The government of Rwanda plans to implement new tax policy reforms which are part of its medium-term strategy to broaden the tax base, increase revenue mobilisation and streamline operations in order to meet the country’s development goals, according to the Ministry of Finance and Economic Planning (MINECOFIN). ALSO READ: What you need to know about Rwanda’s new tax reforms The reforms were approved by the Cabinet on Monday, February 10, to strengthen financing for the second phase of the National Strategy for Transformation (NST2) – the government’s five-year development programme. Rwanda targets to increase its tax to gross domestic product (GDP) ratio from the current 14.6 per cent (as of 2023/2024 fiscal year) to 19 per cent by 2029 to raise more revenues and accelerate socio-economic development. ALSO READ: Unpacking Rwanda’s five-year development strategy: Here are the 14 goals According to MINECOFIN, the implementation of the new reforms will be gradual to ensure a smooth transition, and are part of efforts to strengthen the economy and promote fairness in taxation. Here is the timeline for the implementation of the new tax reforms: Reforms taking effect immediately The Ministry of Finance indicated that some goods and services will be subject to valued-added tax (VAT) under the new tax policy, most of which will take effect in the current fiscal year 2024/25. For the current fiscal year, which will end on June 30, VAT is due to apply to mobile phones and information and communication technology (ICT) equipment. Other taxes to be implemented in the current fiscal year include an excise duty of 15 per cent on cost-insurance-freight (CIF) on cosmetic and beauty products, including 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, such as those used for medical purposes, will be exempted from such a tax. ALSO READ: Rwanda makes tax reforms to drive economic growth In the same period, the fixed fee imposed on cigarettes will go up from the current Rwf130 to Rwf230 per pack. Cigarettes will continue to pay excise duty of 36 per cent of retail price. 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 in the current fiscal year. The ministry observed that this move is intended to encourage responsible gambling. Vehicles, previously subject to a fuel levy that was fixed at Rwf115 per litre, will now pay 15 per cent of CIF. This, the government says, is aimed at enhancing road maintenance. Under the new reforms, there has been an increase in beer excise duty, from 60 per cent to 65 per cent of factory price. A new tourism tax of 3 per cent imposed on accommodation [to be levied on the cost of rooms] to support investments in the tourism and hospitality sector was also introduced. Reforms taking effect in 2025/2026 For the fiscal year 2025/2026, VAT will be imposed on hybrid vehicles, fee-based financial services, fossil fuels, and road transport services for goods. The government did not specify exactly which fee-based financial services, fossil fuels, or road transport services will be taxed. There will also be an environmental levy of 0.2 per cent of CIF that will be imposed on imported goods packaged in plastic materials or single-use products. Capital gain tax – levied on profits made from the sale of assets like stocks or real estate – has been revised upward from 5 per cent to 10 per cent on the sale of shares and other similar instruments. VAT on business input VAT exemptions on business inputs such as machinery and capital assets, as well as raw materials will be scrapped, according to the new reforms. The new reforms also introduce digital services tax, which will take effect in 2026/2027. Excise duty on financial transactions An excise duty of 15 per cent on fees charged for financial transactions will be levied effective 2027/2028. VAT on electric vehicles Starting from the fiscal year 2028/2029, VAT will be introduced for electric vehicles.
