Houses with three floors will now pay 0.25%, down from the previous 0.5%. Those with over three floors will only be taxed at 0.1%.
In an effort to bolster the economy and enhance financial ease for property owners, the government has announced substantial tax reductions on residential properties.
Uzziel Ndagijimana, the Minister of Finance and Economic Planning, revealed these reforms on Sunday, December 17, during an interview with state broadcaster, Rwanda Television.
Under the revised tax structure, the levy on a second residential house has been slashed to 0.5% of the combined market value of the property and land. This marks a significant decrease from the previous rate of 1%. Notably, the primary residence remains exempt from this tax, with the owner only responsible for land tax.
The initiative forms a part of a comprehensive tax reform strategy aimed at lowering tax rates, broadening the tax base, and bolstering compliance while curbing evasion. The government projects an increase in tax revenues equivalent to 1% of GDP by the fiscal year 2025/26.
Moreover, a comprehensive review has been conducted on taxes and fees collected by decentralized entities, further streamlining the tax framework.
Minister Ndagijimana highlighted, "Previously, the second residential house was taxed separately for the house and the land it occupies. Now, these taxes have been amalgamated. Taxpayers will now only pay a single tax, amounting to 0.5% of the total value of both the house and the land."
Commercial building owners also stand to benefit from reduced taxes, with the rate lowered from 0.5% to 0.3% of the property's market value on both the building and the land. However, tax charges on commercial buildings are capped at Rwf30 billion.
Furthermore, the revised tax structure extends its benefits to multi-floor residential and condominium houses. Houses with three floors will now pay 0.25%, down from the previous 0.5%. Those with over three floors will only be taxed at 0.1%.
The changes also encompass adjustments in land tax rates, with plots recently designated as residential zones but lacking essential infrastructure possibly being exempt from taxation. The revised rates set the land tax between Rwf0 to Rwf80 per square meter, a considerable reduction from the prior Rwf0 to Rwf300 rate.
In a move to enhance Rwanda's economic competitiveness, the government has reduced the corporate income tax statutory rate from 30% to 28%, with a long-term target of reaching 20%. These measures aim to position Rwanda as an attractive investment destination within Africa.
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Additionally, alterations in taxation on high-end products, particularly beverages, have been implemented to stimulate the tourism and MICE (Meetings, Incentives, Conferences, and Exhibitions) industry.
The adjustments in taxation on the sale of immovable property will now entail a 2% levy on the property value for registered taxpayers and 2.5% for non-registered taxpayers. The initial five million of every property sale will be tax exempt.
Furthermore, simplification measures have been introduced for businesses and traders, consolidating the trading license tax into a single payment, particularly beneficial for businesses operating across multiple branches within a district.
Also, certain fees previously levied by decentralized entities have been abolished to align with the overarching goal of achieving stable revenue growth in the medium term.
