Rwanda uses tax as a major source of revenue. Hence there are several deductible taxes which are explained in this article
Individual tax
Individuals who live in Rwanda pay taxes on their worldwide earnings. Rwanda taxes non-residents on income made in the country. Tax rates are the same for both residents and non-residents.
The entirety of a person’s income for the year less the total amount of deductions allowed to that individual is the taxable income for that year. Employment income, business profits, and investment income are all examples of taxable income.
Tax Rate
The taxable income is rounded to the closest thousand (1,000) Rwandan francs and taxed by the income, as explained below:
- From 0 to 360.000 is 0%
- From 360.001 to 1.200.000 is 15%
- 1.200.001 and greater than 30%
Owners of intermediate businesses must pay a 4% tax on annual revenue as a one-time payment.
Corporate income tax
Rwanda has a system of source and residence-based taxation. This means that any revenue perceived to originate in Rwanda will be subject to Rwandan taxation. Furthermore, resident entities are taxed on their global earnings. When such income is taxed in another country, however, a tax credit is available that does not exceed the tax that would have been payable in Rwanda on the same income.
Non-resident entities are taxed on income derived from a permanent establishment in Rwanda (PE).
The standard corporate income tax (CIT) rate is 30%. Micro-enterprises (those with a turnover of less than 12 million Rwanda francs [RWF] in a tax period) pay flat taxes, whereas small firms (those with a turnover of between RWF 12 million and RWF 20 million in a tax period) pay a lump sum tax of 3% of turnover.
Special CIT regimes
Certain industries or areas of the economy have different CIT rates.
For five years, newly listed firms on capital markets are taxed as follows:
- The CIT rate is 28 percent if a firm sells at least 20% of its stock to the public.
- The CIT rate is 25% if a corporation sells at least 30% of its stock to the general public.
- The CIT rate is 20% if a corporation sells at least 40% of its stock to the general public.
Companies and cooperatives that carry out microfinance activities and are approved by competent authorities pay a 0% CIT rate for the first five years after their approval.
VAT ( Value Added Tax)
VAT is levied on taxable products and services supplied in Rwanda, as well as taxable goods and services imported into Rwanda.
A taxable turnover of RWF 20 million in any relevant year or RWF 5 million in a calendar quarter is required for VAT registration.
The usual VAT rate is 18 percent, and it applies to both exempt and zero-rated products and services.
The VAT rate on products and services exported is zero percent. Supplies to privileged persons, such as products imported for diplomatic missions’ official functions, supplies made under special arrangements between the Rwandan government and donors, and supplies or importation made under special technical aid agreements, are all entitled to a 0% VAT rate.
Persons who are entitled to zero-rating on goods or supplies they receive must pay VAT at the time of receipt and then seek a refund of the VAT paid.
Water services, health-related goods and services, educational materials and services, transportation services, books and newspapers, financial and insurance services, lending or leasing interests in land or buildings for residential purposes, funeral services, energy supplies, and all unprocessed agricultural and livestock products, mobile handsets, and information, communication, and technology equipment are all exempt from VAT.
Customs duties
Rwanda is a member of the East African Community, which imposes import duties under the East African Community Customs Act (EACMA). For commodities originating outside the Customs Union, the EACMA establishes Common External Tariffs (CET). Import duties on raw materials and capital goods are zero percent, intermediate goods are ten percent, and completed items are twenty-five percent.
Only goods that comply with the East African Community (EAC) Customs Union Rules of Origin will be eligible for preferential community tariffs.
Under customs legislation, certain sectors and commodities are also subject to exemptions (e.g. assemblers of bicycles and motorbikes, importers of gas cylinders, specific hotel equipment, solar equipment, and energy-saving light bulbs).
