Low-income earners to get tax cut as Rwanda enforces law
Friday, November 03, 2023
Workers at Pink Mango C&D – a Hong Kong-based textile manufacturer that acquired former C&H Garment Factory at Kigali Special Economic Zone on 26 November 2020. File

Low-income earners, like primary school teacher Angelique Uwubuntu, will, starting this November, receive relatively higher pay as the government moves to enforce a relevant provision of the 2022 income tax law, The New Times understands.

Uwubuntu told The New Times that the current tax rates of 20 per cent levied on a monthly income of between Rwf60, 000 and Rwf100, 000 and 30 per cent for that of 100,000 and Rwf200, 000, were high, and were limiting low-income earners’ ability to meet basic needs.

The problem is set to be alleviated thanks to the enforcement of a provision on reducing such tax rates set in the 2022 income tax law, starting from November 2023.

With the development, workers who earn Rwf60,000 to Rwf100,000 will be taxed at the rate of 10 per cent instead of 20 per cent, and those who earn Rwf 100,000 to 200,000 will be taxed at the rate of 20 per cent instead of the current 30 per cent.

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Uwubuntu said her salary is between Rwf100,000 and Rwf200,000 a month, and that the tax cut was necessary amid the rise in the cost of living which is the case today.

"The tax cut decision is laudable since it will reduce my financial obligation as a worker while increasing — to some extent— my ability towards meeting my basic needs,” she said, citing foodstuffs whose prices went up.

According to an announcement issued by the Rwanda Revenue Authority (RRA) on October 25, the second year of application of the new Pay As You Earn (PAYE) tax bands commences with the November 2023 tax period, adding that the tax declaration for this month will be declared not later than December 15.

This is in line with applying the law establishing taxes on income, which was enacted in October 2022 – especially a provision of Article 56.

PAYE tax is an income tax that is determined by how much one earns and directly deducted from their pay — as a withholding tax on employment income.

The president of the Labour Congress and Workers’ Brotherhood in Rwanda (COTRAF Rwanda), Eric Nzabandora,

told The New Times that tax reduction is a relief for workers who earn a relatively small income.

"The tax waiver on income for employees earning up to Rwf60,000, and tax cut for those receiving between Rwf60,000 and Rwf200,000 will help them to meet their needs,” he said, underscoring the essence of taxes as a contributor to the country’s development, but also the need to ensure that a citizen enjoys welfare.

Meanwhile, Nzabandora appreciated the fact that the law also provides for tax exemption for workers whose monthly income does not exceed Rwf60,000.

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In October 2022, The New Times got information from the Ministry of Finance and Economic Planning (MINECOFIN) showing that in the second year since the law came into force (phase 2), the tax cut (for workers who earn Rwf60, 000-Rwf100, 000 and 200,000) was estimated to benefit at least 107,500 formal workers (20 per cent of total formal workers who were estimated at more than 541,000 in Rwanda as of June 2022).

According to MINECOFIN, to implement the tax reform, the government will forego more than Rwf43 billion for the two years (including Rwf20.7 billion for phase 1 consisting of the tax waiver on the smallest income earners, and Rwf22.5 billion for phase 2, which is about tax cut).