Small businesses with annual turnover of between Rwf12 million and Rwf50 million will pay a presumptive tax of 3 percent on their annual profits, a reduction from 4 per cent, as government moves to promote the Small and Medium enterprises.
The Chairman of the Private Sector Federation, Faustin Mbundu, welcomed the decision, saying it is a step in the right direction.
The Private Sector Federation plays an advocacy role on behalf of private businesses.
"Reducing direct tax on micro enterprises indicates that the government is listening to the proposals of the private sector and although we are looking forward to more reforms, this is a step in the right direction," Mbundu said.
"We have to seek ways of improving the tax structure to attract more investments. I am hopeful that by reducing the direct tax on SMEs, more people will come on board, and it is also a worthy answer to investors who complained that the 4 percent was high."
The Commissioner for Domestic Taxes at Rwanda Revenue Authority, Celestin Bumbakare, said that the reduction also aims at improving tax collection by wooing businessmen who originally evaded tax through under declarations.
"We listened to the input by private sector investments and after reviewing the previous law, it was agreed that the presumptive tax for micro enterprises be modified to 3 percent. Although it hasn't happened as soon as they had expected, it has finally been reduced and I am certain it will ease operations of small businesses," Bumbakare said.
The government is looking to boost Small and Medium business which play a key role to the country's economic growth which has recorded an average of 8 percent over the last couple of years.
Other moves by government to support the businesses include easing access to credit, providing financial advisory services and skills training.