There is no provision for group taxation in Rwanda. Each individual corporate group member is required to submit their own tax return on a stand-alone basis.
Rwandan transfer pricing legislation and the prescribed transfer pricing methods are generally consistent with OECD guidelines. The law requires that transactions between related parties be carried out under the arm's-length principle.
The tax law empowers the Commissioner General to adjust profits earned between related parties if the Commissioner General considers that the trading arrangements between related parties do not adhere to the arm's-length principle. The arm's-length principle requires that transfer prices charged between related parties are equivalent to those that would be charged between independent parties in the same circumstances.
Rwanda operates a self-assessment system; consequently, taxpayers are obligated to self-assess their compliance to the tax legislation, which includes transfer pricing policy. According to the new income tax law, related persons involved in controlled transactions are required to have documents justifying that their prices are applied according to the arm’s-length principle. This means that companies are now expected to have transfer pricing policies and documentation.
Failure to do so would result into the tax administration’s adjustment of transactions prices in accordance with general rules on transfer pricing, issued by an Order of the Minister.
On 14 December 2020, GoR issued a Ministerial Order establishing the general rules on transfer pricing (TP). According to the Order:
- Qualifying tax-payers are required to have TP documentation in place before the deadline for the income tax declaration i.e. by 31 March for December year ends or 3 months after an entity's tax period.
- The TP documentation should only be submitted to the tax authority on request and within 7 days from the date of receipt of the written request.
- While there is no requirement for the TP documentation to be submitted to the tax authority along with the annual CIT declaration, a controlled transactions schedule must be submitted alongside the annual CIT return.
The interest paid on loans and advances from related entities is not tax deductible to the extent that the total amount of loans/advances exceeds four times the amount of equity during the tax period. For purposes of determining the above, equity excludes provisions and reserves. This provision does not apply to commercial banks, financial institutions, and insurance companies.
Controlled foreign companies (CFCs)
There are no provisions in Rwanda for CFCs.