A new tourism levy that was introduced recently by the government is set to benefit the sector, Godfrey Kabera, Minister of State for National Treasury at the Ministry of Finance and Economic Planning, has said.
The new tourism levy, which introduces a 3 per cent tax on accommodation services (excluding VAT), applies to hotels, motels, lodges, apartments, and Airbnb facilities.
Once enacted, all accommodation businesses will be required to register for the tax and remit payments monthly.
Following Parliament's approval of the draft law's relevance on March 19, the government is now set to finalize its details and implementation strategy aligning with Rwanda's broader efforts to boost revenue and strengthen its position as a top ecotourism destination under the National Strategy for Transformation (NST2).
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Minister Kabera emphasized that the new tax will help finance Rwanda's tourism sector expansion and contribute to the government's goal of increasing tourism revenue from $620 million to $1.1 billion by 2029.
The government has set ambitious tourism targets. Kabera emphasised that the new tax will play a crucial role in achieving these goals without overburdening consumers.
"After all the efforts invested in developing tourism through initiatives like Visit Rwanda campaign, infrastructure improvements, and entertainment, this tax represents the next step in further strengthening the sector," he said.
With revenue set to increase, it's clear that this approach, already adopted by countries like Kenya and Tanzania, won't deter tourists, he said.
"In fact, it is designed to enhance the sector without altering the expectations of those who come to experience Rwanda's beauty and unique offerings," he noted.
"From training better service providers to equipping people in the tourism industry with more skills, this tax will play a significant role in advancing the sector," he added.
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Tax will apply across
While defending the bill before members of parliament, Kabera explained that the tax applies to all guests, whether local or foreign, ensuring an equal contribution toward the sector's development.
"Whether people are traveling for work or tourism, this tax applies to all accommodation stays. Anyone renting a room, whether a local or a foreign visitor, will be subject to the tax, as it is a standard charge for all guests," he noted.
MP Ingrid Marie Parfaite Izere raised concern about the potential impact of the new tax on tourism costs, asking whether the new tax could not discourage visitors or drive-up accommodation prices.
"Property owners might use this and increase the prices for their own benefits, passing the cost onto customers, making it an added burden for travelers," she questioned.
Kabera acknowledged that prices may rise slightly but assured that the impact would be minimal.
"The 3 per cent tax will likely be passed on to consumers, but we do not expect it to significantly impact demand. For instance, someone paying $100 for a room would only pay an additional $3, which is unlikely to deter anyone willing to book accommodation," he explained.
MP Angélique Nyirabazayire questioned why an increase in VAT for the sector was not considered instead of introducing a new levy.
However, Kabera highlighted that the tax on accommodation services was designed to directly benefit the industry and was already implemented in neighboring countries like Kenya and Tanzania.
MP Judith Mukarugwiza questioned whether businesses could be given a longer timeframe to pay the tax, suggesting that it be paid quarterly instead of monthly.
Kabera stated that payments will be required within 15 days after the end of each month, giving businesses time to adjust while also addressing issues such as business owners misusing the funds for personal gain.
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"The customer will pay this tax before leaving the premises, so there is no justification for businesses holding onto it since it rightfully belongs to the government," he explained.
To ensure a smooth transition, awareness campaigns will be conducted to educate accommodation providers on the tax's implementation, said Kabera.
Rwanda currently has 21,232 hotel rooms, an increase from 17,078 rooms in 2020, according to the 2024 Statistical Year Book by the National Institute of Statistics of Rwanda (NISR).
The Rwanda Chamber of Tourism, the apex body for all private-sector tourism establishments in Rwanda, targets to have 35,000 hotel rooms in the next five years.
As the number of visitors to Rwanda increases, investments in hotel rooms are also expected to rise, according to the Private Sector Federation (PSF).
Rwanda recorded 1.4 million visitors in 2023, a number expected to double by 2029.
