As Rwanda plans to charge value added tax (VAT) on fee-based financial services as part of revenue mobilisation measures approved by Cabinet, in February, the Minister of Finance and Economic Planning, Yusuf Murangwa, has issued a list of financial and insurance services exempted from this tax. The list is in a ministerial order determining financial and insurance services exempted from value added tax which was published in the official gazette on April 17. ALSO READ: What you need to know about Rwanda’s new tax reforms Here are eight financial and insurance services (categories) exempted from value added tax: 1. Financial and equity investment return This service category includes interest income on investments, which consists of interest income on treasury bills or income on treasury bonds; interest income on nostros (accounts financial institutions hold with others); interest income on overnight (daily) loans; interest income on placements (fixed-term savings); interest income on current accounts; and interest income on securities or bonds trading. There is also interest income on loans, and penalties on late repayment of loans; dividends, bill or invoice discounting commissions; and invoice factoring commissions. 2. Cashless transactions The eligible transactions are transfer fees charged on current account operations; agent banking commissions; mobile banking fees or commissions; and commissions on electronic money transactions; and salary remittance commissions. ALSO READ: Proposed tax changes set to rake in Rwf300bn annually 3. Foreign exchange operations This consists of income on foreign exchange transactions which encompasses profit or loss on foreign exchange transactions, market exchange or foreign exchange trading gains; exchange differences on foreign exchange operations; and cup foreign exchange gain or loss, cup interchange fee or fee on small denomination. 4. Fees and commissions originating from foreign countries Under this classification, commissions on money remittance transactions; commissions income from correspondent bank; and chargeback outward payment (recovery of undue payments) are eligible. 5. Grants or donations Grant amortisation income or grant income also features the eligible list. 6. Internally generated income This part revolves around write-back provisions on non-performing or written-off loans. It includes credits written back or write-back on loans; written back provisions on nonperforming loans, provisions for non-performing loans written off; and write-back on agios (bank charges). It also features written-back on other provisions, written-back on depreciation, cash surplus or overages, profit or loss on disposal of assets or on sale of fixed assets; recovery of non-performing loans, losses recovered, or debt recovery income; recovery of interest on loan written-off; recovery of expenses incurred in the process of loan recovery; as well as revaluation income. 7. Miscellaneous services These services include courier or postage income, and penalties on early closure of term-deposits. Commissions on bank guarantees and other financial commitments also benefit from the VAT exemption. They comprise a letter of credits opening, confirmation, modification, notification, extension payment control; bank guarantees commissions; and promise of a credit line. Capital market-related services featuring transfer of securities offered on the capital market; capital market transactions in listed securities; and capital market transactions advisory services are also VAT-exempt. Other exempted services are the operations of the National Bank of Rwanda; and transfer of shares. 8. Insurance Premiums charged on life and medical insurance services are VAT-free.
