions (approximately USD. 8,000) are liable for VAT. Although international organizations, embassies & consulates are exempt from VAT, they are first required to pay the VAT and the OBR would thereafter refund the paid VAT.
In addition, some specific businesses and transactions are exempt from VAT, notably financial transactions, leasing operations, warehousing operations, house and office renting, hotels, medical care and pharmaceutical products, scholar and university activities, social security organisations, agricultural products, and international travelling costs.
The basis for calculation of VAT depends on the kind of the business involved. For sales of goods and services, the basis shall be the whole price paid by the purchaser. It is worth mentioning that all taxes, duties, fees, bank interests that have affected the transaction are included in the basis for calculation of VAT. For imported goods, the basis shall be the CIF value.
The VAT rate is of 18%. For export operations, a rate of 0% applies.
The tax paid may be refunded to the taxpayer under specified conditions provided in the law.
The law creating the OBR
The OBR is a public legal entity with juridical personality. It is under the authority of the Minister of Finance. It can acquire movable and immovable property in its own name.
The OBR has authority to establish, calculate, and manage, in the name of the Government all taxes and duties. It also assists the Government in the formulation of its investment and fiscal policy and is entitled to fight against fiscal evasion.
OBR prepares and publishes all reports related to revenue collection and commercial exchanges. All tax exemptions are also managed by OBR.
The management of OBR is delegated to a board comprising of 8 members all appointed by the President of the Republic. The state budget director, the governor of the central bank and the general director of commerce are de jure members of the board. Other members are selected from the private and professional sectors. The chairman and the deputy chairman of the board are also appointed by the President of the Republic from among the members of the board.
The members of the board are not considered as public servants. They are appointed for a period of 3 years (renewable once) and their remuneration is fixed by the Minister of Finance. The members can be suspended or dismissed by the President of the Republic if they fail to comply with the relevant regulations governing OBR.
Day to day management of OBR is under a general commissioner and a deputy general commissioner both with a contract for a term of 4 years (renewable once). The first general commissioner had to be appointed through a competition process from among expatriate experts. Under the two top commissioners are also commissioners in charge of various OBR departments and appointed by the board for a term of 4 years.
The chiefs of various OBR services are appointed through a competition process and the board determines their remuneration. A team of auditors is in charge of the verification of financial statements. An external audit can be carried out if need be, by decision of the board.
The introduction of OBR in the tax sector in Burundi is an important milestone. One of the reasons for which OBR was created was to fight corruption and tax evasion. It is too early to appreciate to which extent OBR has met these expectations. However, some positive impacts have already been observed, such as a harmonious reorganisation of the various tax services and a fast process in dealing with tax files.