Home VoicesUnderstanding the Newly Introduced Taxes: Implications and Changes in the Recent Legislation

Understanding the Newly Introduced Taxes: Implications and Changes in the Recent Legislation

by Joel Namanya

On May 27, 2025, the Rwandan government introduced various changes to the tax laws. This represents a strategic move by the Rwandan government to expand its tax base and address pressing issues such as environmental sustainability and public health. In addition, these changes are aimed at enhancing the country’s revenue generation. We provide below key highlights of some of these changes.

One of the key amendments passed was the introduction of excise duty on specific goods such as luxury items and harmful products such as tobacco and alcohol. While the primary aim of this amendment was to raise revenues, the move can also be viewed as a means of the government in discouraging the consumption of products deemed to the public.

Another key change from the tax front was the increase in the capital gains tax on disposal of shares from 5% to 10%. This move is a reflection of the increasing need for the government to raise additional tax revenues.

The above is an example of changes in tax rates aimed at increasing revenues for the governments. As outlined in the ensuing sections of this article, there is an increasing shift by government to source for alternative revenue streams, as outlined below

The Rwandan government has introduced a levy on petrol and gas oil at the rate of Frw 50 per litre. This levy is aimed at funding the establishment of a strategic petroleum products reserve. By creating this reserve, the government is taking steps to ensure energy security, particularly in times of crisis or supply chain disruptions. The levy encourages responsible consumption of fossil fuels, aligning with global movements towards renewable energy sources.

Tied to the above, the government has introduced a levy on petrol, gas oil and motor vehicles for road maintenance. This levy will be applicable at the rate of 15% of the value of petrol or gas oil, on a cost insurance and freight basis and the base levy will be informed by the type of vehicle. With this levy, there is a clear shift in direction by the government to look for alternative means of raising revenues, over and above taxation measures.

On the environmental front, the government has established an environmental levy on plastic packaging at the rate of 0.2% of the customs value of the plastic packaging. Examples of items that will be in scope for this levy include water, all types of juices, body lotions, mattresses, clothes among other items. This levy will take effect from 1 July 2025, and it is aimed at encouraging the management of waste generated from plastic materials, promoting a shift towards more sustainable practices and encouraging businesses to consider eco-friendly packaging alternatives.

In addition to the above, the government has extended the exemption from VAT on the importation of pure electric motor vehicles, batteries and charging station equipment to 30 June 2028. As such, this will be viewed as a mechanism of encouraging the purchase of electric motor vehicle, which will contribute towards the government’s green agenda.

Rwanda is viewed as one of the top tourism destinations. Particularly, the Rwandan government has been projecting itself as a key Meetings, Incentives, Conventions and Exhibitions (MICE) destination. Given the prominence of this sector, the government has introduced a tourism levy of 3% of the amount payable with respect to accommodation with effect from 1 July 2025. We expect that this levy will be used to fund tourism infrastructure, enhance visitor experience, promote sustainable tourism while maintaining the goal of promoting Rwanda as a prime travel destination.

Overall, these tax reforms reflect a forward-looking strategy that balances revenue generation with long-term national goals. By addressing public health, environmental sustainability, energy security, and economic development, the government is taking concrete steps to build a resilient and inclusive economy that benefits all Rwandans.

The writer is a Manager, Tax & Legal Services at KPMG in Rwanda. 

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