The value-added tax (VAT) on hybrid vehicles, announced by the Ministry of Finance and Economic Planning in February, is set to officially take effect on July 1.

The new tax regime includes an 18 percent VAT and an excise duty of five percent on hybrid vehicles less than three years old. A 10 percent excise duty will be imposed on those between four and eight years old, and 15 percent on vehicles older than eight years.

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However, the 25 percent import duty exemption for hybrid cars was extended for the 2025/26 fiscal year.

According to the Ministry of Finance, the new tax changes aim to promote green mobility and reduce carbon emissions, encouraging a shift toward fully electric vehicles.

Purely electric vehicles, their batteries, and charging station equipment remain exempt from VAT until June 30, 2028.

Jean-Paulin Uwitonze, Assistant Commissioner in charge of Taxpayer Services and Communications Division at RRA, said they are prepared to implement the new tax measures, as he also hinted at what the taxpayers are required to do.

"As RRA, we already have IT systems in place. What we will do is simply to adjust the tax rates in the system according to the legal provisions,” he noted.

He added that RRA has been actively communicating the upcoming changes to taxpayers, noting that the tax officials have already met with various groups that are related to the new tax policies, including importers and customs clearing agencies.

"To importers and clearing agents, we expounded on adjustments they have to make concerning VAT on transport and its application in different circumstances,” he said.

"More importantly, we urged them to use genuine invoices and a clear description of goods during their customs declaration,” he added.

Currently, nearly 45 percent of vehicles imported into Rwanda are hybrids. Of these, about 43 percent were manufactured more than 10 years ago.

RRA’s data shows that between 2020 and 2024, 7,172 hybrid and electric vehicles were imported. Of these, only 512 (just over 7 percent) were electric, while 6,660 (more than 92.8 percent) were hybrids.

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Aaron Ntwari, an official at Carcarbaba, the official dealer of Dong Feng vehicles in Rwanda, said the new taxes will lead to a significant increase in car prices. For example, he noted that a vehicle currently priced at Rwf 53 million could rise to as much as Rwf 68 million.

Around 90 percent of Carcarbaba’s fleet consists of hybrid vehicles, while the remaining 10 percent are fully electric.

A tax expert’s take

Joel Namanya, Manager of Tax and Legal Services at KPMG Rwanda, an audit, tax, and advisory firm, told The New Times that as the implementation takes shape, RRA should put efforts in communication and guidance to the taxpayers, in addition to carrying out effective monitoring and evaluation of the tax&039;s impact.

Talking about the potential impact on taxpayers, Namanya noted that the inclusion of an 18 percent VAT on hybrid vehicles will increase retail prices, which could reduce consumer demand or slow the adoption of such vehicles.

On a positive side, he pointed out that shifting from a VAT exemption to an 18 percent VAT rate on hybrid vehicles will generate additional revenue for the country.

ALSO READ: Rwanda extends import tax exemption for electric vehicles

"This can support broader fiscal objectives such as infrastructure development, social programs, or debt management," he said.

"It also supports Rwanda’s environmental and climate goals by encouraging cleaner transportation options and lastly the combined effect of higher VAT collection and lower import duties aims to balance fiscal revenue and promote green technology without overly burdening consumers,” he added.