Corporate income tax is levied on profits of companies registered in Rwanda.
The current tax rate is 30 per cent but reduced corporation tax rates for newly listed companies on the capital market are taxed for a period of five years as follows:
20 per cent if those companies sell at least 40 per cent of their shares to the public, 25 per cent if those companies sell at least 30 per cent of their shares to the public, 28 per cent if they sell at least 20 per cent of their shares to the public.
Venture capital companies registered with the Capital Market Authority in Rwanda enjoy a tax-free period of five years with regards to corporate income tax.
Intermediate, which do not keep proper books of accounts and as thus, they are not able to prepare statutory books of accounts for audit purposes pay 4 per cent.
However in the event a company makes losses, it does not pay any corporate income tax. In addition, losses may be carried forward for five subsequent years.
The Rwandan tax regime caters for exemptions for CIT purposes. Income from agricultural and livestock activities not exceeding Rwf12,000,000 (US$20,000) turnover in a tax period is exempted from corporate income tax.
Income accruing to registered collective schemes investment and employee’s shares in the company they work for are exempted from CIT. Most of the companies in Rwanda have not started the employee share scheme to utilise this advantage.
Micro-finance companies enjoy a tax-free period of five years with regards to corporate income tax from the time of the approval of the activity.
40 per cent investment allowance is accorded to those who invest in the city of Kigali. This is increased to 50 per cent when the investor goes outside Kigali City or for priority sectors.
The amount is deducted in the first year of investment. Investors should however be aware of conditions necessary for these allowances to be permissible.
In the first instance, the investor must be registered as a taxpayer and must invest more than Rwf30m (US$50,000). Assets must be held for at least three years or tax periods after the period allowance is given.
Investment income comprises of interest, dividends, service fees, royalties and rent. This excludes capital gain on secondary market transaction on Listed Securities that are exempted from capital gains tax.
All revenues derived from rent of machinery and other equipment and land including livestock in Rwanda, are included in taxable income, reduced by 10 per cent of revenue for expenses, interest on loans, and depreciation
Are there any investment incentives in Rwanda tax regime?
A registered investor is entitled to a profit tax discount as follows:
In the event he employs staff between 100 and 200 Rwandans. 5 per cent allowance is given if the investor employs between 201 and 400 Rwandans, 6 per cent if they employ between 401 and 900 Rwandans and 7 per cent if they employs more than 900 Rwandans.
To benefit from the above, the employer must maintain employees for at least six months during the tax period and should not be employees with incomes that fall within the zero per cent tax rate.
Companies that deal in exports benefit from the following incentives:
When a taxpayer exports commodities or services that fetch for the country between US$3m and Rwf5m in a tax period, he/she is entitled to a tax discount of 3 per cent.
In the event a taxpayer exports commodities or services that fetch more than US$5m in a tax period, he/she is entitled to a discount of 5 per cent.
Rwanda established a Free Trade Zone (FTZ) and a registered investment entity that operates in a FTZ is entitled to enjoy a tax-free period of five years with regards to corporate income tax, exemption from withholding tax and tax free repatriation of profit.
Rwanda has an attractive tax incentives compared to those prevailing in the region and taxpayers or investors should take advantages of the situation in order to obtain increased profits after taxation.
The author is a Tax Manager at KPMG Rwanda