Investment Policy Review - Rwanda - UNCTAD Virtual Institute

Investment Policy Review of Rwanda
1. A competitive and efficient fiscal regime
Although reforming the fiscal system is unlikely to generate much investment (domestic or foreign)
in and of itself, providing a competitive, fair and efficient regime should be a crucial element of Rwanda’s
economic policy. A number of improvements and modifications could be introduced over the coming
years as part of the strategy to turn Rwanda into a centre of excellence in soft infrastructure and
governance. These improvements should make the general regime attractive and competitive, and turn
the RRA into the best tax administrator in the region. The reforms would:
Make Rwanda’s general fiscal regime the most competitive and well-administered in the region
A number of incremental improvements and modifications could be introduced over the next few
years in order to make Rwanda’s tax regime a model of excellence in administration, efficiency and
fairness, and the most competitive in the region. The recent reduction in the corporate income tax rate
is a step in the right direction, as is the decision to provide unilateral tax credits on foreign sourced
income. Additional measures to make the general regime more competitive could be adopted:
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Lower the headline corporate income tax rate to 25 per cent in the near future and bring the
dividend withholding tax rate to 10 per cent;
Provide for faster rates of depreciation on durable assets and allow unlimited loss carry-forward
in lieu of the current five years;
Set up a comprehensive duty drawback scheme for exporters;
Further improve capacity at the RRA, provide more clarity in tax regulations and ensure full
consistency between the three language versions of the fiscal laws and regulations;
Draw up clear guidelines and regulations for transfer pricing;
Minimize the impact of taxation on companies' cash flow, including through removing anticipatory
payments on corporate income tax and the 3 per cent tax on the value of invoice for winners
of public tenders.
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Streamline the administration of incentives
Incentives provided by law should be easy to administer and widely and readily available to investors.
Small investors should not be discriminated against, which is currently the case as RIEPA certificates serve
as the gateway to a number of incentives. This should no longer be the case and eligibility conditions to
RIEPA certificates should be reformed (see below).
Make fiscal incentives outcome-based and targeted to development goals
Incentives should be conditional upon outcomes and available to all who reach the desired outcome,
regardless of other conditions (size, time of establishment, etc.). These could focus on employment
creation and export promotion (as is already the case), but could also target the transfer of knowledge
and skills. The Government could consider:
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Supplementary deductions from the income tax base for personnel training expenses;
Targeted incentives to attract foreign skills and entrepreneurship.
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