Rwanda’s Cabinet, on Monday, February 10, approved legal instruments implementing medium term domestic resource mobilisation measures, including taxes and levies to strengthen financing for the second phase of the National Strategy for Transformation (NST2). The government introduced a new tax on foreign digital services like Netflix and Amazon, among others. ALSO READ: Rwanda makes tax reforms to drive economic growth According to a note on tax policy reforms – contained in the legal instruments – issued by the Ministry of Finance and Economic Planning, Rwanda registered significant development progress over the last 30 years, funded through a combination of domestic and external resources. Rwanda's continued ability to mobilise financial resources, including through a wider tax base, will enable the country to grow the economy and transform livelihoods of all citizens, as envisaged in NST2 – the government’s five-year development programme running from 2024 to 2029. The new tax policy reforms are part of the government's medium-term strategy to broaden the tax base, increase revenue mobilisation and streamline tax administration in order to meet Rwanda’s development goals. Here is what you need to know about the new tax reforms: A 15 per cent excise duty cosmetic and beauty products According to the Ministry of Finance and Economic Planning, as part of the new reforms, the government is introducing an excise duty of 15 per cent on Cost-Insurance-Freight (CIF), on make-up, body lotion and hair products. CIF refers to the value of a product including its cost from where it originated, and the costs of insurance and freight or transport upon their shipment into the importing country. The ministry of finance specified that, in consultation with the Ministry of Health, critical pharmaceutical beauty products will be exempted from such a tax. Registration fees for vehicles An increase in the registration fees for all vehicles including electric vehicles, is also considered in the new reforms. Fuel levy An adjustment from a fixed fee of Rwf115 per litre to 15 per cent of CIF to enhance road maintenance also features in the new tax policy changes. VAT on mobile telephones reintroduced The government is re-introducing value-added tax (VAT) on mobile phones which had been exempted since 2010. This exemption successfully boosted affordability and increased digital penetration and the government will continue working with stakeholders to boost smartphone ownership and usage, according to the ministry. Reintroduction of VAT on ICT equipment The government is also re-introducing VAT on ICT equipment which was exempted in 2012 to promote adoption of ICT. However, the ministry stated that selected ICT equipment will continue to be exempted in consultation with the Ministry of ICT and Innovation. A hike in taxes on gambling To encourage responsible gambling, the tax on Gross Gambling Revenue (GGR) will increase from 13 per cent to 40 per cent — implying a 27 percentage point rise — and withholding tax on winnings will increase from 15 per cent to 25 per cent, which is a 10 percentage point rise. Introduction of tourism levy A new levy of 3 per cent of the cost of rooms will be levied on accommodation to support investments in the tourism and hospitality sector. Hybrid vehicles to pay VAT, but continue enjoying import duty exemption To promote green mobility and reduce carbon emissions, hybrid vehicles will continue to benefit from import duty exemption of 25 per cent. To encourage importation of newer hybrid cars, with longer battery life, the new measures introduce excise duty proportionate to the age of the vehicle (5 per cent for below three years; 10 per cent for four-seven years and 15 per cent for eight years and above). VAT, and a withholding tax of 5 per cent will be reintroduced for all hybrid vehicles. Electric vehicles will remain fully exempted to promote green transportation. This measure will take effect in the fiscal year 2025/2026. Rise in excise duty on cigarettes According to the reforms, excise duty on cigarettes will go up from the current Rwf130, to Rwf230 per pack, plus 36 per cent of retail price. Beer excise duty up by 5 percentage points Beer excise duty is expected to rise from 60 per cent to 65 per cent of factory price. Excise duty increase on airtime For airtime, excise duty is projected to increase from 10 per cent to 12 per cent in 2024/2025 and gradual increase in the medium term to 15 per cent. Additional tax policy measures The ministry indicated that additional measures in different sectors, including financial services, transportation and ICT, will take effect in the next fiscal year [2025/2026], and beyond. These measures include an environmental levy on single-use plastics and VAT on select fee-based financial services, fossil fuels and road transportation services of goods.
