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November 30, 2022

Rwanda gazettes new Income Tax Law

  • The Government of Rwanda has enacted a new income tax law to align the income tax law with the new developments within the Kigali International Financial Center initiative. This Alert highlights the key provisions under the new law.

  • All concerned taxpayers should put in place measures to comply with the provisions of the new law as its provisions took effect as of 28 October 2022.

Executive summary

The Government of Rwanda gazetted Income Tax Law No 027/2022 (ITL 2022) on 28 October 2022. The ITL 2022 repealed Law No 016/2018 of 13/04/2018 establishing taxes on income (repealed tax law), Law Nº 29/2012 of 27/07/2012 establishing tax on gaming activities (repealed gaming law), and all prior legal provisions contrary to the new ITL 2022.

All provisions under the repealed tax law that are consistent with the ITL 2022 will remain in force for a period not exceeding 12 months starting from 28 October 2022.

The main reason behind the enactment of the ITL 2022 is to align the income tax law with the new developments within the Kigali International Financial Center (KIFC) initiative. The new law also seeks to provide clarity on existing definitions and provisions under the repealed tax law. The ITL 2022 mirrors Rwanda’s first Medium Term Revenue Strategy (MTRS) covering the period from 2021 to 2024. The MTRS proposes a tax framework that is competitive, encourages investment, and redistributes wealth.

This Alert highlights the key provisions under the gazetted ITL 2022.

Detailed discussion

Amendment to the definition of terms (Article 3)

The ITL 2022 has introduced and defined new terms and has amended existing ones as follows:

Digital services

Online advertising services, the supply of user data, online search engines, online intermediation platform, social media platforms, online media, digital content services, online gaming, cloud computing services or standardized online teaching services.

Controlled transaction

Any transaction carried out between related persons, or any transaction deemed to be controlled which is conducted between independent persons, one of them being a resident person of a country or a place in the country considered by the Tax Administration as a beneficial tax regime.


Money or other means of extinguishing an obligation that are distributed, payable, credited, dealt with, or considered to have been paid in the interest or on behalf of a person.

Protected cell company

A company in which a single legal entity consists of a core divided into several cells, each with separate assets and liabilities.

Common-benefit foundation

A foundation whose activity serves exclusively common benefit purposes in accordance with the charter or declaration of its establishment.

Foreign trust

A trust governed by a law of a foreign country and of which the settlor and beneficiaries are nonresident in Rwanda with a resident trustee.

Trust income

Any income chargeable to tax and received by any person in his or her capacity as a trustee, enforcer, protector, or beneficiary under the trust instrument.

Special purpose vehicle

A corporate entity including an asset-backed security, a real estate investment trust or any other entities used only and for the reason of being a pass-through vehicle to facilitate investments in accordance with laws regulating the capital market products and business.

Residence for individuals (Article 4)

The conditions for triggering tax residency in Rwanda have been expanded to include individuals who have been present in Rwanda during the tax period of assessment and for periods averaging more than 122 days in each of the two preceding tax periods.

This new condition is meant to complement the following existing tax residency conditions for individuals in Rwanda who:

  • Have a permanent residence in Rwanda

  • Have a habitual abode in Rwanda

  • Are Rwandan representing Rwanda abroad

  • Are present in Rwanda during the tax period for a period or periods amounting in aggregate to 183 days or more

The permanent residence for a natural person is defined as a house, an apartment, a hotel, or any other residential quarters in Rwanda where the individual habitually stays.

Permanent establishment (Article 5)

The Income Tax Law 2022 has introduced additional considerations that will result in the creation of a permanent establishment in Rwanda to include:

  • A person who acts on behalf of another person and has authority to negotiate or conclude contracts in that other person’s name or plays the principal role leading to the conclusion of such contracts, that other person is considered to have a permanent establishment in Rwanda.

  • The activities of an independent broker in capital markets or of an agent that are carried out wholly or almost wholly on behalf of the person with a non-permanent establishment and conditions imposed between that person and their agents in their commercial and financial relations differ from those that would have been made between independent persons.

  • An insurance entity except with respect to re-insurance, is considered to have a permanent establishment if it collects premiums or insures risks through a person other than a broker in capital markets or an agent of an independent status in accordance with procedures of the ordinary course of the activities of such an agent establishment.

Source of taxable income (Article 6)

The ITL 2022 has expanded the list of activities subject to tax in Rwanda to include the following activities:

  • Change of profits into shares that increases the capital of partners except for a financial institution whose paid-up capital is below the minimum requirement set by the National bank of Rwanda

  • Digital services

  • Gaming activities (previously covered under the repealed gaming law)

Persons exempt from filing an annual tax declaration (Article 9)

Persons whose annual turnover is less than FRW2 million are not required to file an annual tax declaration. This is in addition to existing exemptions where persons who receive employment income and income on investments that has been subject to withholding tax are exempt from filing an annual tax declaration.

Exemption from personal income tax (Article 12)

A resident taxpayer who was not resident in Rwanda in the five years immediately prior to becoming a resident and works as an expert or a professional directly for an entity carrying out licensed activities at the KIFC is exempted from personal income tax on foreign-sourced income during the first five years following the date of becoming a resident.

This new provision is meant to attract skilled foreign nationals to work within the KIFC.

Rate for personal income tax (Article 14)

The ITL 2022 has expanded the Pay As You Earn (PAYE) brackets as follows:

Effective from 1 November 2022

The second year after commencement of the law

Monthly taxable income

Tax rate

Monthly taxable income

Tax rate


















and above






and above


Further, a casual laborer’s taxable income below FRW60,000 has been exempted from tax. Under the repealed tax law, only the amount below FRW30,000 was exempted from personal income tax.

Tax exemption of income accrued from savings in a collective investment scheme and employees’ shares within a company (Article 20)

The ITL 2022 exempts income accruing from savings in collective investment schemes and Rwanda’s employees’ shares within a company from income tax.

Under the repealed tax law, the exemption from income tax was on income accruing from savings in collective investment schemes and employees’ shares scheme (for both Rwandese and non-Rwandese employees).

Non-Rwandese employees are not covered by the new law.

Further, the ITL 2022 provides that the exemption does not apply to an employee whose proportion of the company’s share capital is greater than 10%.

Allowable deductions from taxable income (Article 24)

For an expense to be treated as an allowable deduction from taxable income, the ITL 2022 has amended the previous requirement to include a real expense that can be substantiated with proper invoice or receipts accepted by the Tax Administration.

While the new law does not explicitly refer to Electronic Billing Machine (EBM) invoices or custom declarations it is expected to provide the legal backing for the Commissioner General’s announcement dated 24 December 2020 requiring expenses to be supported by EBM invoices or custom declarations for them to be deemed as tax deductible.

Non-deductible expenses from taxable income (Article 25)

The list of non-deductible expenses has been expanded to include:

  • Realized foreign exchange loss arising from total loans between related persons for thinly capitalized entities those whose debt-to-equity ratio exceeds 4:1

  • Unrealized foreign exchange losses

  • A mandatory contribution paid by a taxpayer is allowed as a deductible expense. However, the new law does not provide clarity on the nature of mandatory contribution envisaged under this provision

Trading stock value and work-in progress (Article 26)

The trading stock is valued at the cost price of its acquisition while degraded or damaged stock is valued at the lower price between the cost price and the market price on the last day of the tax period.

Under the repealed tax law, the trading stock was valued at the lower of cost price and the market price on the last day of the tax period.

Loss carried forward (Article 31)

If during a tax period, the direct or indirect ownership of the share capital or voting rights of a company, whose shares are not traded on a recognized stock exchange changes more than 25% by value or by number, then current and previous period tax losses will be forfeited.

The ITL 2022, however, introduces an exemption that gives taxpayers the right to carry forward tax losses if the direct or indirect ownership of the share capital or voting rights of a company is a result of an internal business reorganization which maintains all the shareholders, provided that those shareholders have been in the shareholding structure for a period of not less than three years.

Transfer pricing between related persons (Article 32)

The law has introduced the concept of Advance Pricing Agreement between the taxpayer and the Tax Administration before determining the price arrangement between related persons. Taxpayers may request the tax administration to enter into such agreement for a fixed period to determine the modalities of setting prices and profit complying with the arm’s-length principle.

Ordinarily, related persons involved in controlled transactions must have documents justifying that their prices and profits are to be applied according to the arm’s-length principle.

Quarterly prepayment (Article 33)

Calculation of quarterly prepayments will be based on the tax paid for previous annual tax liability divided by the annual turnover of the previous period, times the current quarterly turnover. The method was first introduced in 2020 as a temporary measure to cushion taxpayers against the adverse economic effects during the COVID-19 pandemic.

Previously, the quarterly prepayments calculations were based on 25% of the tax liability of the previous tax period.

Capital gains tax (Articles 35 and 37)

The ITL 2022 provides clarity that the capital gains tax is charged on the direct and indirect sale or transfer of shares carried out in Rwanda and abroad.

Previously, the repealed tax law was vague on whether capital gains tax was applicable on direct and/or indirect share sale or transfers.

Exemption from capital gains tax (Article 39)

The ITL 2022 restricts the exemption from capital gains tax to the sale or transfer of listed shares and other securities on the securities exchange operating in Rwanda.

Previously, the law was vague on which capital market the sale or transfer of shares should occur for the capital gains tax exemption purposes.

Taxpayers subject to corporate income tax (Article 44)

The list of taxpayers subject to corporate income tax has been expanded to include:

  • A state-owned company

  • Trustee, enforcer, or protector of a trust

  • A foundation

  • A protected cell company or a cell of a protected cell company depending on the choice of the investor at the time of company registration

  • A nonresident in Rwanda person with a permanent establishment

Persons exempted from corporate income tax (Article 45)

The list of persons exempted from corporate income tax has been expanded to include:

  • The Government of Rwanda

  • Special purpose vehicle, unless the revenue received exceeds the corresponding expenses

  • Common benefit foundation

  • Resident trustee for income earned by a foreign trust

Entities subject to corporate income tax (Article 47)

Resident entities are subject to corporate income tax on business profit per tax period whether from domestic or foreign operations.

The ITL 2022 exempts dividends paid between resident companies and unrealized foreign exchange gains on outstanding loan from corporate taxable income.

In addition, dividends paid between resident companies are also exempt from withholding tax.

Previously, dividends paid between resident companies which had been subject to withholding tax were not included in corporate taxable income.

Taxation of income for companies carrying out gaming activities (Articles 50 and 61)

Gross gaming revenue, which is the difference between total amounts wagered and winnings awarded, is taxed at a rate of 13%.

The ITL 2022 has clarified that the tax paid on gross gaming revenue is deductible from the taxable income in determining corporate income tax due.

Under the repealed tax law, there was no clarity on whether the tax paid on gross gaming revenue was to be treated as an allowable deduction or offset as a credit for tax paid in advance.

Further, withholding tax at 15% is now chargeable on the net player winnings (i.e., difference between gross player winnings and amount invested) as opposed to net player winnings exceeding FRW30,000. The withholding tax is deducted and paid by the company conducting gaming activities.

Taxation of income from partnerships (Article 52)

Following the enactment of a new law on partnerships in 2021, the ITL 2022 has introduced the provisions meant to guide the taxation of partnerships:

  • Income generated from a general partnership, limited partnership and limited liability partnership is taxable at the level of each partner.

  • The partnership prepares its financial accounts, determines, and declares the taxable share in profit of each partner, withholds, and remits corresponding tax to the tax administration.

  • In the determination of tax liability, corporate partners are subject to corporate income tax while individual partners are subject to personal income tax.

  • The partnership and the partners are jointly liable in the case of a failure to meet their tax obligations.

Restructuring of business entities (Article 53)

The conditions of business restructuring have been amended as follows:

  • The acquisition or a takeover of 50% or more of shares or voting rights, by number or value operated by shareholders in a resident entity

  • The acquisition or transfer of 50% or more of the assets or liabilities of a resident entity by another entity

Under the repealed tax law, the restructuring of business was solely limited to the acquisition or transfer of 50% or more of shares/voting rights or assets/liabilities in exchange of shares in the purchasing entity.

Withholding tax on allowance to a board member (Article 59)

The ITL 2022 has amended the provision as follows:

Withholding tax on allowances allocated to a member of the board of directors and any other member of a similar organ, is taxable at a rate of 30%.

Previously, the law only considered sitting allowances allocated to the members of the board of directors.

Withholding tax on payments (Article 60)

The list of payments subject to withholding tax has been expanded to include:

  • Dividends except those paid between resident companies and income distributed to the holders of shares or units in collective investment schemes

  • Profit after tax or retained earnings that are converted into shares, except for financial institutions with paid-up capital below the minimum requirement set by the National Bank of Rwanda.

  • Profits repatriated from Rwanda.

  • Payments made in cash or in kind by a resident person in Rwanda on behalf of a nonresident in Rwanda contracted person provided for under the contract in addition to contractual remuneration.

  • Re-insurance premiums paid to a nonresident insurer except premiums paid to insurers that have signed agreements with the Government of Rwanda.

Persons exempt from withholding tax (Article 65)

List of persons exempted from withholding tax has been expanded to include those who are newly registered during the concerned annual tax period.

Anti-abuse rules on avoidance arrangements (Article 68)

For the first time, anti-abuse rules are introduced in Rwanda. These rules are intended to prevent the entitlement of tax benefit to taxpayers in inappropriate circumstances.

Under the ITL 2022, avoidance arrangements between persons consist of at least one of the following acts:

  • An arrangement whose principal purpose is to obtain a tax benefit

  • An arrangement that, in whole or in part, lacks commercial substance

  • An arrangement that creates rights or obligations that would not normally be created between persons dealing at arm’s length

  • An arrangement that may result, directly or indirectly, in the abuse of the provisions of tax laws in Rwanda

Where there is an avoidance arrangement between persons, the Tax Administration determines tax after taking at least one of the following actions:

  • Treating the avoidance arrangement as if it had not been carried out.

  • Recharacterizing the nature of any income, payment, expenditure, or any other transaction.

  • Disallowing or reallocating any income, loss, deduction, allowance, relief, credit, exemption, or exclusion in whole or in part.

  • Deeming any two or more persons to be related persons or to be the same person.

Next steps

All concerned taxpayers should put in place measures to comply with the provisions of the Income Tax Law 2022 noting that the requirements of the new law took effect from the date it was gazetted, i.e., on 28 October 2022.


For additional information with respect this Alert, please contact the following:

Ernst & Young (Kenya), Nairobi

Ernst & Young Rwanda Limited, Kigali

Ernst & Young Société d’Avocats, Pan African Tax – Transfer Pricing Desk, Paris

Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London

Ernst & Young LLP (United States), Pan African Tax Desk, New York


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