Rwanda is moving to revise its tax policy on hybrid vehicles as part of efforts to promote eco-friendly transportation, Minister of State for National Treasury, Godfrey Kabera, told Members of Parliament on Wednesday, March 19.
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The proposed changes, outlined in a bill amending the 2023 VAT law, include reintroducing an 18 per cent VAT on hybrid vehicles, which had been exempt since 2021.
Justifying the move, Kabera pointed to concerns over the aging fleet of imported hybrids, which he said undermines environmental protection efforts.
He noted that between July 2021 and July 2024, 45 per cent of hybrid vehicles imported into Rwanda were between 10 and 14 years old, limiting their intended environmental benefits.
Hybrid vehicles were exempted from VAT since 2021, according to information from MINECOFIN.
Between July 2021 and July 2024, Kabera indicated, 45 per cent of hybrid cars imported into Rwanda were aged between 10 and 14 years.
Data from Rwanda Revenue Authority (RRA) shows that of the 7,172 hybrid and electric cars that were imported into Rwanda between 2020 and 2024, only 512, or slightly over 7 per cent were electric, while 6,660 (shipped into the country since 2021), or more than 92.8 per cent, were hybrid.
"This seems like we are encouraging the purchase of old vehicles, yet it comes with other issues including environmental pollution," Kabera said, underscoring Rwanda's intention to encourage pure electric vehicles.
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MP Odette Uwamariya expressed her understanding of the government's measures to enhance the country's financial capacity through citizen contributions. However, she raised a concern regarding the removal of hybrid vehicles from the list of VAT-exempt products.
"Could there be a way to remove ageing hybrid vehicles from the exemption list, while still encouraging the importation of newer models? This would support our goal of reducing emissions from vehicles that contribute to atmospheric pollution," she suggested.
Kabera explained that the VAT exemption on hybrid vehicles was initially introduced to encourage their adoption in Rwanda.
However, he expressed concerns about their long-term impact, noting that as these vehicles age, they tend to rely more on their petrol or diesel components.
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"When these hybrid cars get very old, they only operate using the fuel-powered part. As a result, we are not fully achieving our goal of promoting e-mobility," he said.
To address this, Kabera emphasised the need to encourage the importation of newer hybrid models.
"Now that Rwandans have become familiar with hybrid technology, our focus is on ensuring that newer models enter the market. That's why we've structured excise duty rates based on the vehicle's age from the date of manufacture," he explained, adding that VAT exemptions are no longer necessary since hybrid vehicles are now widely recognized.
He further highlighted the government's broader environmental agenda, stating, "In line with our commitment to environmental protection and reducing emissions, we want full-electric vehicles to become the preferred choice."
Meanwhile, the government has introduced a bill to amend the 2023 excise duty law, which, among other changes, proposes excise duties on hybrid vehicles.
The bill aims to incentivise the importation of newer hybrids - which tend to have longer battery life - by setting excise duties according to vehicle age.
Under the proposed structure, vehicles not exceeding three years from manufacture will be subject to 5per cent excise duty, those aged over three but not exceeding eight years will face a 10 per cent excise duty, while vehicles older than eight years will incur a 15 per cent excise duty.
Parliament approved the relevance of the legislation, which will later be analysed by a responsible parliamentary committee, prior to being put to a vote into law by its plenary.
