Tax Incentives

Tax Incentives

The tax law nº16/2005 of 18/08/2005 on direct taxes on income provides the following   tax incentives to investors in Rwanda:

Investment allowance

An investment allowance of forty percent (40% in Kigali and 50% outside Kigali) of the invested amount in new or used assets may be depreciated excluding motor vehicles that carry less than eight (8) persons, except those exclusively used in a tourist business is deductible for a registered investor in the first tax period of purchase and/or of use of such an assets  provided the amount of business assets invested is equal to thirty million (30,000,000) Rwandan francs; and, the business assets are held at the establishment for at least three (3) tax periods after the tax period in which the investment allowance was taken into consideration.

Training and research expenses

All Training and Research expenses incurred and declared as agreed by a taxpayer and declared and earlier agreed and which promote activities during a tax period are considered as deductible from taxable profits in accordance with provisions of Article 21 of this law provided they do not relate to capital expenditure.

Loss carried forward

If the determination of business profit results in a loss in a tax period, the loss may be deducted from the business profit in the next five (5) tax periods, earlier losses being deducted before later losses. Foreign losses do not come into play. No carry back of losses is available.

Tax discount and exemption

A registered investment entity that operates in a Free Trade Zone and foreign companies that have theirs headquarters in Rwanda that fulfils the requirements stipulated in the Rwandan law on Investment Promotion is entitled to pay corporate income tax at the rate of zero per cent (0%) and is exempted  from 15% withholding tax mentioned in Article 51 of the law nº 16/2005 of 18/08/2005 on direct income. It is also entitled to tax free repatriation of profits.

Profit Tax Discount

A registered investor shall be entitled to a profit tax discount ranging from 2% to 7% depending on the number of Rwandans employed and the value of exports made during the tax period..

Micro finance activities

Companies that carry out micro finance activities approved by competent authorities pay corporate income tax at the rate of zero percent (0%) for a period of five (5) years from the time of the approval of the activity. However, this period may be renewed by the order of the Minister