The Plenary Sitting of the Chamber of Deputies on Wednesday adopted the relevance of the draft law amending law nº 016/2018 of 13/04/2018 establishing taxes on income which has proposed, among other key changes, the taxable monthly income amount of Rwf60,000 instead of the current Rwf30,000. The development is in line with reducing the tax burden on low-income formal workers and promote employment. According to the existing law, income not exceeding Rwf30,000 per month is taxed zero percent, while that ranging from Rwf30,001 and Rwf100,000 has to pay 20 percent tax rate, and above that is taxed 30 percent. “The Rwf30,000 per month or Rwf360,000 per year was set in 2005, some 15 years ago. As our franc depreciates, we realised it was time to raise that to Rwf60,000 a month,” said Richard Tusabe, Minister of State in Charge of the National Treasury at the Ministry of Finance and Economic Planning. He pointed out that the revision should be done every five years [given the change in the cost of living]. Cautious optimism MP Diogene Bitunguramye commended the move to raise the taxable income threshold from Rwf30,000 to Rwf60,000 per month and Rwf360,000 to Rwf720,000 per year. However, he asked whether that would increase to at least Rwf100,000 per month. “I realised that this can increase employee’s purchasing power,” he said, indicating that tax would still be generated through VAT (Value Added Tax) and efforts should be put in ensuring that people are sensitized to pay VAT effectively. MP Frank Habineza said Rwf720,000 annually was still a small income and its earner should not be taxed, calling for taxing at least those earning rwf1 million per year. Tusabe said that the country can even increase taxable income to Rwf100,000 per month, but it cannot do it overnight, rather “it requires that we do it progressively because it has a cost implication on the national treasury.” Unions welcome move Dominique Bicamumpaka, technical advisor to Labour Congress and Workers’ Brotherhood in Rwanda (COTRAF) told The New Times that a study on the living conditions of pensioners and low-income workers in Rwanda that was carried out in 2014 indicated the monthly minimum wage that needed was Rwf127,000 in the City of Kigali, and about Rwf85,000 in rural areas. “We are happy with the development to increase the taxable income from Rwf30,000 to Rwf60,000 per month, but want that this be raised further to Rwf100,000,” he said, giving an example that even Rwf90,000 cannot be enough for meals for a working person’s a family with five members. Giving a picture of the rising cost of living and the declining purchasing power, he said that a kilogramme of [Irish] potatoes in Rubavu District was Rwf25 in 2002, but it is about Rwf180 currently, while a sack of charcoal that cost Rwf800-Rwf900 then is currently between Rwf12,000 and Rwf15,000. In the same period, he said, a bottle of soda was Rwf120, while it Rwf400 currently. “One dollar was exchanging for Rwf300 in 2002, but it about Rwf1000 today, implying that the Rwandan Franc depreciated more than three times against the dollar,” he said Other changes in the bill The draft law also clarifies that a taxpayer is not required to file his or her annual tax declaration if he/she has an annual turnover of less than Rwf2 million. Annual turnover is your business’s yearly income made from the total sales of your goods and/or services. Under the new bill, the number of payments subject to withholding tax – a tax that is withheld from an employees wages and paid directly to the government by the employer – of 15 percent, has been extended to cater for gaming activities. To support startup, taxpayers who are newly registered during the concerned annual tax period are exempted from withholding tax on sitting allowance, on payments or other methods of discharging an obligation, and on public tenders. “This provision gives us the opportunity to continue supporting startups so that they have a secure commencement and get means to start paying tax in the second year of doing business,” Tusabe observed. In order to attract experts and investors within the framework of activities related to Kigali International Financial Centre (KIFC), the draft law provides that a person who works as an expert or a professional directly for an entity carrying out KIFC activities, who was not resident at any point in the five years immediately prior to becoming resident in Rwanda, will be exempted from personal income tax on foreign-sourced income during the first five years following the date of becoming its resident.
