Rwanda has a well-organized economy, and there are strict laws guiding the establishment of businesses. It is hence important to know the type of company structures available in the country for someone hoping to establish one
Domestic company (VAT liable)
A domestic company is a company incorporated in Rwanda. It may take the form of a company limited by shares, a company limited by guarantee, a company limited by both shares and guarantee, or an unlimited company.
The online registration process is the same for all four categories of domestic companies (although requirements may vary). The tax identification number (TIN) and social security number are both included in the company code on the incorporation certificate.
If a company’s turnover exceeds Rwf 20 million in any 12 months or Rwf 5 million in three consecutive months in the previous quarter, it must register for VAT.
Small and medium firms with a net capital investment of less than Rwf 70 million, annual sales of less than Rwf 50 million, and fewer than 100 workers are exempt from paying the trading license tax for the first two years after their creation. After the exemption period expires, they will just need to register at the district level and begin paying trade license tax by January 31st of each year, beginning the third year after incorporation.
Domestic company (large company)
A domestic firm is registered in Rwanda. It might be a limited business with shares, a limited company with a guarantee, a limited company with both shares and a guarantee, or an unlimited corporation. The online registration process is the same for all four categories of domestic companies (although requirements may vary). The tax identification number (TIN) and social security number are both included in the company code on the incorporation certificate.
If a company’s turnover exceeds Rwf 20 million in any 12 months or Rwf 5 million in three consecutive months in the previous quarter, it must register for VAT. Large enterprises, defined as those with a net capital investment of more than Rwf 70 million, an annual turnover of more than Rwf 50 million, and more than 100 workers, must register at the sector level as soon as possible to pay the trading license tax by January 31st of each year.
Branch of a foreign company (VAT liable)
A foreign company is registered in another country and does business in Rwanda by:
- Opening a share transfer or registration office in Rwanda
- Managing, administering, or dealing with property in Rwanda as an agent, personal representative, or trustee, whether directly or through an agency.
The tax identification number (TIN) and social security number are both included in the company code on the incorporation certificate. If a company’s turnover exceeds Rwf 20 million in any 12 months or Rwf 5 million in three consecutive months in the previous quarter, it must register for VAT.
Small and medium firms with a net capital investment of less than Rwf 70 million, annual sales of less than Rwf 50 million, and fewer than 100 workers are exempt from paying the trading license tax for the first two years after their creation. After the exemption period expires, they will just need to register at the district level and begin paying trade license tax by January 31st of each year, beginning the third year after incorporation.
Sole Proprietor
A sole proprietorship, also known as a sole trader, is a form of business entity owned and operated by a single person with no legal distinction between the owner and the business.
The owner is responsible for the gains and losses (subject to taxation).
A sole proprietorship is best for a small firm if you are the only one who has put money into it. In Rwanda, this is the most frequent business structure. It has several advantages, including being simple to form because you are the only person involved, as opposed to a business, which may have numerous members who must sit down and agree to form it.
In addition, unlike organizations, it is flexible and easy to control because all decisions are made by you without the need to consult a board of directors.
Furthermore, unlike a company where the board of directors and shareholders must first sit and declare that the company produced profits and is solvent before giving any dividends to its shareholders, you receive all profits whenever you see fit.
