Residents are subject to tax on their worldwide income, while nonresidents are subject to tax on their Rwandan-source income only.
Income subject to tax
Employment income. Employment income includes the following:
- Wages and salaries
- Vacation pay
- Sick pay
- Payments instead of vacation
- Directors’ fees
- Entertainment or other allowances received for employment
Employment income also includes all benefits in kind, including employer-provided cars, housing, loans at interest rates lower than the central bank lending rates and benefits provided to employees’ relatives by employers.
Self-employment and business income. Business income includes the following:
- Trading profits
- Gains derived from disposals of business assets, shares of profits or profits from partnership interests
- Professional, technical, management and other fees
Investment and other income. A final withholding tax at a rate of 15% is imposed on the following:
- Dividends other than intercompany dividends
- Technical, management and other service fees
- Performance fees paid to athletes and musicians
- Lottery and gambling proceeds
Individual property owners who earn rental income are subject to rental income tax. The tax is payable to local or urban decentralized authorities at the following rates.
Capital gains. Capital gains derived from the disposal of business assets, excluding commercial buildings, are aggregated with other income and are taxed at the rates set forth in Rates. Gains derived from the disposal of commercial buildings are subject to a capital gains tax at a rate of 30%.
Personal deductions. Individuals who earn employment income may claim a tax deduction for their contributions to qualified pension funds. The maximum annual deduction is the lower of 10% of their gross employment income or RWF1,200,000.
Business deductions. Business expenses are deductible to the extent they are incurred in the production of income. Bad debts incurred in the production of taxable income are not deductible until they are written off following a court ruling attesting that the debts are unrecoverable.
Fixed assets qualify for an annual capital allowance deduction. The deduction may be calculated using the straight-line or declining-balance methods at rates ranging from 5% to 50%, depending on the type of asset.
Rates. The following table sets forth the tax rates, which are applicable to employment income and taxable business income earned by individuals and unincorporated entities.
A presumptive tax rate of 4% is allowed for persons whose annual turnover does not exceed RWF20 million and who do not maintain proper books of account.
Relief for losses. Losses may be carried forward for five years to offset future profits of businesses. Losses may not be carried back except with respect to construction projects.
Estate and gift tax. Estate and gift tax is not levied in Rwanda.
Net worth tax: Net worth tax is not levied in Rwanda.
The Rwanda Social Security Board, which is Rwanda’s statutory social security fund, provides employees with retirement benefits.
Em ployees contribute 3% of their total annual salaries excluding transport allowance, and employers contribute an amount equal to 8% of each employee’s total salary excluding transport allow ance.
Tax filing and payment procedures
Tax is withheld from employees under the Pay-As-You-Earn (PAYE) system. However, if the employer is unable to withhold tax from an employee, the obligation of declaring and paying the tax reverts to the employee.
The tax year runs from 1 January to 31 December. Taxpayers with accounting periods coinciding with the tax year must file three provisional returns and pay tax equal to 25% of the tax paid in the preceding year by 30 June, 30 September and 31 December. Taxpayers with other accounting periods must file provisional returns within three months after the beginning of the accounting period that ends within the tax year.
Taxpayers must file their final tax returns within three months after the end of their accounting year. An assessment is made based on the return, with a credit granted for taxes withheld at source and for provisional taxes paid.
Nonresidents who trade in Rwanda must register their operations or appoint an agent for tax purposes and are subject to the filing and payment requirements described above.
Double tax relief and tax treaties
In accordance with tax treaties, residents may credit foreign taxes paid on foreign-source income against Rwandan tax payable in accordance with tax treaties. Rwanda has entered into double tax treaties with Belgium and South Africa.
All foreign visitors must obtain valid entry visas to enter Rwanda, with the exception of nationals of member countries of the East African Community (EAC) and nationals of a few other countries.
Visitors’ passes are issued on entry into Rwanda. They are normally valid for three months and may be extended for up to six months.
Students may obtain long-term permits called students’ passes, which are valid for the duration of their courses of study.
Transit passes are normally valid for 14 days.
When applying for passes, applicants must have valid passports or equivalent travel documents. No quota system exists for immigration purposes in Rwanda.
Work permits and self-employment
Foreign nationals must obtain a work permit before undertaking employment in Rwanda. The application for a work permit is made to the Director General of Immigration and Emigration and consists of:
- An application letter from the employer
- Copies of the applicant’s academic certificates
- A police clearance certificate from the applicant’s home country
- The applicant’s curriculum vitae (CV) and a copy of his or her passport
- Completed application form
- Two passport photographs of the applicant
- An employment contract signed by the applicant and employer
- Payment of RWF50,000 (approximately USD90) to the government treasury
A work permit has a dual purpose in Rwanda. It serves as a work permit and resident permit, allowing an expatriate to live in Rwanda during his or her assignment.
Family and personal considerations
Family members. Dependents of expatriates with work permits may obtain long-term permits called dependents’ passes. The duration of these passes depends on the duration of the expatriate’s work permit.
Working spouses of work permit holders do not automatically receive the same type of pass or permit as the principal permit holder. Applications must be filed independently.
Driver’s permits. Foreign nationals may drive legally in Rwanda with their home country driver’s licenses for three months.
To obtain a local driver’s license in Rwanda, an applicant must obtain a provisional driver’s license after paying a general fee. This enables the applicant to go to a driving school and to take a driving test, after which he or she is issued a driving permit. No written or physical examination is required.