The Rwandan Government after a cabinet meeting held on Thursday, April 20, approved a raft of tax reforms aimed at ensuring a stable path of revenue growth.
The reforms were directed by President Paul Kagame, who in January this year called for fiscal reforms that will ensure people are not overburdened by the tax. To ease the burden, he called for the broadening of the tax base.
The reforms are also in line with the revised Medium Term Revenue Strategy (MTRS) and follow months long outcry over prohibitive taxes amidst a challenging economic environment.
According to the Ministry of Finance and Economic Planning, the reforms will reduce tax rates, broaden the tax base, and improve tax compliance while ensuring that tax revenues increase by at least 1 percent of GDP by the Financial Year 2025/26.
The approved tax reforms include Corporate Income Tax (CIT), Value Added Tax (VAT) and Excise Duty, as well as a review of the existing taxes and fees collected by decentralised entities.
In the implementation, the government will exempt VAT on rice and maize flour for both domestic trade and imports, a move expected to improve food security and bolster the school feeding programme.
It will also reduce the corporate income tax statutory rate from 30 to 28 per cent with an eventual target of 20 percent in the medium term, stated the Finance Ministry.
“This will improve Rwanda’s competitiveness and position the country as a preferred African investment destination.”
Meanwhile, changes in excise duty to boost Rwanda’s tourism and MICE industry will touch on the taxation of high-end products, especially beverages. For instance, under the new reforms excise tax on wine will be 70 percent of value with a cap of Rwf40,000.
Changes in property tax
According to the approved tax reforms, the new rate applied on land tax has been set between Rwf0 to Rwf80 per square meter from the initial Rwf0 to Rwf300 rate.
It further stipulates that a second residential house will be taxed at 0.5 percent of the combined market value of the house and land while the tax rate for commercial buildings is reduced from 0.5 percent to 0.3 percent of its market value on both building and land.
Tax charges on commercial buildings are capped at Rwf30 billion.
For those who want to sell immovable properties, a levy will be applied at 2 percent of the property value for registered taxpayers and 2.5 percent for non-registered taxpayers. However, immovable property not exceeding Rwf5 million will be exempt.
On the other hand, businesses and traders will pay a single trading license tax that combines market and public cleaning fees, whereas businesses with more than one branch will pay only one license per district.
It is equally important to note that all fees previously charged by decentralized entities on documents, or services have been scrapped