The tax law nº16/2005 of 18/08/2005 on direct taxes on income provides many tax incentives to investors in Rwanda:
An investment allowance of forty percent (40%) of the invested amount in new or used assets may be depreciated excluding motor vehicles that carry less than eight (8) persons, except those exclusively used in a tourist business is deductible for a registered investor in the first tax period of purchase and/or of use of such an assets if:
1° the amount of business assets invested is equal to thirty million (30,000,000) Rwandan francs; and,
2° the business assets are held at the establishment for at least three (3) tax periods after the tax period in which the investment allowance was taken into consideration.
The investment allowance becomes fifty (50%) if the registered business is located outside Kigali or falls within the priority sectors determined by the Investment Code of Rwanda.
The investment allowance reduces the acquisition or construction cost, as well as the basic depreciation value of pooled business assets.
If the business asset that is granted an investment allowance is disposed before the end of the period mentioned in point 2° paragraph one, the reduction of income tax caused by the investment allowance, increased by an interest and penalties applicable to taxpayers who do not pay tax on time, starting from when that investment allowance was granted to the time of disposal, must be paid back to the Tax Administration unless such an asset is removed due to natural calamities or other involuntary conversion.
Training and research expenses
All Training and Research expenses incurred and declared as agreed by a taxpayer and declared and earlier agreed and which promote activities during a tax period are considered as deductible from taxable profits in accordance with provisions of Article 21 of this law.
Expenses on training, research and on promotion of activities as applied in this Article do not concern the purchase of land, of houses, of buildings and other immovable properties including refining, rehabilitation and reconstruction as well as exploration expenses and other assets.
Loss carried forward
If the determination of business profit results in a loss in a tax period, the loss may be deducted from the business profit in the next five (5) tax periods, earlier losses being deducted before later losses.
However, foreign sourced losses can neither reduce domestic sourced business profits nor can they reduce future domestic sourced business profits.
Loss sustained by a taxpayer whose share are not traded in the stock market, is not allowed to be carried forward when changes of ownership occur by more than 25%. This applies to losses incurred in the tax period the change of ownership happened and the previous tax period.
Tax discount and exemption
A registered investment entity that operates in a Free Trade Zone and foreign companies that have theirs headquarters in Rwanda that fulfils the requirements stipulated in the Rwandan law on Investment Promotion is entitled to:
1° pay corporate income tax at the rate of zero per cent (0%);
2° exemption from 15% withholding tax mentioned in Article 51 of the law nº 16/2005 of 18/08/2005 on direct income;
3° tax free repatriation of profits.
Profit Tax Discount
A registered investor shall be entitled to a profit tax discount of:
1° two percent (2%) if the investor employs between one hundred (100) and two hundred (200) Rwandans;
2° five percent (5%) if the investor employs between two hundred and one (201) and four hundred (400) Rwandans;
3° six percent (6%) if the investor employs between four hundred and one (401) and nine hundred (900) Rwandans;
4° seven percent (7%) if the investor employs more than nine hundred (900) Rwandans.
The tax discount mentioned in the previous paragraph is granted to the investor only if he or she maintains the employees for a period of at least six (6) months during a tax period, and are not in the category of employees who pay at the rate of zero percent (0%) as stipulated in Article 50 of the law nº 16/2005 of 18/08/2005; . If a taxpayer exports commodities or services that bring to the country between three million (3,000,000) US dollars and five million (5,000,000) US dollars in a tax period, he or she is entitled to a tax discount of three percent (3%).
If he or she exports commodities or services that bring to the country more than five million (5,000,000) US dollars in a tax period, he or she is entitled to a tax discount of five percent (5%).
Companies that carry out micro finance activities approved by competent authorities pay corporate income tax at the rate of zero percent (0%) for a period of five (5) years from the time of the approval of the activity. However, this period may be renewed by the order of the Minister.