As the new fiscal year 2025/26 commences on July 1, some of the taxes for which laws were enacted in Rwanda in May, have come into force. They include value-added tax and proportionate excise duty on hybrid cars, vehicle levy, and tourism tax on accommodation, among others. ALSO READ: How Rwanda plans to fund, spend Rwf7tn budget for 2025/26 They are part of ongoing tax policy reforms aimed at increasing domestic revenue collection, according to the Rwanda Revenue Authority (RRA). According to RRA, when fully implemented, the measures are expected to generate an additional Rwf174.1 billion in the 2025/2026 fiscal year and up to Rwf353 billion by the 2029/2030 fiscal year. ALSO READ: Proposed tax changes set to rake in Rwf300bn annually Here is a look at the taxes that take immediate effect — starting with the new fiscal year. Taxes on hybrid vehicles Hybrid vehicles are now subject to different taxes, for which they previously enjoyed exemptions – since 2021. Nevertheless, these taxes remain lower than those applied to fuel-powered vehicles. ALSO READ: Rwanda reintroduces VAT on hybrid vehicles to spur e-mobility The applicable taxes include 18 per cent VAT, 5 per cent withholding tax, and an excise duty based on the year of manufacture – with hybrid vehicles with older batteries attracting higher rate. The intention is to discourage the importation of older hybrids – which tend to have shorter battery life, according to the Government. Under the new excise law, petrol- or diesel-powered vehicles with an engine capacity of less than 1500cc, as well as hybrid vehicles that are under three years old, are subject to a tax rate of 5 per cent. Vehicles with engine capacity between 1500cc and 2500cc or hybrids aged three to eight years, are taxed at 10 per cent. Vehicles with engine capacity above 2500cc or hybrids older than eight years are taxed at 15 per cent. However, hybrid vehicles still enjoy the 25 per cent import duty exemption. Certain vehicles are exempt from excise tax. These include minibuses and buses with a capacity of more than 14 passengers, trucks and single-cabin pickups used for transporting goods, refrigerated vehicles, tourism vehicles, ambulances, and vehicles for persons with disabilities. Electric vehicles, their batteries, and charging equipment remain VAT-exempt until June 30, 2028, as per RRA. VAT on transport of goods Land transportation of goods, which was previously exempt, is now subject to 18 per cent VAT starting July 1. International transport services, however, remain zero-rated. In line with enforcement, entities required to charge VAT include VAT-registered taxpayers, voluntary registrants, and businesses with a turnover of Rwf5 million – each – over three months or Rwf20 million annually. Transport services that remain VAT-exempt, when provided by licensed operators, include land transport of passengers in vehicles with a capacity of 14 or more, air passenger transport, transport by boat for passengers or cargo, and the collection and transportation of household solid waste. Tourism tax on accommodation A May 2025 law introduces a 3 per cent tourism tax on accommodation, defined as a service that provides a room or place to sleep or rest. Accommodation providers like hotels, apartments, motels, lodges, and others, are required to register for the tax with the tax administration – Rwanda Revenue Authority (RRA) in this case. ALSO READ: Parliament passes bill setting tourism tax The tax becomes due upon receipt of payment and must be declared and paid within 15 days following the end of each declaration month. Providers are also required to use the Electronic Invoicing System (EBM) to comply with tax regulations and ensure accurate reporting and declaration. Environmental levy According to a new law, a 0.2 per cent environmental levy is imposed on imported items packaged in plastic materials, calculated based on their customs value. The law identifies nine categories of items subject to the levy in question. They include bottled water; all types of juice, energy drinks and carbonated non-alcoholic beverages; peanut butter, honey, and related products. The list also includes body lotions, petroleum jelly and shampoos; mattresses; clothes; shoes; all types of soaps; and toilet paper. Motor-vehicle road maintenance levy As per of the reforms, a new relevant law establishing a levy on petrol, gas oil, and motor vehicles for road maintenance, owners of locally registered motor vehicles can now declare and pay the levy according to the following vehicle categories: Car and Jeep: Rwf50,000 Pick-up, microbus, minibus, bus: Rwf100,000 Truck and half-trailer: Rwf120,000 Trailer: Rwf150,000 The levy on motor vehicles for road maintenance is declared and paid annually to the tax administration not later than December 31 of each year. Meanwhile, ICT equipment and mobile phones started paying an 18 per cent VAT, which became effective from May 29. Similarly, a 15 per cent excise duty on cosmetic and beauty products – including make-up, body lotion and hair products took effect on May 29. Meanwhile, MINECOFIN specified that in consultation with the Ministry of Health, critical pharmaceutical beauty products will be exempted from such a tax.
