Rwanda’s newly gazetted transfer pricing regulations are expected to strengthen oversight of transactions between related companies while reducing disputes between taxpayers and the tax administration, according to experts.
The reforms are contained in a Ministerial Order of April 29 covering transfer pricing, simplified accounting methods, and authorisation for taxpayers to carry forward losses beyond five tax periods.
Transfer pricing refers to the pricing of goods, services, or assets exchanged between entities under common ownership or control. Because such transactions occur within corporate groups, tax authorities closely monitor them to prevent profit shifting from higher-tax jurisdictions to lower-tax ones.
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Dieudonné Nzafashwanayo, a tax lawyer and Partner at ENSAfrica, said that although related companies are legally separate, they often remain under common control, creating room for pricing decisions that may not reflect normal market conditions.
"You may have a company operating in a low-tax jurisdiction dealing with a company in Rwanda. Services or goods can be priced in a way that is not consistent with market value, even though the entities are legally distinct but economically connected,” he explained.
He noted that Rwanda previously applied transfer pricing rules under the 2020 Ministerial Order, which remained in force during the transition period following the 2022 Income Tax Law.
However, once that period expired, authorities relied on international standards such as the OECD Transfer Pricing Guidelines and the UN Transfer Pricing Manual to fill the gap.
"With the new rules now gazetted, that gap has been addressed. One of the key developments is the introduction of a clearer framework for Advance Pricing Agreements (APAs),” he said.
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APAs are arrangements between taxpayers and the Rwanda Revenue Authority that predefines how related-party transactions will be priced and the methods to be used before transactions take place.
Under the new framework, only taxpayers with an annual turnover of at least Rwf600 million and related-party transactions exceeding Rwf100 million qualify for APAs. The agreements are valid for three years and may be renewed once.
Nzafashwanayo said the agreements provide certainty on issues such as pricing methods, profit margins, and valuation approaches, helping to reduce future disputes.
The regulations also require companies involved in controlled transactions to maintain detailed transfer pricing documentation, including local and master files, which must be submitted within seven days upon request by the tax administration.
He noted that disputes often arise when tax authorities question whether companies applied appropriate pricing methods or whether declared profit margins reflect real market conditions.
"In many cases, disagreements stem from whether the correct method was used or whether the margins charged were reasonable. The APA framework is expected to reduce such disputes by providing clarity in advance,” he said.
Nzafashwanayo added that the reforms bring Rwanda’s framework closer to international tax standards and strengthen oversight of cross-border corporate transactions.
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Arm’s length principle
The Ministerial Order also reinforces the arm’s length principle, requiring that transactions between related companies be priced as if they were conducted between independent businesses under normal market conditions.
Tax authorities are empowered to review and adjust transactions where pricing or profit margins appear inconsistent with market reality, while companies are required to rely on recognised transfer pricing methods to support their pricing decisions.
According to Angello Musinguzi, Tax & Regulatory Partner at Garnet Partners Ltd, the updated rules enhance the RRA’s ability to detect inflated costs or understated profits within group transactions.
"These provisions provide a clearer framework for assessing controlled transactions and ensure that taxation reflects real economic activity rather than internal pricing structures,” he said.
Musinguzi highlighted that while transfer pricing rules are not new, the revised framework improves clarity around documentation requirements, compliance obligations, and regulatory oversight.
He further noted that the seven-day submission requirement places an obligation on companies to maintain continuous records rather than prepare them only during audits.
"It is not practical to assemble all documentation within seven days if records were not properly maintained beforehand. Companies are therefore expected to keep updated documentation ready for immediate submission upon request,” he said.
He said the requirement is designed to strengthen transparency and support more efficient tax assessments by the authorities.
Joel Namaya, the Manager Tax and Legal Services at KPMG Rwanda, said that the reference to simplified accounting methods and other provisions are refinement of existing rules governing corporate taxation and transfer pricing.
"The reforms mainly aim to improve clarity and consistency in how companies justify their profits and related-party transactions, rather than fundamentally changing the tax framework,” he said.
The direction of the reform, he added, is not to change the regime, but to strengthen the structure and tighten oversight so that compliance becomes more transparent and consistent.