Rwanda Revenue Authority (RRA) on Tuesday announced it had started enforcing the new Income Tax law, which was enacted last month.
Officials said Tuesday that the previous law was partly amended to address loopholes that were identified during its implementation.
The overall aim, they said, is to continue encouraging voluntary compliance among taxpayers.
According to Aimable Kayigi Habiyambere, the Commissioner for Domestic Taxes at Rwanda Revenue Authority, the new law replaces the 2005 Income Tax law and comes to further facilitate and promote investments.
"The new changes are aimed at harmonising the law with the recently adopted investment code. Generally, we want to continue facilitating and promoting investment in the country," he told the media at the RRA offices.
The previous law had been in place for more than 13 years and Habiyambere said that there was a strong need for new reforms in the law.
Encouraging capital market investment
The new law also seeks to boost investments in the local capital market, officials said.
The new law stipulates that capital gains from the sale or transfer of shares on the capital market and the sale or transfer of units of collective investment schemes, is exempted from Capital Gain Tax.
However, a Capital Gain Tax on sale or transfer of shares was introduced. Kayigi said that a tax rate of 5 per cent on capital gain will be charged on the sale or transfer of shares.
"Capital gain on the sale or transfer of shares is the difference between the acquisition value of shares and their selling or transfer price," the new law reads in part.
There are currently eight players listed on the local bourse with only four local players, others being regional firms. The new law may attract more players to invest in the local capital market and encourage small and medium-sized businesses to list their businesses on the local exchange.
For the past months, officials at Capital Markets Authority (CMA), the regulator of the market, said were optimistic that the new law would support the development of the local capital market, as well as enable the entry of SMEs to raise development finance through the exchange.
Under the new legal framework, income earned by an agriculturalist or pastoralist on agricultural or livestock activities is exempt if the turnover from agricultural or livestock activities do not exceed Rwf12 million in a tax period.