Rwanda incorporated companies or associations are treated as Rwanda resident entities. In addition, companies incorporated overseas are also treated as Rwandan resident companies if they have a place of effective management in Rwanda at any time during the tax period. The term 'effective management' is not defined in the tax law.
Rwandan government companies are also considered to be residents in Rwanda.
Permanent establishment (PE)
The definition of a PE for Rwanda is largely based on the Organisation for Economic Co-operation and Development (OECD) Model Tax Convention definition. According to Rwandan tax law, a PE means a fixed place of business through which the business of a person is wholly or partially carried on.
For non-resident companies, CIT liability will arise if they have a PE in Rwanda through which a trade is carried on. The profits attributable to the PE will be taxed in Rwanda. However, there are no rules or guidance on how the PE's profit should be evaluated for Rwanda tax purposes. The general understanding is that entities are required to use transfer pricing methods to determine the level of profits that should be attributable to the PE based on the functions it performs.
In particular, the existence of the following triggers a PE:
- A place of management.
- A branch.
- A factory or workshop.
- A mine, quarry, or any other place for the exploitation of natural resources.
- A site set for construction, construction site, or a place where supervision or assembly works are carried out.
- A place of provision of services, including consulting services, carried on by a person, with the support of employees or other personnel, for more than 90 days in a 12-month period, either continuously or intermittently.
There are a number of specific exceptions from the definition of a PE. A person is deemed not to have a PE if that person:
- uses facilities solely for the purpose of storage of goods or merchandise belonging to that person
- maintains a stock of goods or merchandise belonging to that person solely for the purpose of storage
- maintains a stock of goods or merchandise belonging to that person solely for the purpose of processing by another person
- has a place of operation aimed purposely at purchasing goods or merchandise or at collecting information related to one's business, or
- has a place of operation solely for the purpose of performing, within the context of one’s activities, any other activities of a preparatory nature or intended to make them more effective.
Where a person, except an independent person (i.e. agent) concerned with (e) above, acts on behalf of another person (i.e. principal), and the agent has capacity to make contracts in the name of the principal, the principal is considered as owning a PE in respect of activities one's agent undertakes except if such activities of the agent are limited to those mentioned in (a) to (e) above.
However, a person is not considered as having a PE if one carries out activities through a broker, general commission agent, or any other private agent in accordance with procedures of the ordinary course of the activities of such an agent.
A company that controls or is controlled by another company does not, of itself, constitute either company to be a PE of the other.