Over the last eight years, the Government of Rwanda has deliberately considered and studied the possibility of advancing the competitiveness of Rwanda’s financial sector to meet international standards and position the country as a financial services hub for the continent. After wide consultation and engagement, the Government established Rwanda Finance Limited to lead the development and promotion of Kigali International Financial Centre (KIFC). KIFC is a positive development on the continent that should help to attract more investment into Rwanda and other African countries. KIFC is the first of its kind in Africa, in that it is not offering a location, a building, an economic free zone or a specific category of company registration. Instead, it positions Kigali as a preferred financial centre for international investment in African for Holding Companies, Fund and Fund Management Companies, Foundations and Family Offices, Business Process Outsourcing, Fintech Companies, International Banks, Foreign Exchange Trading hubs, Trust and Corporate Services providers and other entities. KIFC’s umbrella network of laws and regulations is intended to nurture domestic and foreign talent, support leading technologies that drive value and inspire trust amongst investors, regulators and other stakeholders. Rwanda Finance Limited seeks to position KIFC as aligning the needs of financial centre investors, related professional services providers, the government and regulators. The strategy to support and develop Rwanda as a financial centre has picked up momentum and the future looks promising. KIFC’s unique value proposition KIFC deliberately adheres to and supports full compliance with international tax standards in the provision of incentives and requirements associated with minimum economic substance, Rwanda’s tax regime and recent reforms. This strategy ensures that KIFC will not compete with other financial centres on aggressive and harmful tax incentives that could be detrimental to the reputation of Rwanda, nor will Rwanda’s tax regime or reforms erode the existing tax revenue base in Rwanda. Rwanda’s government has endeavoured to pass a number of tax and legal reforms and continues to do so. To deliberately provide an ecosystem that supports significant inward investment into Africa and to position the country as a highly credible financial centre, Rwanda has initiated 24 new double taxation treaties, 13 of them on the African continent, six with Europe and the others in countries like China, South Korea, Israel, and the US. This number of treaties is exceptional in Africa. Rwanda has also developed a number of strategic alliances and partnerships to compete with other financial centres, as well as deliberately targeting some of them for closer collaboration. Financial centres such as Jersey Finance, Casablanca Finance City, Dubai International Financial Center, Qatar Financial City, Paris EuropePlace and CDC UK have signed or are considering to sign MoUs for international recognition, collaboration and assistance. Next steps on the right path To be sure, there are aspects of KIFC’s incentive and economic substance requirements that will require refinement over time. The transfer of skills and economic substance requirements associated with KIFC ensure that investors prioritise the development of Rwandan talent. The minimum threshold of 30% for Rwandan professional staff is not unusual nor overly-ambitious, however. Rwanda already hosts a number of internationally-accredited institutions that support skills in legal, accounting and other professional services. The requirement of 30% Rwandan staff and other requirements like hosting Board meetings in Rwanda help to ensure that Rwanda’s KIFC attracts the kind of investment that will support local development and the local economy. Entities investing in Rwanda may experience challenges with regard to the requirement that all Board meetings on strategic decisions must be held in Rwanda; this may not be practical or even advisable, depending on the circumstances. Fortunately, there is a process in place for organisations to engage Rwanda Finance, especially where there are practical challenges to meet certain requirements. Finally, some of the sectors that Rwanda Finance intends to attract, such as BPO and Fintech, will require time to develop, which is why KIFC has a long-term, evolving approach to the kinds of regulations and incentives that will support the development of these and other sectors in Rwanda. Overall, Rwanda’s position as a financial centre will help support a future vision of the country as a gateway to Africa and an enticing and career-enhancing place to live and work, for Rwandans and foreigners alike. This vision was validated on 22 November 2020 when, during the signing ceremony of the establishment agreement for the USD 500 million Funds for Export Development in Africa (FEDA), the President of Afreximan Bank said, “The location of FEDA in Kigali will attract other major financial institutions into the capital and accelerate the realization of the Rwandese Government’s vision of converting Kigali into a major financial hub in Africa.’’ The writer is an Associate Director at PwC Rwanda where he leads the firm’s tax services practice.
