Employment income includes all payments made to the employee in cash or in kind. This includes the following:
- Wages, salary, leave pay, sick pay and medical allowance, payment in lieu of leave for an employee who stops working before benefiting from one's annual leave, sitting allowances, commissions, bonuses, and gratuity.
- Allowances relating to the cost of living, subsistence allowances, housing allowances, and entertainment or travel allowances.
- Any discharge or reimbursement of expenses incurred by the employee or an associate.
- Payments to the employee working in exceptional conditions of employment.
- Payments for redundancy or loss or termination of contract.
- Pension payments.
- Other payments made in respect of previous, current, or future employment.
Benefits in kind form part of taxable remuneration. The Rwandan law provides the basis for taxation of the following benefits in kind:
- Housing: This is taxed at 20% of total employment income, excluding benefits in kind.
- Motor vehicle benefit: This is taxed at 10% of employment income, excluding benefits in kind.
- Rent of house or motor vehicle directly paid by an employer for an employee: This is taxed as any other allowance.
- Loan to staff at low interest rate: Benefit arises if the loan is three times more than the monthly salary. The benefit is computed as the difference between the rate of interest offered to commercial banks by the National Bank of Rwanda and the actual interest paid by the employee that month.
There is no relief for pension contribution as contribution is based on the amount after payment of PIT. The withdrawal is therefore not taxed.
There is no specific law on taxation of stock options. In practice, stock options acquired by virtue of employment, whether from the employer or an associated institution, are subject to income tax on the difference between the market value of the equity instrument and the consideration paid by the employee or office holder on the date that the equity instruments vest.
Self-employment income is derived from an unincorporated business, partnership, trade, or profession.
An amount received or accrued from self-employment will be taxable in Rwanda. Non-residents will only be taxed on Rwandan-sourced self-employment income.
Capital gains on secondary market transactions on listed securities are not taxable. In addition, income accruing to employee share option schemes is also exempt from tax. There is no comprehensive law on taxation of capital gains for individuals. However, capital gains on sale or transfer of shares is taxed at 5% on the difference between the acquisition value of shares and their selling or transfer price where the gain is not expressly exempt from tax.
Dividends declared by Rwandan resident companies are generally subject to a 15% dividend withholding tax (WHT) for individual shareholders, which is the final tax.
Interest income is subject to WHT at rate of 15%, which is the final tax.
Rental income tax is charged on income generated by individuals from rented fixed assets located in Rwanda.
Rental income tax is charged to the following:
- Income from rented buildings in all or part.
- Income from rented improvements in whole or in part.
- Any other activity to which rental income may be accrued.
The taxable income shall be obtained by deducting from the gross rental income 50%, considered as the expenses incurred by the taxpayer on maintenance and upkeep of the rented property.
When the taxpayer produces the proof of bank interest payments on a loan for the construction or purchase of a rented property, the taxable income is determined by deducting from gross rental income 30%, considered as the expenses incurred plus actual bank interest paid from the beginning of the rental period.
The rental income tax is calculated as follows:
- The bracket part of annual income generated through rental of a building from RWF 1 to RWF 180,000 is taxed at 0%.
- The bracket part of annual income generated through rental of a building from RWF 180,001 to RWF 1 million is taxed at 20%.
- The bracket part of annual income generated through rental of a building above RWF 1 million is taxed at 30%.
Any person who earns rental income must, on or before 31 March each year, file an official tax declaration.
The following items are exempt from tax:
- Discharge or reimbursement of expenses incurred by employee (wholly and exclusively for business).
- Contributions made by the employer for the employee to the public institution in charge of social security.
- Pension payment from the public institution in charge of social security or from a qualified pension fund.
- Employment income received by an employee who is not a citizen of Rwanda from a foreign government or non-governmental organisation (NGO) under an agreement signed by the government of Rwanda, where income relates to performance of aid services in Rwanda. The agreement needs to specify the tax exemption.
- Employment income received from an employer who is not a resident in Rwanda by a non-resident individual for the performance of services in Rwanda, unless such services are related to a permanent establishment (PE) of the employer in Rwanda.
Persons exempted from employment income tax
The following persons are exempted from employment income tax in Rwanda as provided for by international agreements:
- A foreigner who represents one's country in Rwanda.
- Any other individual employed in any Embassy, Legation, Consulate, or Mission of a foreign state performing state affairs, who is a national of that state and who possesses a diplomatic passport.
- A non-citizen individual employed by an international organisation that has signed an agreement with the government of Rwanda in accordance with Rwandan laws.