16 June 2025 Rwanda introduces numerous tax changes - A government notice, published in the Gazette on 29 May 2025, amends various tax laws mainly focused on increase in taxes or levies; some of the changes became effective immediately.
- The capital gains tax rate will increase from 5% to 10%, effective from 1 January 2026, potentially affecting entities' investment strategies.
- A new 1.5% digital service tax will be imposed on companies providing digital services with substantial national presence, effective from 1 October 2025.
- A 3% tourism tax on accommodation services will take effect on 1 July 2025, requiring accommodation providers to adjust their pricing and tax remittance processes accordingly.
- Affected entities should prepare for increased excise duties on various goods, including a 15% duty on financial transactions and cosmetics, which will affect cost structures and pricing strategies across multiple sectors.
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On 29 May 2025, the Government of Rwanda via a Gazette Notice made a wide array of tax changes, including the following: - Increases the capital gains tax rate from 5% to 10%
- Introduces a 1.5% digital service tax on companies supplying digital services with substantial national presence
- Exempts from value-added tax (VAT) imported fully electric vehicles and charging station equipment, up to 30 June 2028
- Imposes VAT on information, communication and technology equipment and service that were previously exempt from VAT
- Reclassifies hybrid automotive vehicles from exempt to taxable supplies
- Provides VAT exemption on certain goods and services, including pharmaceutical products, books, education materials, livestock insurance services, financial and health services determined by a Ministerial Order
- Introduces a 15% excise duty on financial transactions and cosmetic products
- Introduces a 0.2% environment levy on imported items packed in plastic materials
- Introduces a 50 Rwandan France (FRW 50) per-liter tax on petrol or gas oil for the establishment of the strategic petroleum products reserves
- Introduces a 15% road levy on petrol or gas oil based on value of the fuel and a fixed annual road levy based on different categories of vehicles ranging from FRW 5,000 to FRW 15,000
- Imposes a 40% tax on companies engaged in gaming activities based on the difference between the wagers and winnings awarded and 25% withholding tax on player winnings
The changes are intended to help Rwanda realize its National Strategy for Transformation (NST-2), currently under implementation up to year 2030. Key policy changes for Fiscal Year 2025—2026 VAT changes in the new law include: - New 18% VAT on ICT equipment, telephone and SIM cards that were previously exempt from VAT
- Eliminated VAT exemptions for:
- Hybrid automotive vehicles
- Transport of goods by land
- New VAT exemptions for:
- Livestock insurance services
- Machinery, capital assets and raw materials used in industries, up to 30 June 2026 as per list in Ministerial Order (awaiting gazettement)
- Imported fully electric vehicles and charging station equipment, up to 30 June 2028
- Energy supply equipment, up to 30 June 2028
Effective date: The changes took effect on the date of the Gazette Notice. The capital gains tax rate has been increased from 5% to 10%. A new 1.5% digital service tax will be levied on digital service providers, with substantial activity in Rwanda, on their income sourced in Rwanda. A Ministerial Order will be issued to outline the scope, definition of substantial national presence, procedures for registration, tax declaration, payment and additional criteria for taxing digital services. Gaming companies are now exempt from corporate income tax, a change from the previous standard rate of 28%. However, they will be (excluding the national lottery) taxed at 40% on net revenue (amount wagered minus winnings). Gaming companies are required to withhold 25% on net player winnings (winnings minus wager); this amount was previously 15%. Effective date: The capital gains tax increase and new digital service tax took effect on the date of the Gazette Notice. The gaming tax provisions will take effect three months from the date of the Gazette Notice. The new law defines "accommodation" to mean a service that consists of providing a room or place to sleep or rest. A 3% tourism tax has been introduced on accommodation services, on the transaction amount excluding VAT. Accommodation service providers should remit tourism tax to the Tax Administration within 15 days after the end of each month. Effective date: 1 July 2025 A 0.2% environmental levy will be charged on the customs value of imported goods packaged in plastic. Effective date: 1 July 2025 Strategic petroleum reserve levy This levy has been increased from FRW 32.73 per liter to FRW 50 per liter on petrol and gas oil. Effective date: The increase took effect on the date of the Gazette Notice. A new 15% road maintenance levy will be charged on petrol and diesel, based on cost, insurance and freight value. Additionally, the law has introduced a fixed annual levy on vehicles to offset the cost of road maintenance. This levy must be declared and paid annually to Tax Administration not later than 31 December. Vehicle | Amount | Car, Jeep | FRW 50,000 | Pickup truck, microbus, minibus, bus | FRW 100,000 | Truck, half trailer | FRW 120,000 | Trailer | FRW 150,000 |
The following vehicles will be exempt from the fixed annual levy: - Government vehicles
- Vehicles belonging to diplomats, high commissions and embassies accredited to Rwanda
- Vehicles owned by international organizations that have signed agreements with the Rwandan Government
Effective date: The changes took effect on the date of the Gazette Notice. The law has introduced the following key definitions: - "Levy" means a charge applied to imported items that are packaged in plastic materials.
- "Item" means tangible or intangible property packaged in plastic materials.
- "Plastic materials" are defined as lightweight, soft and non-compostable materials including carry bags made from substances from petrochemicals.
- "Taxable service" means a financial transaction and telephone communication service.
- "Calendar month" means a period of time defined with reference to the calendar from period of first day to last day of a given month.
Excise duty is levied on imported products, locally manufactured goods and excisable services. Below are some of the key changes in excise duty rates on goods: Products | Previous rate | New rate | Hybrid vehicles aged between 0-3 years from the date of manufacture | - | 5% | Hybrid vehicles aged between 3-8 years from the date of manufacture | - | 10% | Hybrid vehicles older than 8 years from date of manufacture | - | 15% | Natural juice | 5% | 10% | Beer for which local raw material content, excluding water, is at least 70% by weight of its constituents | 30% | 40% | Other beers | 60% | 65% | Wine for which local raw material content, excluding water, is at least 70% by weight of its constituents | 30% | 40% | Cigarettes | 36% of retail price of a pack of 20 rods plus FRW 130 per pack | 36% of retail price tax inclusive of a pack of 20 rods plus FRW 230 per pack | Telephone communications | 10% | 12% first year, 14% second year, 15% third |
The law has also introduced an excise duty on the following goods and services: - 15% on amount or commission charged on financial transactions
- 15% on cosmetics and beauty products
- 65% on certain fermented beverages
- 30% on certain alcoholic beverages with local raw materials content
Exemptions from excise duty The new law exempts the following goods from excise duty: - Goods for charitable organizations
- Locally assembled vehicles
- One personal vehicle of a former diplomat returning from a foreign mission
- Tourist vehicles and refrigerating vehicles
- Ambulances and vehicles for persons with disabilities
Effective date: The changes took effect on the date of the Gazette Notice. Businesses should make the necessary steps to align their operations with the changes while monitoring further communication on the implementation modalities of the changes. Relatedly, the Ministry of Finance and Economic Planning (Minecofin) issued guidance on 3 June 2025, on the implementation of dates of the above tax measures as follows: - VAT, withholding tax and excise duty on hybrid vehicles will be effective on 1 July 2025.
- VAT on the transport of goods will be effective on 1 July 2025.
- Excise duty on financial transactions will be effective on 1 July 2027.
| * * * * * * * * * * | | Contact Information | For additional information concerning this Alert, please contact: Ernst & Young (Kenya), Nairobi Ernst & Young Rwanda Limited, Kigali Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London | | Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor |
Document ID: 2025-1272 |
