Value-added tax (VAT)
VAT is levied on the supply of taxable goods and services in Rwanda as well as on the importation of taxable goods and services into Rwanda.
The threshold for VAT registration is taxable turnover of RWF 20 million in any relevant year or RWF 5 million in a calendar quarter.
The standard VAT rate is 18% and applies to goods and services that are neither exempt from VAT nor zero-rated.
Exports of goods and services are subject to VAT at 0%. Supplies to privileged persons, such as goods imported for official purposes of diplomatic missions, supplies made under special arrangements between the government of Rwanda and donors, and supplies or importation made under special technical aid agreements, are subject to VAT at 0%. Persons entitled to zero rating of goods or supplies received by them are required to pay VAT at the time of receiving the supply and then apply for a refund of the VAT paid or rather engage a revenue authority so they can affix a signature and a stamp on the VAT invoices so that the VAT is not paid on such invoices.
Some supplies are exempt from VAT, the main categories being supply of clean water service, goods and services for health purposes, educational materials and services, transport services, books and newspapers, financial and insurance services, lending or leasing interests in land or building for residential purposes, funeral services, energy supplies, all unprocessed agricultural and livestock products, mobile handsets, and equipment for information, communication, and technology.
Suppliers who provide zero-rated services or goods are entitled to recover input VAT incurred in making the supply. This is unlike exempt supplies, where input VAT recovery is not allowed. Therefore, zero rating is preferable to exemption.
The VAT returns and relevant payment are due to the RRA on a monthly basis by the 15th day of the following month. However, for taxpayers whose annual turnover is equal to or less than RWF 200 million, the VAT declaration is done quarterly and the payment of the tax due is within 15 days after the end of the quarter. Voluntary VAT declaration on a monthly basis is, however, still admissible for taxpayers in this bracket.
Rwanda is a member of the East African Community (EAC), Common Market for Eastern and Southern Africa (COMESA) as well as African Continental Free Trade Area (AfCFTA). Common External Tariffs (CET) levied by all those economic blocks where Rwanda is part of are generally as follows:
- 0% for raw materials and capital goods.
- 10% for intermediate goods.
- 25% for finished goods.
Goods will only enjoy the preferential community tariffs if they meet the East African Community Customs Union Rules of Origin.
Certain industries and items are also entitled to exemptions under the customs law for example certain hotel equipment, solar equipment, computer software and electric vehicles, spare parts, batteries and charging station equipment.
Enterprises established in Free Trade Zones are exempt from customs duty on imports for exported products. There also exists an import duty remission scheme, where import duty may be waived for raw materials used to manufacture goods for export. This is subject to a requirement for proof of export and execution of the bond.
All imported goods, except those listed as exempt, are also subject to the 1.5% Infrastructure Development Levy (IDL) and the 0.2% African Union Levy (AUL). Additionally, imported goods, regardless of whether they are exempted, are subject to a 0.2% Quality Inspection Fee (QIF). The levies are computed on the customs value of imported goods.
Excise tax is imposed on the manufacturing or importation of certain commodities, mainly soft drinks, bottled water, cigarettes, alcohol, fuels, and lubricants.
The following rates apply in respect of products and services for which excise duty is applied:
- Juice from natural fruits or vegetables - 5%.
- Soda, lemonade and non-natural juices - 39%.
- Mineral water - 10%.
- Beer - 30% to 60%.
- Wine, brandies, liquors, and whisky - 30% to 70%.
- Cigarettes - 36% of retail price of a pack (of 20 rods) and RWF 30 per pack.
- Telephone communication - 10%.
- Premium (excluding benzene) fuel and gas oil - RWF 183/litre on premium fuel and RWF 150/litre on gas oil.
- Lubricants - 37%.
- Powdered milk - 10%.
- Vehicles with an engine capacity of above 2500cc - 15%.
- Vehicles with an engine capacity of between 1500cc and 2500cc - 10%.
- Vehicles with an engine capacity of less than 1500cc - 5%.
The following goods are exempt from the excise duty:
- Goods for charitable organisations.
- Vehicles assembled in Rwanda.
- 1 personal vehicle of former diplomats returning from foreign diplomatic missions.
- 1 vehicle of Rwandan refugees or returnees from a foreign country who fulfil exemption conditions set forth under the Customs Law.
- vehicles of the following categories: minibus and bus that can carry not less than 14 persons, lorries and single cabin pickups manufactured to carry goods, refrigerating vehicles, tourist vehicles, ambulances and vehicles designed for persons with disabilities.
- Products specifically manufactured for export.
- Products sold to duty free shops and other specific persons legally determined.
Property taxes/fixed asset tax
The immovable property tax is assessed and paid by the owner, the usufructuary or any other person considered to be the owner. The immovable property tax is levied on the market value of a building and surface of a plot of land.
If the immovable property consists of a plot of land that is not built, the tax on immovable property is calculated on each square metre of the whole surface of the plot of land. Where the immovable property consists of a plot of land, a building and its improvements, the tax on immovable property for a plot of land is calculated separately on each square metre, while the tax on the building and its improvements is based on the market value.
The tax rate on buildings is determined as follows:
- 1% of the market value of a residential building.
- 0.3% of the market value of the building for commercial buildings but capped to RWF 30 billion.
- 0.1% of the market value of industrial buildings, buildings belonging to small and medium enterprises and those intended for other activities.
The tax rate on plots of land varies between RWF 0 and RWF 80 per square metre. Any undeveloped plot of land is subject to additional tax of 100% of what is arrived at using the rates per square metre.
For the first assessment cycle of 5 years, declaration of immovable property tax is made to the tax administration not later than 31 December of the first tax period. A new declaration of immovable property tax for the second assessment cycle and going forward will be filed not later than 31st December of the last year of each tax assessment cycle.
There is a fixed fee of RWF 20,000 on transfer of property. However, no transfer of ownership of a fixed asset can be effected without a tax clearance certificate issued by the concerned decentralised entity.
There are no stamp duties in Rwanda.
Employers are required to withhold tax on payments to employees in respect of employment services that they have rendered. The tax is withheld through the Pay-As-You-Earn (PAYE) system. The tax deducted should be remitted to the RRA by the 15th day of the following month.
Social security contributions
All people working in Rwanda, both nationals and foreigners, are required to contribute to a national social security contribution fund managed by the Rwanda Social Security Board (RSSB). The employer is required to contribute 5% of the employee’s gross salary to the scheme, while the employee’s contribution is 3%.
Gross salary means total remuneration received by the employee, including allowances, bonuses, commissions, and all other cash benefits, as well as any fringe benefits, but excludes reimbursement of business expenses, transport allowances and transport benefit in kind.
The social security contributions computed are required to be remitted to the RRA by the 15th day of the following month.
Maternity leave benefits scheme
The law governing maternity leave benefits requires all employers and employees to contribute towards a maternity fund, which is administered by the RSSB.
The law grants employed women full monthly salary for the entire 12 weeks duration of maternity leave. The main requirements affecting employers are summarised below:
- The employer is responsible for collecting and remitting the contributions to the RSSB.
- The total contribution for maternity leave benefits is 0.6% of the contribution base. The employer and the employee are each required to contribute 0.3%.
- The contribution base is the gross pay to the employee, including benefits in kind, but excluding transport allowance, transport benefit in kind, termination benefits, retirement benefits, dismissal compensation, and any other allowances that have a compensatory character.
- The employer is required to declare and remit the collected contribution to the RSSB by the 15th day of the month following the month to which the contribution relates.
Community Based Health Insurance Scheme (CBHIS) contribution
The law governing the CBHIS contributions requires all employees to contribute towards the CBHIS fund, which is administered by the RSSB.
The main requirements are summarised below:
- The employer is responsible for collecting and remitting the contributions to the RSSB.
- The total contribution for CBHIS is 0.5% of the employee's net pay.
- The employer is required to declare and remit the collected contribution by the 15th day of the month following the month to which the contribution relates. The declaration for CBHIS is done via the RRA portal.
Trading licence fee
Districts charge a trading licence fee, which is paid by any person who commences a profit-oriented activity in Rwanda. The tax year starts on 1 January and ends on 31 December, and the trading licence fee must be paid for a whole year. If such activity starts after January, the taxpayer must pay a trading licence fee equivalent to the remaining months, including the one in which the activities started.
The tax declaration is made not later than 31 January of the year that corresponds to the tax period. The trading licence fee is calculated on the basis of turnover, and the amount of the fee varies between RWF 60,000 (for turnover of less than RWF 40 million) and RWF 250,000 (for turnover of over RWF 150 million).
The turnover applied is as per the amount approved in the previous year by the RRA. Every year, not later than 31 January, the RRA submits the necessary data to the concerned decentralised entity.
There are also different trading licence fee rates for other small traders (not registered for VAT). These include vendors without shops, small-scale technicians, transporters of people and goods on motorcycles, transporter of people and goods using all other vehicles besides bicycles, transport activities by motor boat, and other profit-oriented activities.