Rwanda operates both a source and residence-based taxation system. This means that any income that is deemed to be from sources within Rwanda will be liable to tax in Rwanda. In addition, resident entities are taxed on their worldwide income. However, where such income is taxed in another country, a tax credit is allowed, which does not exceed the tax that would have been payable on the same income in Rwanda.
Non-resident entities are taxed on income sourced in Rwanda through a permanent establishment (PE).
The standard corporate income tax (CIT) rate is 30%. However, micro-enterprise companies (with turnover of less than 12 million Rwanda francs [RWF] in a tax period) pay flat tax amounts, and small businesses (whose turnover is between RWF 12 million and RWF 20 million in a tax period) pay a lump sum tax at the rate of 3% of turnover.
Special CIT regimes
There are special CIT rates for certain industries or sectors of the economy.
Newly listed companies on capital markets are taxed as follows for a period of five years:
- If a company sells at least 20% of their shares to the public, the CIT rate is 28%.
- If a company sells at least 30% of their shares to the public, the CIT rate is 25%.
- If a company sells at least 40% of their shares to the public, the CIT rate is 20%.
Companies and cooperatives that carry out micro-finance activities, approved by competent authorities, pay CIT at the rate of 0% for a period of five years from the time of their approval.
Registered investors in priority sectors can enjoy reduced CIT rates and tax holidays where certain conditions and thresholds are fulfilled. See the Tax credits and incentives section for more information.
Local income taxes
Rwandan legislation does not provide for any provincial or local taxes on income.