The Government of Rwanda is clearly focused on promoting and facilitating investment, as well as positioning the country as a gateway to the rest of Africa. The new investment law, known formally as Law no. 006/2021, was gazetted on 8 February and includes a number of key changes. Understanding the intent of the new investment law and its various requirements and incentives is essential for any investor currently operating in Rwanda or considering a future investment – including start-ups and entrepreneurs. The new investment law is part of a wider effort to position Rwanda at a regional and pan-African level as an investment destination fully in compliance with international standards and best practices. In no way does the law institute anything approaching an ‘aggressive tax incentive regime’, which could harm the reputation of Rwanda or erode the country’s existing tax revenue base. Instead, the law grants incentives to investors complying with certain minimum economic substance requirements and demonstrating that their governance, management and control of investments resides in Rwanda. Perhaps the most significant change in the new investment law is its shift in vision. The old law was designed to maximize cost effectiveness and incentives for registered investors, which rendered it time-bound and performance-based. The new law, on the other hand, aims to promote a thriving, diversified and highly productive private sector facilitated through the Kigali Innovation City, the Kigali International Financial Centre, start-up organisations and entrepreneurs. Growing Rwanda’s private sector and talent pool through these channels will help the Government to focus more on public investment and development objectives and less on direct private sector support. Three channels to promote investment The Kigali Innovation City (KIC) is a remarkable concept inspired by America’s Silicon Valley and intended to promote technological advancements through cluster-enhanced activities. In such a cluster, innovation would thrive in a cohesive ecosystem of universities, technology companies and biotech firms. On KIC’s 70 hectare ‘campus’ zoned for commercial and retail use, these entities can benefit from close proximity and help to build a critical mass of talent, research and innovation - the first of its kind in Africa and a highly competitive prospect for investors. Universities like Carnegie Mellon University Africa and African Leadership University have already set-up shop in this zoned area. Similarly, the Kigali International Financial Center (KIFC) helps to position Rwanda as a preferred financial jurisdiction for investments into Africa. Rather than a cohesive zoning, KIFC is more like an umbrella of laws and regulations helping to nurture talent, support leading technologies, inspire trust amongst regulators and investors and provide transparent incentives. Investors and certain types of companies that support investors (such as fund managers) may qualify for certain incentives. The new investment law also provides a number of incentives for start-up organisations and entrepreneurs. Recognising their potential in a number of areas, including employment generation and innovation. The new law institutionalizes the Government’s interest in attracting small and medium-sized angel investors, exporters, philanthropists, film industry innovators, certain types of manufacturing and affordable housing entities and those involved in electric mobility, adventure tourism or agriculture tourism. Aside from its focus on attracting investment through these three key channels, the new investment law also introduces expiration dates for all investment certificates. Now, an investment certificate is valid for five years from the date of issuance, although the certificate can be renewed in certain circumstances. In time, this five year period of validity may need to be reviewed for investors in projects like power plants, mining operations and manufacturing facilities which are typically longer-term and investment intensive. The Government does not intend for the new investment law to instigate an overnight transition for investors that complied with the old law. Investment incentives that were granted to an investor in accordance with the old law (and which are not provided for by the new law, or whose period of validity has not been fixed) shall remain valid for 12 months from the new law’s effective date of 5 February 2021. Therefore, investors holding certificates under the old law will need to apply for fresh certificates under the new law before 6 February 2022 and so should review and update their business plans without delay. The new investment law is part of a wider effort to enhance the Government’s agility in adapting to evolving investment priorities. Overall, the new law’s qualification requirements are more stringent, and investors need to prepare adequately and seek appropriate advice. But it is clear from the law’s design and intent that it will help to position Rwanda as an investment destination with significant benefits for the economy, employment, skills development and innovation. The writer Mugambwa is an Associate Director at PwC Rwanda where he leads the firm’s tax practice. The views expressed in this article are of the writer.
