From foodstuff to cars: Inside new raft of tax exemptions

The Government has maintained different existing tax policies so that they are applied in the 2024/25 fiscal year to, among others, support Rwandans’ access to basic needs, and stimulate a green economy, according to information from the Ministry of Finance and Economic Planning (MINECOFIN). They include the reduction of import duty rates for rice, sugar, and other imported products available in the country, increased rates for second-hand clothes and shoes, and tax exemption on electric vehicles. The fiscal year in question began on July 1 and runs through June 30, 2025. As per MINECOFIN, the tax policies for the current fiscal year aim at sustaining the economic recovery path (from the Covid-19 pandemic), protecting local producers, and harmonising taxation with the East African Community (EAC) Partner States. Specifically, it indicated, the policies are to support the citizens to access basic needs, promote Made in Rwanda Policy and a cashless economy, fast-tracking and sustaining the economic recovery in the aftermath of the global economic shocks, as well as encouraging green economic initiatives. ALSO READ: Nine products exempted from taxes in new budget Rwanda is one of the Partner States of the East African Community (EAC) – a regional bloc – that has a Common External Tariff (CET). However, each partner state can request to stay (suspend) the application of set CET rates and apply lower charges in line with priorities for a given fiscal year, upon approval by the EAC council of finance ministers. Electric vehicles exempted from import duty as an incentive According to MINECOFIN, the Government decided to extend incentives on electric and hybrid vehicles and electric motorcycles to pay an import duty rate of zero. This intends to accelerate the transition to electric vehicles and reduce greenhouse gas emissions from vehicle transportation. It is reviewed on an annual basis. Luxury cars for high-end tourism also enjoy tax exemption While hosting high-level events and promoting the tourism sector, the incentives on cars above $60,000 will be extended to increase its stock, according to Citizen’s Guide to the budget for 2024/2025 by MINECOFIN. The incentives will be as follows: imported cars will pay Common External Tariff import duty applicable of 25 per cent and all relevant taxes up to the Cost, Insurance and Freight (CIF) value of $60,000 [as set by EAC]. Anything above $60,000 will not pay such a tax. ALSO READ: Rwanda’s tourism revenue hit $620 million in 2023 Incentives for strategic items, including foodstuffs, buses Under the tax policies, rice will be charged an import duty rate of 45 per cent or $345 per tonne [whichever is higher], instead of 75 per cent or $345 per tonne [whichever is higher]. Sugar will have an import duty rate of 25 per cent for 70,000 tonnes, instead of 100 per cent or 460 per tonne whichever is higher, while refined cooking oils are set to pay an import duty rate of 25 per cent instead of 35 per cent. ALSO READ: BUDGET: Import tax on cooking oil cut by 10% Goods imported for the use by Armed Forces Shop (AFOS) will pay 0 per cent instead of 25 per cent. AFOS is a duty-free shop where Rwanda Defence Force (RDF), Rwanda National Police (RNP), and prisons (correctional facility) personnel (and their family members -- spouses and children), get relatively affordable products including foodstuff. It is in line with improving the welfare of Armed Forces members and their immediate families. Other items considered are road tractors for semi-trailers that will pay a duty rate of 0 per cent instead of 10 per cent. Motor vehicles for the transport of goods with a gross weight exceeding five tonnes but not exceeding 20 tonnes will pay an import duty rate of 10 per cent instead of 25 per cent; while motor vehicles for the transport of goods with a gross weight exceeding 20 tonnes will pay an import duty rate of 0 per cent instead of 25 per cent. Buses for transportation of more than 25 persons will pay an import duty rate of 10 per cent instead of 25 per cent, while buses for transportation of 50 persons and above will pay a duty rate of 0 per cent instead of 25 per cent. Capital machinery and raw materials used in the manufacturing of textile garments and footwear will be charged an import duty of 0 per cent instead of 10 per cent or 25 per cent. Telecommunication equipment will pay an import duty rate of 0 per cent instead of 25 per cent. A list of raw materials [determined by MINECOFIN] used in industries [apart from textile] will pay tax at the rate of 0 per cent instead of 10 per cent, 25 per cent or 35 per cent, and flat-rolled products of iron or non-alloy steel to pay an import duty rate of 0 per cent instead of 10 per cent. To support cashless operations, electronic transaction devices (smart cards, point of sale, cash registers, and cashless machines) will pay 0 per cent instead of 25 per cent. Higher tax rates on second-hand clothes maintained For second-hand clothes, $2.5 per kilogramme (kg) instead of $0.4 per kg or 35 per cent whichever is higher [at EAC level], has been imposed, while second-hand shoes are set to be taxed $5 per kg instead of $0.4 per kg or 35 per cent whichever is higher. Effort to protect local producers Some products will pay a 35 per cent import duty rate instead of 25 per cent, while their raw materials will be imported free of taxes “to protect our local producers,” according to the ministry of finance. The products in question are doors, windows, and their frames, steel tubes, wheelbarrows and handbags with outer surface of sheeting of plastics or of textile material. Construction materials under economic recovery programme to be imported duty-free Another important move in the current financial year is the tax exemption for construction materials under the Manufacture and Build to Recover Program (MBRP) up to December 2024. The incentives consist mainly of tax exemption on imported construction materials not available in the East African Community, as well as on construction materials sourced domestically, with an aim to lower the cost of investment for manufacturing and construction entities. For the 2023/2024 financial year, Rwanda Revenue Authority (RRA) managed to collect Rwf2,619.2 billion, which is 99.3 per cent of the target of Rwf2,637.1 billion. The collected taxes represent 51.2 per cent of the total budget, up from 48.9 per cent in the previous year. In the Rwf5,690.1 billion national budget for the 2024/2025 fiscal year, total domestic resources and external loans combined will account for 87 per cent of the entire budget. Rwanda Revenue Authority (RRA) was tasked to collect Rwf3,061.2 billion, equivalent to 54 per cent of the budget, according to information from RRA.

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From foodstuff to cars: Inside new raft of tax exemptions