After almost two months since Rwanda moved to impose a tax on digital services like NetFlix and Amazon, Rwanda Revenue Authority (RRA) has explained the strategies that will be used in the collection of the tax. According to RRA, the primary method for collecting the tax will be the follow the money strategy. This approach tracks financial transactions to determine tax obligations, ensuring compliance from businesses that operate digitally without a physical presence in Rwanda. The digital services tax, announced in February will start to be implemented in the 2026/2027 financial year. A number of services are expected to be liable to the tax, ranging from Business to Customer (B2C) services to Business to Business (B2B). The Ministry of Finance and Economic Planning revealed that a 1.5 percent tax will be levied on the revenue made by such companies in Rwanda. ALSO READ: Proposed tax changes set to rake in Rwf300bn annually Speaking about the implementation, Ronald Niwenshuti, RRA’s Commissioner General, noted that historically, tax collection focused on businesses with a physical presence in Rwanda, but now, businesses have evolved and are able to earn income from anywhere without needing to be physically present in the country. As such, in order to be able to collect taxes from digital services, RRA plans to establish a list of the companies that provide such services and ensure they are registered in Rwanda. After that, the tax agency will employ the “follow the money” to track the payments made by Rwandan clients to different digital services providers. In order to do this, RRA will work with banks since payments are always made using cards issued by the banks. Niwenshuti noted that RRA is currently able to tax physical products purchased online as opposed to services. He highlighted that when products are purchased online, they pass through customs, where taxes are applied. However, he said, the challenge is with digital services like Netflix, which do not go through customs, making them harder to track and tax. ALSO READ: What you need to know about Rwanda’s new tax reforms In an earlier interview with The New Times, Angello Musinguzi, a Senior Tax Manager at KPMG East Africa, an accounting organisation, suggested that a system of tax collection from digital services could even involve tax agents. A tax agent is a person or institution authorised to act on behalf of a taxpayer in managing their tax obligations, including filing returns, making payments, and ensuring compliance with tax laws. In the context of the digital service tax, agents can act as intermediaries between the foreign digital service providers and the Rwanda Revenue Authority (RRA), since such foreign-based companies like Netflix do not have a physical presence in Rwanda. Musinguzi suggested that such tax agents may include telecom companies or internet service providers working in Rwanda. “Some of the (foreign digital service) companies may appoint tax agents who will be collecting revenue, withholding taxes and paying them to the tax administration, and then remit the profits,” he noted. ALSO READ: Higher taxes on beer and cigarettes: A win for public health, not just revenue He pointed out that it is a good tax that can be a source of revenue, but said the local tax system needs additional investment in terms of technology as it moves to implement it. A joint paper written by Rwanda Revenue Authority (RRA) and International Centre for Tax and Development (ICTD) in 2021, noted that “as the digital sector gains increasing prominence in the wider Rwandan economy, it must be taxed fairly and subject to the same requirements as other businesses.” It added that, while levying taxes on the digital sector is important for equity and to raise government revenues, it must be weighed against the long-term benefits of becoming an ICT Hub. Foreign digital services are enjoying a lot of clientele in various parts of the world and are generating billions of dollars that way. For instance, as of February 2025, Netflix had over 300 million paid subscribers worldwide. The number includes subscribers in over 190 countries.
