Rwanda has been urged to embrace best international practices on taxation and transfer pricing to boost cross-border trade and enhance the investment environment.

Dr. Thomas Balco, a tax expert from the International Centre for Taxation and Development (ICTD), said adopting global best practices in tax administration helps promote tax rights, as well as eliminate harmful tax competition that often affects competitiveness of companies.

"Apart from referring to rules that regulate tax liabilities, and the interaction of tax systems on cross-border trade, it is equally critical for Rwanda to strengthen its tax policies and align them with international tax systems,” Balco pointed out.

The ICTD expert and others from the Central Asia Tax Research Centre are conducting a five-day training for 100 tax inspectors, auditors and legal experts from across the country.

The training workshop in Kigali was organised by the Rwanda Revenue Authority (RRA).

"It is also crucial that both tax regulators and companies understand the concepts of transfer pricing, tax jurisdiction and fundamental tax principles so that local and multinational firms are not exposed to dangers of double taxation,” Balco said.     

The experts also urged the revenue body and other relevant institutions spearhead a campaign for harmonisation of policies to avoid double taxation across the region.

They argued that double taxation has disastrous effects on companies and entrepreneurs and, "consequently, affects the attractiveness in the country”.  

Exeniya Yeroshenko, a tax consultant at the Central Asia Tax Research Centre, said international taxation practices are important in guiding the country on how to react on various tax systems in different countries.

"This is critical for Rwanda’s external trade as it provides a strong foundation through which government can negotiate on behalf of investors,” Yeroshenko said.

Investors have in recent past complained about lack of an East African transfer pricing legislation, saying it limits cross-border trade, thus leaving many investment opportunities unexploited.

Emmanuel Nkuruzinza, a tax expert at the Ministry of Finance and Economic Planning, said if all traders declared imported items as per requirements of the law, this would eliminate possibilities of double taxation.

He however said the term "double taxation” should be clearly defined "to look at both the source of income and principle in different countries”.

Regional governments, including Rwanda are yet to have a transfer pricing legislation that will be aligned to the Organisation for Economic Co-operation and Development (OECD).

Pascal Ruganintwari, the RRA deputy commissioner general in charge of corporate taxes, said though Rwanda was the first EAC member state to ratify double taxation treaty, the country lacks capacity in the area.

"There is need to invest more in human resource to handle the challenge...We want to train more of our staff in these areas, especially transfer pricing, because it is still a big challenge,” Ruganintwari said.

Rwanda is currently reviewing its OECD-based transfer pricing rules, and is drafting guidelines that will allow for more detailed regulations to be put in place.