Rwanda personal Income Tax
Personal income tax rates in Rwanda are progressive to 30%.
Basis – Residents are taxed on worldwide income; nonresidents are taxed only on Rwandan-source income. Foreign-source income derived by residents is subject to personal income tax in the same way as Rwandan-source income.
Residence – An individual is resident in Rwanda if he/she has a permanent residence or habitual domicile in Rwanda, if he/she stays in Rwanda for more than 183 days in a 12- month period or he/she is a Rwandan representing Rwanda abroad.
Tax Filing status – No specific provisions apply.
Taxable income – Employment income, including most employment benefits, is taxable.
Taxation of Capital gains – Capital gains are taxable as ordinary income at the normal personal income tax rate.
Tax Deductions and tax allowances – Tax deductions are available for such items as retirement contributions made by the employer to the Rwanda Social Security Fund, pension payments made under the state social security system and some retirement contributions the employer pays for the employee and contributions by the employee.
Other taxes on individuals:
Capital duty – No
Stamp duty – No
Capital acquisitions tax – No
Net wealth/net worth tax – No Net wealth tax / net worth tax
Inheritance/estate tax – No Inheritance tax / estate tax
Real property tax – Tax is paid to municipal authorities and calculated according to the location and utilisation of the property.
Social security contributions – The total contribution to the Rwanda Social Security Fund is 8% (5% by the employer and 3% by the employee).
Rwanda Tax year – Rwanda tax year is the calendar year, although the taxpayer may request a different 12-month period.
Filing of tax and tax payment – Tax on employment income is withheld by the employer under the PAYE system and remitted to the tax authorities.
Penalties – Penalties, including fines and interest, apply for failure to comply.
Rwanda Corporate Tax
Company tax rate in Rwanda is 30% of taxable income with some discounts for registered investors based on the number of employees and the amount of income derived from the export of goods and services.
Residence – A company is resident if it is established according to Rwandan law or if its headquarters are in Rwanda.
Basis – Residents are taxed on worldwide income; nonresidents are taxed on Rwandan source income. Foreign-source income derived by residents is subject to corporation tax in the same way as Rwandan-source income.
Taxable income – Corporation tax is imposed on a company’s total income after deduction of normal business expenses.
Taxation of dividends – Dividends received by a Rwandan-resident company from another Rwandan company are exempt from corporation tax; other dividends are subject to a withholding tax of 15%.
Taxation of Capital gains – Capital gains are taxable as ordinary income at the standard rate of corporation tax.
Losses – Losses may be carried forward for 5 tax periods. The carryback of losses is not permitted.
Surtax – No
Alternative minimum tax – No
Foreign tax credit – Foreign tax paid may be credited against Rwandan tax on the same income but the credit is limited to the amount of Rwandan tax payable on the foreign income.
Participation exemption – A company that transfers its assets to another company is exonerated from tax in respect of capital gains and losses realised on the participation. A “participation” for these purposes means: a merger of 2 or more resident companies; the purchase or takeover of at least 50% of the shares in a resident company; the purchase of 50% or more of the assets and liabilities by a resident from another resident company; or the splitting of a resident company into 2 or more resident companies.
Holding company regime – See under “Participation exemption”.
Tax Incentives – An investment allowance of 40% of the invested amount in new or used assets is available but the amount invested must be equal to RWF 30 million and the business assets must be held for at least 3 tax periods. The investment allowance is 50% for investment in rural areas and special activities as provided by the Investment Authority.
Withholding tax:
Dividends – Dividends paid to another Rwandan company are exempt. Dividends paid to a nonresident or an individual are subject to a 15% withholding tax unless the rate is reduced under a tax treaty.
Interest – Interest paid to a nonresident is subject to a 15% withholding tax unless the rate is reduced under a tax treaty.
Royalties – Royalties paid to a nonresident are subject to a 15% withholding tax unless the rate is reduced under a tax treaty.
Branch remittance tax – No
Other taxes on corporations:
Capital duty – No
Payroll tax – No
Real property tax – No
Stamp duty – No
Transfer tax – No
Social security contributions – The total contribution to the Rwanda Social Security Fund is 8% (5% by the employer and 3% by the employee).
Other – A presumptive tax of 4% of annual turnover is applicable to taxpayers with an annual turnover less than RWF 20 million that opt for the regime.
Anti-avoidance rules:
Transfer pricing – When independent parties deal with one another, the terms of trade are determined by market forces and may be presumed to be at arm’s length. However, for related party transactions, determination of the arm’s length price requires a comparison of the conditions in a “controlled transaction” against the conditions in a related party or uncontrolled transaction.
Thin capitalisation – Interest on a loan between related parties that exceeds 4 times the amount of equity may not be deducted from taxable income unless the taxpayer is an individual. This rule does not apply to commercial banks and insurance companies.
Controlled foreign companies – No
Disclosure requirements – No
Rwanda Tax year – Rwanda tax year is the calendar year, although the taxpayer may request a different 12-month period.
Consolidated returns – No consolidated tax returns allowed in Rwanda.
Tax Filing requirements – Rwanda operates a self-assessment regime. Advance corporate tax is payable in 3 instalments. The tax return must be filed within 3 months of the calendar year end.
Penalties – Interest is imposed for late payment of tax (0.83% per month) and fines and other penalties are imposed for late payment and understatements.
Rwanda vat (Value Added Tax) rates
The standard VAT rate in Rwanda is 18%, with exemptions and zero rating available in certain cases.
Taxable transactions – VAT is imposed on the sale of goods and the provision of
services.
VAT Registration – The registration threshold for VAT purposes is RWF 20 million of annual turnover. Voluntary registration is possible for taxpayers with turnover under the threshold.
Filing and VAT payment – Filing and payment occur on a monthly basis.