Worldwide Tax Summaries

Rwanda
Last reviewed - 20 July 2022

Corporate - Significant developments

There have been no significant corporate tax developments in Rwanda during the past year.

Corporate - Taxes on corporate income

Rwanda operates both a source and residence-based taxation system. This means that any income that is deemed to be from sources within
Rwanda will be liable to tax in Rwanda. In addition, resident entities are taxed on their worldwide income. However, where such income is taxed
in another country, a tax credit is allowed, which does not exceed the tax that would have been payable on the same income in Rwanda.

Non-resident entities are taxed on income sourced in Rwanda through a permanent establishment (PE).

The standard corporate income tax (CIT) rate is 30%. However, micro-enterprise companies (with turnover of less than 12 million Rwanda francs
[RWF] in a tax period) pay flat tax amounts, and small businesses (whose turnover is between RWF 12 million and RWF 20 million in a tax
period) pay a lump sum tax at the rate of 3% of turnover.

Special CIT regimes

There are special CIT rates for certain industries or sectors of the economy.

Newly listed companies on capital markets are taxed as follows for a period of five years:

If a company sells at least 20% of their shares to the public, the CIT rate is 28%.

If a company sells at least 30% of their shares to the public, the CIT rate is 25%.

If a company sells at least 40% of their shares to the public, the CIT rate is 20%.
Companies and cooperatives that carry out micro-finance activities, approved by competent authorities, pay CIT at the rate of 0% for a period of
five years from the time of their approval.

Registered investors in priority sectors can enjoy reduced CIT rates and tax holidays where certain conditions and thresholds are fulfilled. See
the Tax credits and incentives section for more information.

Local income taxes

Rwandan legislation does not provide for any provincial or local taxes on income.

Corporate - Corporate residence

Rwanda incorporated companies or associations are treated as Rwanda resident entities. In addition, companies incorporated overseas are also
treated as Rwandan resident companies if they have a place of effective management in Rwanda at any time during the tax period. The term
'effective management' is not defined in the tax law.

Rwandan government companies are also considered to be residents in Rwanda.

Permanent establishment (PE)

The definition of a PE for Rwanda is largely based on the Organisation for Economic Co-operation and Development (OECD) Model Tax
Convention definition. According to Rwandan tax law, a PE means a fixed place of business through which the business of a person is wholly or
partially carried on.

For non-resident companies, CIT liability will arise if they have a PE in Rwanda through which a trade is carried on. The profits attributable to the
PE will be taxed in Rwanda. However, there are no rules or guidance on how the PE's profit should be evaluated for Rwanda tax purposes. The
general understanding is that entities are required to use transfer pricing methods to determine the level of profits that should be attributable to
the PE based on the functions it performs.

In particular, the existence of the following triggers a PE:

A place of management.

A branch.

A factory or workshop.
 A mine, quarry, or any other place for the exploitation of natural resources.

A site set for construction, construction site, or a place where supervision or assembly works are carried out.
A place of provision of services, including consulting services, carried on by a person, with the support of employees or other personnel,
for more than 90 days in a 12-month period, either continuously or intermittently.
There are a number of specific exceptions from the definition of a PE. A person is deemed not to have a PE if that person:

a. uses facilities solely for the purpose of storage of goods or merchandise belonging to that person

b. maintains a stock of goods or merchandise belonging to that person solely for the purpose of storage
c. maintains a stock of goods or merchandise belonging to that person solely for the purpose of processing by another person

d. has a place of operation aimed purposely at purchasing goods or merchandise or at collecting information related to one's business, or

e. has a place of operation solely for the purpose of performing, within the context of one’s activities, any other activities of a preparatory
nature or intended to make them more effective.
Where a person, except an independent person (i.e. agent) concerned with (e) above, acts on behalf of another person (i.e. principal), and the
agent has capacity to make contracts in the name of the principal, the principal is considered as owning a PE in respect of activities one's agent
undertakes except if such activities of the agent are limited to those mentioned in (a) to (e) above.

However, a person is not considered as having a PE if one carries out activities through a broker, general commission agent, or any other
private agent in accordance with procedures of the ordinary course of the activities of such an agent.

A company that controls or is controlled by another company does not, of itself, constitute either company to be a PE of the other.

Corporate - Other taxes

Value-added tax (VAT)
VAT is levied on the supply of taxable goods and services in Rwanda as well as on the importation of taxable goods and services into Rwanda.

The threshold for VAT registration is taxable turnover of RWF 20 million in any relevant year or RWF 5 million in a calendar quarter.

The standard VAT rate is 18% and applies to goods and services that are neither exempt from VAT nor zero-rated.

Exports of goods and services are subject to VAT at 0%. Supplies to privileged persons, such as goods imported for official purposes of
diplomatic missions, supplies made under special arrangements between the government of Rwanda and donors, and supplies or importation
made under special technical aid agreements, are subject to VAT at 0%. Persons entitled to zero rating of goods or supplies received by them
are required to pay VAT at the time of receiving the supply and then apply for a refund of the VAT paid.

Some supplies are exempt from VAT, the main categories being supply of water service, goods and services for health purposes, educational
materials and services, transport services, books and newspapers, financial and insurance services, lending or leasing interests in land or
building for residential purposes, funeral services, energy supplies, all unprocessed agricultural and livestock products, mobile handsets, and
equipment for information, communication, and technology.

Suppliers who provide zero-rated services or goods are entitled to recover input VAT incurred in making the supply. This is unlike exempt
supplies, where input VAT recovery is not allowed. Therefore, zero rating is preferable to exemption.

The VAT returns and relevant payment are due to the Rwanda Revenue Authority (RRA) on a monthly basis by the 15th day of the following
month. However, taxpayers with annual turnover of RWF 200 million or below may elect to file VAT returns or make payments on a quarterly or
monthly basis.

Customs duties
Rwanda is a member of the East African Community, which uses the East African Community Customs Act (EACMA) for levying import duty.
The EACMA prescribes Common External Tariffs (CET) for goods originating outside the Customs Union. Goods are generally subject to import
duty of 0% for raw materials and capital goods, 10% for intermediate goods, and 25% for finished goods.

Goods will only enjoy the preferential community tariffs if they meet the East African Community (EAC) Customs Union Rules of Origin.

Certain industries and items are also entitled to exemptions under the customs law (e.g. assemblers of bicycles and motor cycle kits, importers
of gas cylinders, certain hotel equipment, solar equipment, and energy saving bulbs).

Enterprises established in Free Trade Zones are exempt from customs duty on machinery and inputs for exported products. There also exists an
import duty remission scheme, where import duty may be remitted for raw materials used to manufacture goods for export. This is subject to a
requirement for proof of export and execution of the bond.

All imported goods, except those listed as exempt, are also subject to the 1.5% Industrial Development Levy (IDL) and the 0.2% African Union
Levy. Additionally, imported goods, regardless of whether they are exempted, are subject to a 0.2% Quality Inspection Fee (QIF). The levies are
computed on the customs value of imported goods.

Excise taxes
Excise tax is imposed on the manufacturer or importation of certain commodities, mainly soft drinks, bottled water, cigarettes, alcohol, fuels,
and lubricants.
The following rates apply in respect of products and services for which excise duty is applied:

Juice from fruits: 5%.

Soda and lemonade: 39%.

Mineral water: 10%.

Beer: 60%.

Wine, brandies, liquors, and whisky: 70%.

Cigarettes: 36% of retail price of a pack (of 20 rods) and RWF 30 per pack.
Telephone communication: 10%.

Premium (excluding benzene) fuel and gas oil: RWF 183/litre on premium fuel and RWF 150/litre on gas oil.

Lubricants: 37%.
Powdered milk: 10%.

Vehicles with an engine capacity of above 2500cc: 15%.

Vehicles with an engine capacity of between 1500cc and 2500cc: 10%.

Vehicles with an engine capacity of less than 1500cc: 5%.

Property taxes/fixed asset tax

Local government levies fixed asset tax on:

the market value of parcels of land

the market value of buildings and all improvements thereto registered with the land registration centre and for which the owner has
obtained a title deed from the time the building is inhabited or used for other activities

the value of land exploited for quarry purposes, and

the market value of usufruct with a title deed.

The tax rate is fixed at a thousandth (1/1000) of the taxable value per year. The tax payment must be paid not later than 31 March of the
following year.

Transfer taxes
There is a fixed fee of RWF 20,000 on transfer of property. However, no transfer of ownership of a fixed asset can be effected without a tax
clearance certificate issued by the concerned decentralised entity.

Stamp taxes
There are no stamp duties in Rwanda.

Payroll taxes
Employers are required to withhold tax on payments to employees in respect of employment services that they have rendered. The tax is
withheld through the pay-as-you-earn (PAYE) system. The tax deducted should be remitted to the RRA by the 15th day of the following month.

Social security contributions

All people working in Rwanda, both nationals and foreigners, are required to contribute to a national social security contribution fund managed
by the Rwanda Social Security Board (RSSB). The employer is required to contribute 5% of the employee’s gross salary to the scheme, while
the employee’s contribution is 3%.

Gross salary means total remuneration received by the employee, including allowances, bonuses, commissions, and all other cash benefits, as
well as any fringe benefits, but excludes reimbursement of business expenses and transport allowances.

The social security contributions computed are required to be remitted to the RRA by the 15th day of the following month.

Maternity leave benefits scheme

The law governing maternity leave benefits requires all employers and employees to contribute towards a maternity fund, which is administered
by the RSSB.

The law grants employed women full monthly salary for the entire 12 weeks duration of maternity leave. The main requirements affecting
employers are summarised below:

The employer is responsible for collecting and remitting the contributions to the RSSB.

The total contribution for maternity leave benefits is 0.6% of the contribution base. The employer and the employee are each required to
contribute 0.3%.

The contribution base is the gross pay to the employee, including benefits in kind, but excluding termination benefits, retirement benefits,
dismissal compensation, and any other allowances that have a compensatory character.
 The employer is required to declare and remit the collected contribution to the RSSB by 15th day of the month following the month to
which the contribution relates.

Community Based Health Insurance Scheme (CBHIS) contribution

The law governing the CBHIS contributions requires all employees to contribute towards the CBHIS fund, which is administered by the RSSB.

The main requirements are summarised below:

The employer is responsible for collecting and remitting the contributions to the RSSB.

The total contribution for CBHIS is 0.5% of the employee's net pay. 

The employer is required to declare and remit the collected contribution by the 15th day of the month following the month to which the
contribution relates. The declaration for CBHIS is done via the Rwanda Revenue Authority (RRA) portal.

Trading licence fee

Districts charge a trading licence fee, which is paid by any person who commences a profit-oriented activity in Rwanda. The tax year starts on 1
January, and the trading licence fee must be paid for a whole year. If such activity starts after January, the taxpayer must pay a trading licence
fee equivalent to the remaining months, including the one in which the activities started.

The tax declaration is made not later than 31 March of the tax year. The trading licence fee is calculated on the basis of turnover, and the
amount of the fee varies between RWF 60,000 (for turnover of less than RWF 40 million) and RWF 250,000 (for turnover of over RWF 150
million).

The turnover applied is as per the amount approved in the previous year by the RRA. Every year, not later than 31 January, the RRA submits the
necessary data to the concerned decentralised entity.

There are also different trading licence fee rates for other small traders (not registered for VAT). These include vendors without shops, small-
scale technicians who do not use machines, sewing machine operators, transporters of people and goods on motorcycles, non-VAT registered
traders and technicians who use machines, all other vehicles besides bicycles, transport activities by motor boat, and other profit-oriented
activities.

Corporate - Branch income

The tax law does not prescribe special provisions for taxation of branches; consequently, tax rates on the profits of PEs are the same as for
domestic corporations. PEs are subject to tax at a rate of 30% and treated as domestic companies.

A branch is considered a PE for the parent company; consequently, it is taxed on the income that is sourced from Rwanda only.

Corporate - Income determination

Inventory valuation
Trading stock is valued at a lower of cost price or market price on the last day of the tax period. Work in progress is valued at cost.

Capital gains
Capital gains tax is charged on the direct or indirect sale or transfer of shares or debentures. The capital gains tax is charged at the rate of 5%
of the capital gain. The capital gain on sale or transfer of shares is determined as the difference between the acquisition value of the shares and
their selling or transfer price.

Capital gains tax is required to be withheld and accounted for by the company in which the share sale or share transfer transaction occurred.

Capital gains tax is required to be declared and paid within 15 days following the month in which the sale or transfer of shares occurred.

However, the following transactions are exempted from capital gains tax:

Capital gains from the sale or transfer of shares on the capital market.

Capital gains from the sale or transfer of units of collective investment schemes.

Capital gains resulting from restructuring of companies in respect of the transferring company.
There is a general capital gains tax law in Rwanda that provides that capital gains arising from the sale of commercial immovable property are
subject to tax at the rate of 30%. However, capital gains arising from secondary market transactions on listed securities are exempt from
taxation.

In addition, a capital gain arising from a corporate restructuring is exempt from tax in respect of the transferring company.

Corporate restructuring is defined to include the following:

a merger of two or more resident companies into a separate company

the acquisition or a takeover of 50% or more of shares or voting rights by number or value in a resident company in exchange for shares of
the purchasing company
 the acquisition of 50% or more of the assets and liabilities of a resident company by another resident company solely in exchange of
shares in the purchasing company
the acquisition of the entire company’s assets so that its existence is replaced by the purchasing company, or

splitting of a resident company into two or more resident companies.

Dividend income
Dividend income includes income from shares in any societies, other similar income that may be generated by all entities that pay CIT, as well
as the outstanding balance after the taxation of income from the correction made by the tax administration in the transfer pricing.

Dividend income is subject to withholding tax (WHT) at the flat rate of 15%. Where there is a double taxation agreement (DTA) between the
recipient country and Rwanda, a lower rate as per the DTA will apply.

If dividend distribution has been subjected to WHT, this becomes the final tax. Consequently, dividends paid between resident companies and
subjected to WHT are not included in taxable income for CIT purposes.

Financial income
Financial income includes income from loans, income from deposits, and income from guarantees. It also includes income from government
securities and bonds, as well as from negotiable securities issued by the government, securities issued by public and private companies, as well
as income from cash negotiable securities.

Financial income is subject to WHT at a flat rate of 15%. Where there is a DTA between the recipient country and Rwanda, a lower rate as per
the DTA will apply.

However, the following financial interests are not subject to the 15% WHT:

Interests on deposits in financial institutions for at least a period of one year.

Interests on loans granted by a foreign development financial institution exempted from income tax under applicable law in the country of
origin.

Interests paid by banks operating in Rwanda to banks or other foreign financial institutions.

Royalty income
Royalty income includes:

all payments of any kind received as a prize for the use of, or the right to use, any copyright of literary, craftsmanship, or scientific work,
including cinematograph films, films, or tapes used for radio or television broadcasting
any payment received from using a trademark, design or model, computer application, and invention patent

the price of using, or of the right to use, industrial, commercial, or scientific equipment or for information concerning industrial,
commercial, or scientific knowledge, and

payments from use of natural resources.

Royalty income is subject to WHT at flat rate of 15%. Where there is a DTA between the recipient country and Rwanda, a lower rate as per the
DTA will apply.

Rental income
Rental income includes all revenue derived from rent of machinery and other equipment, including agriculture and livestock equipment, in
Rwanda. This is reduced by 10% of gross revenue deemed expenses, interest paid on loans, and depreciation expenses.

Foreign income
Resident companies and enterprises are taxed on their worldwide income. However, a foreign tax credit is granted in respect of taxes paid on
the foreign income, subject to the limit of the tax that would have been paid in Rwanda on the same income.

There are no provisions in Rwanda for tax deferral of income earned abroad.

Corporate - Deductions
A trading company is generally permitted to deduct expenses that are incurred wholly and exclusively for purposes of the company's trade,
provided these costs are not capital in nature and are charged to the profit and loss account.

The Rwandan tax law stipulates that deductible expenses should fulfil the following conditions:

Are incurred for the direct purpose of the business and are directly chargeable to the income.

Correspond to real expenses and can be substantiated with proper purchase receipts.

Lead to a decrease in the net assets of the business.

 Are used for activities related to the tax period in which they are incurred.

Depreciation and amortisation

Accounting depreciation of fixed assets is not allowable as a deduction for tax purposes. The same applies in the case of amortisation of
assets. However, businesses are allowed specified deductions, referred to as tax depreciation in respect of specified classes of assets. This is
deducted in arriving at taxable income.

Tax depreciation allowance is granted to persons who own depreciable assets at the end of the tax period and use such assets in the
production of income.

Land, fine arts, antiquities, jewellery, and any other assets that are not subject to wear and tear or obsolescence are not depreciated. Buildings,
heavy industrial equipment, and machineries are depreciated annually, each on its own, at a depreciation rate of 5% of the cost of acquisition,
construction, refining, rehabilitation, or reconstruction.

Intangible assets, including goodwill that is purchased from a third party, are depreciated annually, each on its own, at a depreciation rate of
10%, while information and communication systems whose life is over 10 years are depreciated annually at the rate of 10% of the cost of
acquisition.

Computers and accessories and information and communication systems whose life is under 10 years are granted tax depreciation at 50%.

Tax depreciation allowance is available on any other business asset at the rate of 25%.

Goodwill
As mentioned above, purchased goodwill will attract tax depreciation at the rate of 10%, which is an allowable deduction. However,
amortisation of goodwill is not tax deductible.

Start-up expenses
There is no clear guidance on the tax treatment of start-up expenses. However, in practice, start-up expenses of a capital nature are not
deductible for tax purposes. Where they relate to purchase of assets, respective tax depreciation is claimed. Start-up expenses of a revenue
nature are tax deductible.

Interest expenses
Interest on borrowed money used for earning business profit or interest in respect of an amount payable for property acquired to earn income is
deductible, provided the interest paid is pursuant to a legal obligation and is reasonable under the circumstances.

Thin capitalisation rules can limit interest deductions when debt owed to related entities exceeds four times the amount of the corporation's
equity (see Thin capitalisation in the Group taxation section).

Bad debt
A bad debt provision will be deductible for tax purposes if it fulfils the following conditions:

a. The amount was previously included in the income of the taxpayer.

b. Debt is written off in the books of accounts.

c. Taxpayer has taken all possible steps in pursuing payment and has shown a court decision declaring the insolvency of one’s debtor.
However, for an individual whose debt is less than RWF 3 million, in addition to the conditions referred to in (a) and (b), the taxpayer must
provide proof that one has taken all reasonable steps over a period of three years to recover the debt.

Further, licensed commercial banks and leasing entities duly licensed as such are allowed to deduct, in determining business profit, any
increase of the mandatory reserve for non-performing loans as required by the directives related to management of bank loans and similar
institutions of the National Bank of Rwanda. Similarly, the business profit is increased by the entire amount recovered from bad debts deducted
from such reserves.

Charitable contributions
Donations and gifts to charitable organisations and other non-profit making organisations are tax deductible to the extent of 1% of turnover.
Consequently, donations to profit making organisations, irrespective of the amount, and any donations above 1% of turnover to non-profit
making organisations are not allowed as deductions for CIT purposes.

Fines and penalties

Fines and similar penalties imposed for breaking the law or for statutory offences, such as late payment of taxes, are not tax deductible.

The law does not specify which type of non-statutory fines or penalties are not allowed for tax. For example, there is no guidance on whether
fines or penalties paid for breach of contract are deductible or not.

Taxes
Income tax paid on business profit and recoverable VAT are not deductible for tax purposes. This includes any back taxes paid by the business.
Net operating losses
Tax losses can only be carried forward for five tax periods, earlier losses being deducted before later losses. However, on application, the tax
administration may authorise the taxpayer to carry forward the tax loss for more than five tax periods. This is subject to fulfilment of certain
conditions.

If the direct or indirect ownership of the share capital or the voting rights of an unlisted company changes more than 25% by value or by number
during a tax period, such a company is restricted from carrying forward losses incurred during the tax period and previous tax periods.

There are no provisions for carrying back tax losses.

Payments to foreign affiliates

Royalties, management fees, and similar payments to related non-residents are deductible expenses to the extent that:

they do not exceed 2% of the turnover of the taxpayer, and

they are incurred to earn income of the Rwandan company, adhere to the arm's-length principle, and comply with transfer pricing
requirements.

Corporate - Group taxation

There is no provision for group taxation in Rwanda. Each individual corporate group member is required to submit their own tax return on a
stand-alone basis.

Transfer pricing
Rwandan transfer pricing legislation and the prescribed transfer pricing methods are generally consistent with OECD guidelines. The law
requires that transactions between related parties be carried out under the arm's-length principle.

The tax law empowers the Commissioner General to adjust profits earned between related parties if the Commissioner General considers that
the trading arrangements between related parties do not adhere to the arm's-length principle. The arm's-length principle requires that transfer
prices charged between related parties are equivalent to those that would be charged between independent parties in the same circumstances.

Rwanda operates a self-assessment system; consequently, taxpayers are obligated to self-assess their compliance to the tax legislation, which
includes transfer pricing policy. According to the new income tax law, related persons involved in controlled transactions are required to have
documents justifying that their prices are applied according to the arm’s-length principle. This means that companies are now expected to have
transfer pricing policies and documentation.

Failure to do so would result into the tax administration’s adjustment of transactions prices in accordance with general rules on transfer pricing,
issued by an Order of the Minister.

On 14 December 2020, the government of Rwanda issued a Ministerial Order establishing the general rules on transfer pricing. According to the
Order:

Qualifying taxpayers are required to have transfer pricing documentation in place before the deadline for the income tax declaration (i.e. by
31 March for December year-ends or 3 months after an entity's tax period).

The transfer pricing documentation should only be submitted to the tax authority on request and within seven days from the date of
receipt of the written request.

While there is no requirement for the transfer pricing documentation to be submitted to the tax authority along with the annual CIT
declaration, a controlled transactions schedule must be submitted alongside the annual CIT return.

Thin capitalisation
The interest paid on loans and advances from related entities is not tax deductible to the extent that the total amount of loans/advances
exceeds four times the amount of equity during the tax period. For purposes of determining the above, equity excludes provisions and reserves.
This provision does not apply to commercial banks, financial institutions, and insurance companies.

Controlled foreign companies (CFCs)

There are no provisions in Rwanda for CFCs.

Corporate - Tax credits and incentives

There are tax incentives in the form of lower CIT rates (see Special CIT regimes in the Taxes on corporate income section) for registered
investors.

The investment code also provides the following incentives to a registered investor:

A seven-year tax holiday for investments in the following specific sectors: manufacturing, tourism, health, exports, energy projects
producing at least 25 MW (excluding investors having an engineering procurement contract [EPC] executed on behalf of the government
 of Rwanda, and information and communications technology (ICT) with an investment involving manufacturing, assembly, and service. The
investment should be of at least 50 million United States dollars (USD) and the investor should contribute at least 30% of this investment in
the form of equity in these sectors.

A preferential CIT rate of 0% for international companies with their regional offices in Rwanda and that fulfil certain requirements, as well as
entities registered by philanthropic investors.

A preferential CIT rate of 15% for registered investors undertaking (i) exportation; (ii) energy generation, transmission, and distribution; (iii)
transport of goods and related activities; (iv) mass transportation of passengers and goods; (v) ICT; (vi) financial services, including global
business activities, private equity funds, fund management, wealth management, mutual funds, collective investment schemes, captive
insurance schemes, venture capital, and asset backed securities; (vii) building of low-cost housing; (viii) manufacturing; (ix) information and
communication technology; (x) research and development; (xi) electric mobility; (xii) adventure and agriculture tourism, and (xiii) any
another priority economic sector as may be determined by an Order of the Minister of Finance.

Exemption from capital gains tax.

Five-year tax holiday for micro-finance institutions and specialised innovation park or specialised industrial park developer.
Customs exemption on products used in Export Processing Zones (EPZs).

Prompt settlement of VAT refunds.

Additional key incentives for priority sectors such as incentives for: the construction and development of the Kigali Innovation City; the
creation and growth of the Kigali Financial Centre; for film production and post-production; mining exploration; and start-ups.
There are, however, certain conditions that have to be fulfilled to obtain the incentives above.

Foreign tax credit

Rwanda allows a foreign tax credit on income generated from business activities performed abroad by a tax resident. The income tax payable is
offset by the foreign tax paid on that income. However, the foreign tax credit is limited to the amount of tax that would have been applicable on
that income in Rwanda.

The credit is allowed where it is supported by appropriate evidence, such as a tax declaration, a WHT certificate, or any other similar acceptable
document.

Corporate - Withholding taxes

WHT of 15% of the total amount, excluding VAT, is required to be accounted for on payments or other methods of extinguishing an obligation
made by resident individuals, including tax-exempt entities. The WHT is due where such payments or other methods of extinguishing an
obligation are made to a person not registered with the tax administration or to a registered person who does not have recent income tax
declaration.

Payments or other methods of extinguishing an obligation subject to WHT of 15% are related to the following:

Dividends, except income distributed to the holders of shares or units in collective investment schemes.

Financial interests, except interests on deposits in financial institutions for at least a period of one year; interests on loans granted by a
foreign development financial institution exempted from income tax under applicable law in the country of origin; and interests paid by
banks operating in Rwanda to banks or other foreign financial institutions.

Royalties.

Service fees, including management and technical service fees, except transport services.

Performance payments made to a crafts person, a musician, an artist, a player, sports, cultural, and leisure activities, irrespective of
whether paid directly or indirectly.
Gambling activities.

Goods sold in Rwanda.

However, money that is recorded in the books of account as a liability of a taxpayer to creditors and that reduces the taxable income is deemed
a payment if it has exceeded six months following the tax period.

WHT is also applicable to non-resident persons for such payments on behalf of their PEs. This means that the local entity/PE is now required to
declare and pay WHT at the time when the non-resident pays the foreign supplier on its behalf and not when the non-resident recharges for the
costs.

As mentioned above, a WHT of 15% is required to be accounted for on dividends attributed to a company registered in Rwanda. However, the
WHT shall be 5% if levied on:

dividends and interest on securities listed on capital market when the beneficiary of the dividends or interest is a resident taxpayer of
Rwanda or of the East African Community, and
interests derived from treasury bonds with a maturity of at least three years.
There is also a WHT of 5% that is applicable on goods imported for commercial use. Public institutions are required to retain 3% on payments to
winners of public tenders. However, businesses that possess a tax clearance certificate are exempted from deduction of the above WHT.

The WHT deducted should be remitted to the RRA within 15 days following the month of deduction.
Tax treaties
Rwanda has DTAs with Belgium, the People's Republic of China, the Democratic Republic of the Congo, Jersey, Luxembourg,
Mauritius, Morocco, Qatar, Singapore, South Africa, Turkey, and The United Arab Emirates. The WHT rates are as follows:

WHT (%)

Recipient
Dividends Interest Royalty Management or professional fees

Non-treaty 15 15 15 15

Treaty:        

Belgium 0/15 10 10 10

China, the People's Republic of 7.5 8 10 10

Congo, Democratic Republic of the 10 10 10 14

Jersey 10 10 10 12

Luxembourg 10 10 10 10

Mauritius 10 10 10 12

Morocco 8 10 10 10

Qatar 5/10 10 10 10

Singapore 7.5 10 10 10

South Africa 10/20 10 10 10

Turkey 10 10 10 10

United Arab Emirates 7.5 10 10 10

The DTAs contain conditions to be complied with for the preferential rates to apply; consequently, it is recommended that professional advice is
sought before application.

Corporate - Tax administration

Taxable period
The normal taxable period is between January and December. However, a different tax period can be allowed on approval by the Minister of
Finance.

Tax returns
Companies are assessed with reference to accounting periods. This refers to the period for which a company prepares its accounts. However,
an accounting period for CIT purposes cannot exceed 12 months, so companies preparing statutory accounts for longer than 12 months need
to prepare more than one CIT return.

Rwanda operates a self-assessment regime. Quarterly tax returns are due on 30 June, 30 September, and 31 December (or by the sixth, ninth,
and 12th month of the tax period). The annual tax return/declaration must be filed within three months after the tax period. The tax declaration
must include audited financial statements as well as any other documents that may be requested by the tax administration.

Payment of tax
Advance CIT is payable in three instalments. Tax payments are due on 30 June, 30 September, and 31 December (or by the sixth, ninth, and
12th month of the tax period). Each instalment is 25% of the tax liability as calculated in the tax return/declaration of the previous tax period.
This amount can be reduced by WHT paid during the tax period. The final payment of CIT for taxpayers with a December year-end is 31 March
of the following year. In the case of other accounting year-ends, the final CIT payment is due by the last day of the third month following the
accounting year-end.

Tax audit process

Large taxpayers are selected for audit by the RRA on a regular basis. The RRA tends to audit two tax periods, but this can be extended on
request by the taxpayer. Most audits are carried out onsite. The RRA may conduct a desk audit of the taxpayer's tax affairs where they note
discrepancies on tax returns filed by the taxpayer, anomalies with turnover, or any other situations that justify an audit.
Under normal in-depth audits, the RRA is required to issue a taxpayer with a draft notice of assessment following the completion of the field
audit. The draft assessment is referred to as a rectification note. The taxpayer is granted 30 days within which to respond. In case the tax issues
are not resolved, a final notice of assessment is issued. The taxpayer is allowed 30 days within which to appeal. Once an appeal is submitted to
the Commissioner General, the RRA has 30 days within which to respond to the objection. This can be extended by another 30 days but not
beyond this period. At this stage, the appeal is handled by the appeal committee, and the taxpayer and the taxpayer's agent are invited for a
meeting to provide explanations.

Once the final assessment is issued, the tax due is payable, although the Commissioner General has powers to suspend the payment pending
the determination of the appeal.

There is a provision for resolving the dispute through an amicable settlement process. Taxpayers can opt for this approach while at the same
time exploring the next stage of the appeal process.

A taxpayer that disagrees with the response on the final assessment can appeal to the high court within 30 days.

Statute of limitations
The RRA has powers to audit a taxpayer for a period going back five years, although this can be extended to ten years in case of fraud.
Taxpayers are required to keep their records for a period of ten years.

Topics of focus for tax authorities

Topics of interest for the RRA include:

Deduction of WHT on payments to non-resident persons and reverse VAT.

Treatment of capital gains on disposal of assets.

Recovery of reverse VAT on services that are regarded as being available in the local market.

Reconciliation of turnover per financial statements to receipts as per taxpayer bank statements.

Reconciliation of cost of sales to importations.

Reconciliation of turnover per financial statements to turnover declared in the VAT returns.

Reconciliation of employment/staff costs per financial statements to staff costs declared in the PAYE returns.

Transfer pricing arrangements

Supporting expenses with proper, sufficient documents.

Carry forward of tax losses.

Categorisation of business assets for tax depreciation purposes.

Rwanda contacts
Moses Nyabanda
Country Senior Partner
+250 252 5882 03/04/05/06

Frobisher Mugambwa
Associate Director, Tax Services

+250 252 588203

© 2017 - 2022 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see
www.pwc.com/structure for further details.