The deadline for declaring and paying immovable property tax and rental income tax is approaching following the extension to February 29, 2024. These taxes are for local government entities and are stipulated by determining the revenue and property sources of decentralised entities, similar to the trading license tax.

Ernest Karasira, Assistant Commissioner in charge of Provincial and Decentralised Revenue Division, reminded taxpayers to declare their taxes today and reserve their time to pay, without waiting until the last minute.

"When individuals procrastinate until the last minute, I often liken our systems to roads. Just as motor vehicles attempting to navigate a single route simultaneously lead to traffic jams and increased accident risks, numerous attempts to use our systems on the deadline day may disrupt our IT systems. That’s why we encourage taxpayers to submit their declarations and make early payments,” he explained.

As the declarations and payments continue, here are the facts you should know about immovable property tax and rental income tax:

1. Tax on buildings and related plots

Immovable properties encompass buildings, fields, plots, or farms. The immovable property tax is levied based on the market value of a building and its related plot, assessed and paid by the owner. When the land is without any construction, different rates apply, ranging from zero to Rwf 80 per square metre of the land’s surface, depending on its location. The tax rates for land are set by district councils and the city of Kigali.

For constructed land, the property is taxed at 0.5 per cent of the market value of both the building and related plot of land for residential use, 0.3 per cent for commercial use, and 0.1 per cent for industrial use, buildings belonging to micro-enterprises, and small businesses.

2. Special consideration for buildings with multiple floors

The government has decided to encourage proper land use and the construction of tall buildings, to accommodate more families. A plot and a building for residential use with three floors are taxed at a rate of 0.25 per cent of their market value, and a rate of 0.1 per cent applies for more than three floors.

3. Rental income tax calculations

Rental income tax is charged on income generated by individuals or entities not subject to corporate tax from rented immovable property in Rwanda. It is charged on income from rented buildings or improvements, wholly or partly, and any other rented immovable property in Rwanda.

Let’s take a house for example. Taxable rental income is obtained by deducting 50 per cent of the gross rental income for maintenance and upkeep expenses. Bank interest payments on loans for construction or purchase of a rented property are considered when determining taxable rental income.

The rental income tax rate ranges from 0 per cent to 30 per cent based on the annual rental income. Zero per cent for an annual rental income from one Rwandan franc to Rwf180,000, 20 per cent for an annual rental income from Rwf180,001 to Rwf1,000,000, and 30 per cent for an annual rental income above Rwf1,000,000.

4. Who is exempted?

Apart from one building intended for occupancy by the owner and its annex buildings on a residential plot for one family, other exempted properties from immovable property tax include immovable property determined by the district council or the council of the City of Kigali as owned by vulnerable persons.

They also include those owned by the state, decentralised entities, public institutions unless used for profit-making activities or leasing, and immovable property belonging to foreign diplomatic missions in Rwanda if their countries do not levy tax on immovable property of Rwanda’s diplomatic missions.

It is the same for land used for agricultural, livestock or forestry activities whose area is equal to or less than two hectares; and land reserved for construction of residential houses but where no basic infrastructure has been erected.

5. Interests and penalties for late payment

Taxpayers failing to file tax declarations on time or filing false declarations are liable to a 40 per cent penalty on the tax due. Additionally, late payment incurs a monthly interest of 1.5 per cent, calculated from the first day after the due date until the payment date.

Except for the interest payable, a surcharge equivalent to 10 per cent of the tax due must be paid. However, such a surcharge cannot exceed an amount of Rwf100,000.