Rwanda: A look at new tax incentives to boost revenue collection


JThe government plans to spend about Rwf 4.6 trillion in the financial year 2022/2023, with spending expected to increase by Rwf 217.8 billion.

The government raises funds through various means, including taxes, loans, and grants. Another source of revenue comes from non-tax collections such as visa fees, traffic fines and licenses.

For this fiscal year, he has chosen to make tax policy changes that should boost revenue collection and support businesses. Incentives to certain strategic sectors should promote products made in Rwanda and stimulate the economy.

Here, To do business examines some of the tax incentives to be implemented under the EAC Customs Act. Products or equipment will be subject to import duties as follows: rice will pay an import duty rate of 45% ($345 per MT) instead of 75% or $345/MT; sugar will pay an import duty rate of 25% instead of 100% or $460/MT.

Oil and Soap will now pay 25% instead of 35%; second-hand clothes will pay $2.5 per kilo instead of 35% while second-hand shoes will pay $5 per kilo instead of $0.4 per kilo or 35%.

However, in order to protect local producers, certain products will pay an increased import duty rate of 35% instead of 25%. These include natural honey; doors, windows and their frames; steel tubes, wheelbarrows; and handbags with an outer surface made of sheets of plastic material or of textile material.

Goods imported for use by the Armed Forces Store (AFOS) will pay zero percent instead of 25 percent. The rate of duty applicable to road tractors for semi-trailers has been reduced to zero per cent instead of 10 per cent.

Motor vehicles for the transport of goods with a gross weight of more than five tons but not exceeding 20 tons will pay an import duty rate of 10 percent instead of 25 percent. Those whose gross weight exceeds 20 tons will be exempt from tax while buses carrying more than 25 people will pay a rate of duty of 10%, instead of 25%. Buses carrying 50 or more people will pay a duty rate of 0% instead of 25%.

In order to further increase the stock of luxury cars needed to host high level events in accordance with MICE (Meetings, Incentives, Conferences and Exhibition), the government has exempted the tax on cars with a CIF value (price paid at import port) over $60,000. while those below will be assessed at 25% and all applicable taxes.

In 2021, the government introduced the Manufacture and Build to Recover (MBRP) program to help the economy recover from the effects of Covid-19. Under this scheme, building materials are exempt from import tax and value added tax.

However, capital goods and raw materials used in the manufacture of textile clothing and footwear will be subject to a zero percent import duty instead of 10 percent or 25 percent.

Telecommunications equipment from the EAC is also exempt from payment of import tax.

In contrast, devices used for electronic transactions such as smart cards, point of sale, cash registers and cashless machines will pay a zero percent import duty.

With the new tax reforms under the EAC Customs Act, importers of products such as building materials, furniture, wine, beauty and makeup products from countries outside the EAC are required to pay more taxes according to the latest EAC directive.

EAC ministers in charge of trade and finance on May 5 adopted 35% as the fourth band of the region’s Common External Tariff (CET). The fourth band tariff lines include dairy and meat products, cereals, cotton and textiles, iron and steel, edible oils, beverages and spirits, furniture, leather goods, flowers freshly cut fruits and nuts, sugar and confectionery, coffee, tea and spices, textiles and clothing, headwear, ceramics and paints.

Implementation of the revised EAC CET started on 1 July.


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