Rwanda: Nine Products Exempted From Taxes in New Budget

Some products will not be taxed in the next financial year as a result of tax policy reforms which aim at sustaining the economic recovery path from the Covid-19 pandemic impact, protecting local producers, and harmonising taxation with other Partner States in the East African Community (EAC), according to the Minister of Finance and Economic Planning, Uzziel Ndagijimana.

“Specifically, these policies are to support the entire population to access basic needs, promoting Made in Rwanda Policy and cashless economy, fast- track the economic recovery in the aftermath of shocks, and encouraging a green economy,” Ndagijimana observed in the 2023/2024 budget estimates speech he delivered to both Chambers of Parliament last week.

Some of the products that will not be taxed in 2023/2024 are:

1. Buses with 50-passenger capacity and above

The projected tax policy reforms include that buses for the transportation of 50 persons and above will pay an import duty rate of zero per cent instead of 25 per cent charged currently, said Ndagijimana.

2. Trucks carrying over 20 tonnes

Also, trucks for the transport of goods with a gross weight exceeding 20 tonnes will pay an import duty rate of 0 per cent, instead of 25 per cent.

Also connected to goods transportation, road tractors for semi-trailers will pay a duty rate of 0 per cent instead of 10 per cent.

3. Army shop products

Goods imported for use by Armed Forces Shop (AFOS) will pay zero per cent import duty, instead of 25 per cent. The development is meant to make products more affordable for the beneficiaries.

AFOS is a duty-free shop where Rwanda Defence Force (RDF), Rwanda National Police (RNP), and prisons (correctional facility) personnel (and their family members — spouses and children), get relatively affordable products including foodstuff. It is in line with improving the welfare of Armed Forces members and their immediate families.

4. Machinery and raw materials textile industry

The capital machinery and raw materials used in the manufacturing of textile garments and footwear will pay an import duty of 0 per cent instead of 10 per cent or 25 per cent rates that are applied so far, according to Ministry of Finance

Meanwhile, Minister Ndagijimana said that a list of raw materials used in industries [apart from textile], will also pay 0 per cent instead of 10 per cent or 25 per cent.

No details were provided on such raw materials in question. But, Ndagijimana told The New Times “there is an existing list of raw materials and it can be updated by the Ministry of Trade and Industry and cleared by the Ministry of Finance”.

5. Telecommunication equipment

It is planned that telecommunication equipment will pay an import duty rate of zero per cent instead of 25 per cent in the next fiscal year.

The intervention is announced when the Government seeks to increase access to smartphones among Rwandans as well as scale up ICT in education through increasing smart classrooms with computers in schools across the country. The overarching objective, according to the Ministry of ICT and Innovation, is to support Rwanda’s efforts to become an information society — a country where work process and service delivery are integrated with information and communications technology (ICT).

During a session with the Senate on ICT development activities in Rwanda, on June 1, 2023, ICT Minister Paula Ingabire said that while 78 per cent of Rwandans owned phones as of 2022, overall, only 25 per cent of them had smartphones. This situation implies that majority of Rwandans had ‘feature phones’ that lack computing capability and connectivity, hence limited access to online services.

The main factor for the low smartphone ownership, Ingabire said, was the cost as the minimum price for a smartphone was generally between Rwf60,000 and Rwf80,000, which was high for some Rwandans with very limited financial means.

6. Electronic transaction devices

In the next fiscal year, electronic transaction devices (smart cards, point of sale, cash registers, and cashless machines) will pay 0 per cent import duty instead of 25 per cent.

Under the first phase of Rwanda’s National Strategy for Transformation(NST1), the country targeted to increase value of payment transactions done electronically as a percentage of its gross domestic product (GDP) from 26.9 per cent in 2017 to 80 per cent by 2024.

“This will be supported by automation of Umurenge SACCOs and implementing a series of sensitizations to increase uptake of electronic and digital financial services,” NST1 document reads in part.

Meanwhile, data from the National Bank of Rwanda’s Monetary Policy and Financial Stability Statement of March 2023, suggest that Rwanda has already surpassed — by far — the digital (cashless) payment to GDP ratio target.

According to the central bank publication, the value of e-payment to GDP increased during the period under review to 146.5 per cent due to the significant use of digital channels. The usage was dominated by mobile payment acquiring services, and internet banking services, which accounted for 54 per cent and 27.6 per cent of the GDP respectively.

7. Luxury cars valued over $6,000 for high-end tourism growth

While imported cars will pay the applicable 25 per cent Common External Tariff import duty and all other relevant taxes up to the CIF (cost, insurance, and freight) value of $60,000, anything above $60,000 (about Rwf70 million) will not attract any tax, MINISTRY OF FINANCE indicated. This is one of the tax incentives being extended to the next fiscal year.

“Rwanda is promoting high-end tourism and it is important to facilitate products that go with it, including high-end vehicles,” Ndagijimana told The New Times as he responded to the question on why the Government is moving to exempt such vehicles from import tax.

8. Electric vehicles (extension)

To accelerate the transition to Electric Vehicles and reduce greenhouse gas emissions from vehicle transportation, incentives on electric and hybrid vehicles and Electric motorcycles to pay an import duty rate of zero will be extended, Minister Ndagijimana said.

He pointed out that the zero rates on import duty for electric vehicles existed already and will be extended for one year as agreed with the EAC Council of Ministers of Finance.

“Exceptional import duty rates (different from the EAC Common External Tariff) are requested every year by member countries and approved by the Council of Ministers of Finance of EAC every year and are valid for 1 year,” he explained.

9. Construction materials under Covid-19 recovery programme

The tax exemption for construction materials under the Manufacture and Build to Recover Programme, will be extended to the next fiscal year. Such action is intended to reduce the cost of investment for new manufacturers and those seeking to expand existing operations in line with Rwanda’s recovery plan from the Covid-19 impact, according to Ministry of Finance.