Some of the products affected by the tax reform.
A Cabinet meeting chaired by President Paul Kagame on Monday approved key policy reforms to boost socio-economic development.
These include tax policy changes to increase domestic resource mobilisation and expand the tax base.
Explaining the rationale, Yusuf Murangwa, Minister of Finance and Economic Planning (MINECOFIN), said the government aims to broaden the tax base while mobilising resources to fund the Second National Strategy for Transformation (NST2) and drive economic growth.
The government will implement the reforms in three phases: increasing existing taxes, introducing new ones, and expanding the Value-Added Tax (VAT) to include previously exempt goods.
“Rwanda has achieved significant development progress over the last 30 years, funded through a combination of domestic and external resources. Strengthening our ability to mobilise financial resources, including through a broader tax base, will enable sustained economic growth and improved livelihoods for all citizens,” the ministry stated on Tuesday.
The new tax reforms align with the government’s medium-term strategy to enhance revenue collection, streamline tax administration, and support Rwanda’s development goals.
Officials said gradual implementation will strengthen economic resilience and promote self-reliance.
“The government is committed to supporting taxpayers to ensure a smooth transition,” the statement added.
Key Changes in Tax Policy
The government will introduce a 15 per cent excise duty on the cost, insurance, and freight (CIF) value of make-up, body lotion, and hair products.
Critical pharmaceutical beauty products will remain exempt in consultation with the Ministry of Health.
The government will increase registration fees for all vehicles, including electric ones.
Authorities will adjust the fuel levy from a fixed fee of Rwf115 per litre to 15 per cent of CIF to enhance road maintenance.
The government will reintroduce VAT on mobile phones, which have been exempt since 2010.
The previous exemption boosted digital penetration, and the government will continue working with stakeholders to enhance smartphone affordability.
Authorities will also reinstate VAT on ICT equipment, which has been exempt since 2012.
However, selected ICT items will remain exempt in consultation with the Ministry of ICT and Innovation.
The tax on gross gambling revenue (GGR) will increase from 13 per cent to 40 per cent.
Withholding tax on winnings will rise from 15 per cent to 25 per cent to encourage responsible gambling.
The government will impose a three per cent levy on accommodation costs to support investments in tourism and hospitality.
Incentives for Hybrid and Electric Vehicles
To promote green mobility and reduce carbon emissions, the government will continue providing a 25 per cent import duty exemption for hybrid vehicles.
Authorities will introduce an excise duty structure based on vehicle age, with a five per cent duty for vehicles under three years old, 10 per cent for those aged four to seven years, and 15 per cent for those eight years and older.
VAT and a five per cent withholding tax will apply to all hybrid vehicles.
The government will keep electric vehicles fully tax-exempt to encourage sustainable transportation.
These measures will take effect in the 2025/2026 fiscal year.
Additional Tax Adjustments
The government will increase excise duty on cigarettes from Rwf 130 to Rwf 230 per pack, plus 36 per cent of the retail price.
Authorities will raise excise duty on beer from 60 per cent to 65 per cent of the factory price.
Excise duty on airtime will increase from 10 per cent to 12 per cent in 2024/2025, with a gradual rise to 15 per cent in the medium term.
The government will implement additional measures in financial services, transportation, and ICT.
These include an environmental levy on single-use plastics, VAT on select fee-based financial services, and taxes on fossil fuels and road transportation services for goods.
Public Awareness Campaign
To ensure a smooth transition, the government will launch an awareness campaign to educate taxpayers on the new tax provisions.
“The Government of Rwanda remains committed to working closely with taxpayers to facilitate a seamless implementation of these reforms and foster a prosperous future for all,” the statement concluded.
