Rental income tax: Landlords must submit tenants’ contracts

Owners of residential and commercial buildings are obliged to submit copies of contracts they signed with tenants to an entity in charge of tax collection — in line with enforcing a provision on rental income tax in the property tax law, The New Times understands. According to the law of September 5, 2023, determining the sources of revenue and property of decentralised entities — also known as property tax law — the rental contract regarding the immovable property must be in writing and signed by the contracting parties. “A copy of this contract is submitted to the tax administration within 15 days following the date the contract was signed,” Article 41 of the law reads in part. The law, which was published in the Official Gazette on September 14, 2023, provides, among other things, that a person who earns a taxable rental income files a rental income tax declaration not later than January 31 each year. As per the law, tax administration means an institution in charge of assessing and collecting taxes and fees on behalf of decentralised entities (districts). Overall, the Rwanda Revenue Authority (RRA) is the public entity in charge of assessing, collecting, and accounting for tax, customs, and other specified revenues. Meanwhile, the property tax law provides that a Prime Minister’s Order determines the institution in charge of the assessment and collection of taxes and fees on behalf of decentralised entities and fixed costs of these services. How much rental income do you have to pay as a house owner? According to the law, the rental income tax rate is determined based on how much rent a house owner gets — levels of income. It provides for a zero per cent tax rate for an annual rental income not exceeding Rwf180,000 – meaning that this rent is exempted from tax; 20 per cent for an annual rental income from Rwf180,001 to Rwf1 million; and 30 per cent for an annual rental income above Rwf1 million. “You realise that overall, the rental income tax you pay is reasonable,” said the Minister of Finance and Economic Planning, Uzziel Ndagijimana. Ndagijimana made the observation while speaking during the ‘Dusangire Ijambo’ television programme aired by public broadcaster – Rwanda Broadcasting Agency (RBA) on December 17. The programme focused on changes in the legislation governing taxes and fees collected by decentralised entities. How rental income tax is calculated The taxable rental income is calculated by subtracting 50 per cent of the gross rental income, which is considered as the expenses incurred by the taxpayer for maintaining and keeping up the rented property, as stipulated by law. “As a house owner, you first deduct 50 per cent of your annual rental income. You understand that the government did its best [to ease tax]. For instance, if you have a house for which you get Rwf1.2 million per year, you deduct Rwf600,000 for which you do not pay rental income tax,” Ndagijimana said, pointing out that it was considered that half of the rental income could be used by a house owner to keep it in good condition, such as through the application of paint [on walls], among other expenses.

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Rental income tax: Landlords must submit tenants’ contracts