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Rwanda: Keep Land Idle at Your Own Risk

by Jean de la Croix Tabaro
5:46 pm

An idle plot of land in Kinyinya sector – Gasabo district. Owner will be paying double in tax if he/she does not develop it within three years

A growing appetite to earn huge from land in Rwanda has pushed the government to introduce a new law that will deter property dealers from keeping their land idle for years as they wait for a buyer who will pay ten folds.

Published in official gazette in October 2018, the law determining the sources of revenue and property of decentralized entities provides in its article 20, that any undeveloped plot of land is subject to additional tax of one hundred percent (100%) to the tax rate.

According to the law, the tax rate on plot of land varies between zero (0) and three hundred Rwandan francs (FRW 300) per square meter.

The District Council determines the tax rate on square meter of plot of land based on criteria and standard rates set by an Order of the Minister in charge of taxes.

A plot of land will even be more demanding to own if the owner keeps it idle for three years.

“Let’s take an example of the land that you bought or inherited from a friend or a relative. The law provides that after three years, if the land is idle, you will be compelled to pay double the tax rate,” said Jonathan Nzayikorera, in charge of Budget education and decentralization at Ministry of Finance and Economic Planning.

The property will be affected by this type of taxation until the owner develops it.

In other provisions of this law, it is indicated that the owner of more than one residential building will be exempted for one house where they live and pay due taxes for the rest.

For residential buildings, a progressive rate is applied as follows:

0.25% from the first year and 0.50% from the second year.

From the third year, the property will pay 0.75% of the property value and from the fourth year onward, property owner will start paying 1% of the property value.

A residential building pays the highest tax compared to the rest of properties.

For example, a progressive tax rate for commercial building starts with 0.2% of the property value on the first year, to 0.5% of the property value from the fourth year onward.

Industrial building would be the least taxed with 0.1% of the market value.

However, owners of low rise apartments have an advantage from this law.

A residential apartments having a minimum of four floors, including basement floors, benefit from reduction of tax rates, equivalent to fifty percent (50%) of the ordinary rate.

On top of individual landowners who keep their plots to earn more after a period of time, to be affected by penalties of land idleness could be institutions or companies that have purchased huge plots in several parts of the capital city including; Kiyovu – Rugenge in Nyarugenge district and Batsinda and Kinyinya of Kinyinya sector – Gasabo district.

The Rwanda Social Security Board (RSSB) acquired a high chunk of land in these areas to develop residential houses.

Isaic Ndayiringiye, a property valuer from Skilled Construction and Consultancy Limited which offers services of property valaution among others told KT Press, that the decision is welcome.

“It will deter land dealers to keep idle plots for a couple of years. Imagine someone buying land at Rwf 1 million and keeping it for two to four years so that he can resell it at Rwf 10 million. Totally unfair; land should be sold to a developer who is ready to develop it according to a designated use.”