In a move designed to boost the Made in Rwanda drive, the government has announced a tax exemption for importation of leather and textile raw materials.
The decision announced at the weekend was taken in collaboration with local leather and textile manufacturers in the face of government’s policy to ban second-hand leather and footwear products.
The decision became effective Friday, December 2, 2016.
Innocent Safari, the Permanent Secretary Ministry of Trade, Industry and EAC Affairs (MINEACOM), explained at the weekend that the exemption applies to both import duties and Value Added Tax (VAT).
According to the ministry, local investors have been paying between 10 and 25 per cent on textile and leather raw materials.
So far this year, the government had collected taxes worth Rwf17 billion from imported leather and textile raw materials.
“The government has sacrificed a huge amount of money that it was getting from leather and textile imports. The move aims at boosting Made in Rwanda campaign. So, investors should take this opportunity to produce enough quality products to satisfy Rwandan market and for exports,” Safari said.
The exemption will not apply to imported finished products, but on the importation of machines and raw materials used to make garments and leather products by local manufacturers.
The tax exemption applies to local investors recognised by MINEACOM; with no limitations on the quantity of leather and textile raw materials to be imported as the country seeks to satisfy the local market demands and export fine products abroad, the official explained.
The case of SMEs
To strengthen Small and Medium Enterprises (SMEs), Safari encouraged small business holders to join cooperatives to easily apply for exemption.
Early this year, East African Heads of State and Government met in Arusha, and agreed to promote national textile industries, and phase out importation of second-hand clothes and foot wear.
The ban on second-hand clothes is set to be executed in the next three years as directed by the EAC leaders.
“We want to satisfy the local market demands with Made in Rwanda products and pave way to phase out cheap imported second hand products. We need joint efforts from local investors. Small business holders who wish to be granted tax exemption on imported raw materials can also approach us, grouped into cooperatives, so we can provide support to a well-organised entity,” Safari said.
Local investors welcome move
Local investors welcomed the tax exemption, saying the taxes have been a hindrance to their businesses growth.
“We are really happy today and this is an opportunity we must take, as local leather and textile industry investors. We really thank the government of Rwanda for the great role it is playing to promote Made in Rwanda manufacture,” said Janet Nkubana, the Managing Director of Gahaya Links, which makes Made in Rwanda products.
“I hope more investors would come on board…the tax exemption comes as a motivation.”
Celestine Sebuhinja, of marketing department at UTEXRWA said the exemption would cut the time spent on customs clearance.