Rwanda has signed a new tax deal with Mauritius, where traders from the two countries will no longer be subjected to double taxation.
Ben Kagarama, the Rwanda Revenue Authority (RRA) Commissioner General, said the new agreement will see introduction of a 10 per cent withholding tax on dividends, loyalties and interest, while investors from either country will part with a 12 per cent management fees.
The deal comes after the previous agreement signed in 2001 was suspended after Rwanda expressed concerns that it favoured Mauritius.
“The new deal is meant to discourage treaty shopping. In the earlier deal, Mauritius had all the rights on taxation, people would go and register there because it is a low-tax economy; sometimes such businesses would not pay taxes at all here.
“They would invest here and repatriate all their income and profits without paying taxes,” said Kagarama
Kagarama further noted that the new agreement will minimise revenue leakage and allow fair taxation between the two countries.
“We want fair taxation,” he said. He pointed out that introducing withholding taxes on dividends and interest and a capital gains tax on big companies will boost revenue collection.
Amb. Claver Gatete, the Minister for Finance, said the deal will benefit businesses in Rwanda and also attract more investors from Mauritius.
“We found that in terms of taxation, the old deal was benefiting Mauritius more than ourselves. Now that local businesses have picked up, and with information technology infrastructure services picking up, we are going to focus on offshore services and business outsourcing.
“Mauritius has the capacity to do that from here, but we are saying they should play by our rules,” Gatete said.
Rwanda also plans to sign a similar tax agreement with Singapore.
“The country has stepped up its quest for private investment in recent months to boost domestic resources as it seeks to wean itself off aid,” according to Kagarama.
Mauritius has invested in Rwanda’s energy and sugar sectors. It is the best country to do business in Africa, followed by Rwanda, according to the World Bank Doing Business report for 2014.