Rwanda

Value-added tax (VAT)

VAT is levied on the supply of taxable goods and services including online 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.

Services supplied are taxable if:

1. The service recipient and the service provider are residents of Rwanda;
2. The service recipient is a resident of Rwanda and the service is useful to the recipient in Rwanda; and if
3. The service provider is a resident of Rwanda and the service is useful to the recipient in Rwanda.

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 and journals, financial and insurance services, lending or leasing interests in land or building for residential purposes, funeral services, energy supplies, lease of exempted goods, all unprocessed agricultural and livestock products, agricultural insurance services, gaming activities, goods and services for special economic zone, mobile handsets, and equipment for information, communication, and technology, goods sold in customs, aircraft and its spare parts/ maintenance tools, imported electric vehicles and accessories.

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.

Customs duties

Rwanda is a member of the East African Community (EAC), Common Market for Eastern and Southern Africa (COMESA), and 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 EAC Customs Union Rules of Origin.

Certain industries and items are also entitled to exemptions under the customs law (e.g. 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 taxes

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%.
• 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.
• Electronic cigarettes - RWF 30,000 per unit
• Cigars and similar products containing tobacco or tobacco substitutes - 160%
• Cartridge with liquid for use in electronic cigarette - RWF 24,400 per unit
• 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%.
• Sweets and Chewing gum - RWF 322/kg
• Chocolate - RWF 1,930/kg
• 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 excise duty:

• Goods for charitable organisations.
• Vehicles assembled in Rwanda.
• One personal vehicle of former diplomats returning from foreign diplomatic missions or an international organisation.
• One 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.

Immovable property 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:

• 0.5% of the market value of both the building and a related plot of land for residential use. However, the Law offers special rates for residential buildings of below features:
  • a plot and a building of three floors which is used for residential purposes is taxed at the rate of 0.25% of its market value.
  • a plot and a building for residential use with more than three floors is taxed at the rate of 0.1% of its market value.
• 0.3% of the market value of both the building and a related plot of land for commercial use.
• 0.1% of the market value of both the building and a related plot of land for industrial use, buildings and plot belonging to micro enterprises and small business.

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 five 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 31 December of the last year of each tax assessment cycle.

Transfer taxes

The sale of immovable property that is for commercial use results in immovable property tax at the rate of 2% where the seller is a registered taxpayer or at the rate of 2.5% where the seller is an unregistered taxpayer. This tax however is taxable on the amount in excess of the first RWF 5 million of the selling price.

Stamp taxes

There are no stamp duties in Rwanda.

Capital gains tax (CGT)

CGT is charged on the direct or indirect sale or transfer of shares. The CGT is charged at the rate of 5% of the capital gain. The capital gain on sale or transfer of shares is determined as the difference between the acquisition value of the shares and their selling or transfer price.

CGT is required to be collected and remitted to the revenue authority by the company in which the share sale or share transfer transaction occurred.

CGT is required to be declared and paid within 15 days following the month in which the sale or transfer of shares occurred.

However, the following transactions are exempted from capital gains tax:

• Capital gains from the sale or transfer of listed shares and other securities on the capital market.
• Capital gains from the sale or transfer of shares or units of collective investment schemes.
• Capital gains resulting from restructuring of companies.

Corporate restructuring is defined to include the following:

• A merger of two or more resident companies into a separate company.
• The acquisition or a takeover of 50% or more of shares or voting rights by number or value in a resident company.
• The acquisition or transfer of 50% or more of the assets and liabilities of a resident company by another company.
• The acquisition or transfer of the entire company’s shares, assets, or liabilities so that its existence is replaced by the purchasing company.
• Splitting of a resident company into two or more resident companies.

Note that capital gains arising from the sale of commercial immovable property are subject to tax at the rate of 30%.

Payroll taxes

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 100,000 (for turnover of more than RWF 2 million) and RWF 2 million (for turnover of over RWF 50 billion).

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. These include profit oriented activities that are not registered on income tax which are in urban and rural zones, transporters of people and goods on vehicles, boats and motorcycles.