Rwanda published Law No. 027/2022 of 20 October 2022 in the Official Gazette on 28 October 2022, replacing the prior law establishing taxes on income, Law No. 016/2018. The main new and revised measures of the new law are summarized as follows:

• The brackets and rates for personal income tax are amended as follows:
  • for the first year following the date of commencement of the law (i.e., 2023):
    • RWF 0 to 720,000 - 0%
    • RWF 720,001 to 1,200,000 - 20%
    • RWF 1,200,001 and above - 30%
  • from the second year following the date of commencement of the law (i.e., from 2024):
    • RWF 0 to 720,000 - 0%
    • RWF 720,001 to 1,200,000 - 10%
    • RWF 1,200,001 to 2,400,000 - 20%
    • RWF 2,400,001 and above - 30%
• Corresponding changes are made to monthly withholding tax brackets/rates for employment income:
  • for the first year following the date of commencement of the law (i.e., 2023):
    • RWF 0 to 60,000 - 0%
    • RWF 60,001 to 100,000 - 20%
    • RWF 100,001 and above - 30%
  • from the second year following the date of commencement of the law (i.e., from 2024):
    • RWF 0 to 60,000 - 0%
    • RWF 60,001 to 100,000 - 10%
    • RWF 100,001 to 200,000 - 20%
    • RWF 200,001 and above - 30%
• An exemption is introduced in order to attract experts and investors within the framework of activities related to Kigali International Financial Center (KIFC), providing that a resident taxpayer who was not resident in Rwanda in the 5 years immediately prior to becoming resident, who works as an expert or a professional directly for an entity carrying out KIFC licensed activities, is exempted from personal income tax on foreign sourced income during the first 5 years following the date of becoming resident;
• It is provided that a individual is not required to file his or her annual tax declaration if the person:
  • has an annual turnover of less than RWF 2 million;
  • receives only employment income; or
  • receives only income on investments that is subject to withholding tax;
• The provisions on residence for tax purposes are revised, including that an individual is considered a resident of Rwanda if fulfilling one of the following conditions:
  • he or she has a permanent residence in Rwanda (unchanged);
  • he or she has a habitual abode in Rwanda (unchanged);
  • he or she is a Rwandan representing Rwanda abroad (unchanged);
  • he or she is present in Rwanda during the tax period for a period or periods amounting in aggregate to 183 days or more (revised);
  • he or she is present in Rwanda during the tax period of assessment and has been present for periods averaging more than 122 days in each of the 2 preceding tax periods (new condition);
• A person other than an individual is considered to be a resident in Rwanda during a tax period where it fulfills one of the following requirements:
  • where it is established according to Rwandan laws;
  • it has a place of effective management in Rwanda at any time during that tax period;
• The definition of a permanent establishment in Rwanda has been extended to provide that:
  • if a person acts on behalf of another person and has the 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; and
  • an insurance entity, except in regard to reinsurance, is considered to have a permanent establishment if it collects premiums or insures risks through a person other than a broker in a capital market or an agent of an independent status;
• The scope of taxpayers of corporate income tax is revised to include:
  • a company established in accordance with Rwandan law and a foreign company registered in Rwanda;
  • a cooperative society;
  • a State-owned company (new);
  • a trustee, enforcer, or protector of a trust(new);
  • a foundation (new);
  • 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 (new);
  • a non-resident in Rwanda person with a permanent establishment (new);
  • an entity established by a District or the City of Kigali if that entity performs an income-generating activity; and
  • an association or entity that is established to realize profits regardless of its nature;
• The types of persons exempted from corporate income tax is expanded with the addition of:
  • special purpose vehicle, unless the revenue received exceeds the corresponding expenses;
  • common benefit foundations; and
  • resident trustees for income earned by a foreign trust;
• New rules are introduced for the taxation of income from partnerships (previously within the scope of corporate income tax), including that income generated from general partnerships, limited partnerships, and limited liability partnerships is taxable at the level of each partner, with corporate partners subject to corporate income tax and individual partners subject to personal income tax;
• Specified sources of taxable income are expanded to include income earned from digital services, which is defined as online advertising services, the supply of user data, online search engines, online intermediation platforms, social media platforms, online media, digital content services, online gaming, cloud computing services or standardized online teaching services;
• The scope of non-deductible expenses from taxable income is amended and expanded to include:
  • the aggregate of expenses of management activities, technical services, and royalty fees paid to a non-resident related person exceeding 2% of the turnover of the taxpayer (previous law stated non-residents in general, although a public ruling issued in 2018 already clarified that the limit would only apply for payments to related non-residents);
  • realized foreign exchange loss arising from total loans between related persons in excess of 4 times the amount of paid-up equity, which excludes provisions or reserves and retained earnings according to the balance sheet drawn up in accordance with the generally accepted accounting principles (new); and
  • unrealized foreign exchange losses (new);
• The rules on trading stock value and work-in-progress are amended to provide that:
  • trading stock is valued at the cost price of its acquisition;
  • 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; and
  • work-in-progress is valued at the cost price incurred;
• The rules limiting the carry forward of losses following a greater than 25% direct or indirect change of ownership are amended to provide that losses may still be carried forward for up to 5 tax periods if the change is the result of an internal business reorganization that maintains all the shareholders, provided that those shareholders have been in the shareholding structure for a period of not less than 3 years;
• Payments subject to 15% withholding tax have been expanded with the addition of:
  • 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 non-resident in Rwanda contracted person provided for under the contract in addition to contractual remuneration; and
  • re-insurance premiums paid to non-resident insurers, except premiums paid to insurers that have signed agreements with the Government of Rwanda;
• New rules are introduced for the taxation of gaming activities, including that companies carrying out gaming activities pay tax at a rate of 13% on gaming activities calculated based on the difference between the total amount placed for betting and the winnings awarded (previously covered by Law No. 29/2012);
• New anti-abuse rules on avoidance arrangements are introduced including:
  • 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; and/or
    • 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; and/or
    • deeming any two or more persons to be related persons or to be the same person;
• The rules on transfer pricing documentation and adjustments are expanded, providing that:
  • related persons involved in controlled transactions must have documents justifying that their prices and profits are applied according to the arm's length principle;
  • if such persons do not provide documents or the documents provided do not justify that the price and the profit are applied in accordance with the arm's length principle, the tax administration adjusts transaction prices or profits in accordance with general rules on transfer pricing; and
  • before determining the price arrangement between related persons, the taxpayer may request the tax administration to enter into an advance pricing agreement for a fixed period to determine modalities of setting prices and profit complying with the arm's length principle.

Unless otherwise noted, the measures of Law No. 027/2022 generally entered into force on 28 October 2022. Law No. 016/2018 and Law No. 29/2012 and all prior legal provisions contrary to Law No. 027/2022 are repealed. However, all provisions of Orders provided by Law No. 016/2018 that are consistent with Law No. 027/2022, remain in force for a period not exceeding 12 months.