The Rwandan government has reintroduced Value Added Tax (VAT) on mobile phones, marking the end of a 15-year exemption that was initially implemented to drive digital inclusion. The move is part of broader tax policy reforms aimed at expanding the country’s revenue base and ensuring economic resilience.
Finance Minister Yusufu Murangwa justified the decision, stating that the exemption had successfully served its purpose. “At least 80% of Rwandans now own smartphones. The exemption has served its goal. Now it’s time to place the levy,” Murangwa said.
Since 2010, mobile phones had been VAT-exempt, a measure that significantly boosted affordability and digital penetration. However, the government now believes the market is mature enough to sustain a VAT levy without hindering access.
The reinstatement of VAT on ICT equipment follows the same rationale. Devices such as computers and other digital tools had been exempt from VAT since 2012 to encourage adoption, but the government has opted to reinstate the tax, with selected ICT equipment remaining exempt in consultation with the Ministry of ICT and Innovation.
Beyond ICT, the reforms introduce several tax increases across multiple sectors. Gambling taxes will see a sharp rise, with the tax on Gross Gambling Revenue (GGR) increasing from 13% to 40%, while the withholding tax on winnings will jump from 15% to 25%. The move aims to promote responsible gambling and generate additional revenue.
Cosmetic and beauty products will now be subject to a 15% excise duty on their Cost-Insurance-Freight (CIF) value. However, critical pharmaceutical beauty products will be exempt in consultation with the Ministry of Health.
Vehicle owners will also feel the impact of the new tax measures, with an increase in registration fees for all vehicles, including electric cars. Additionally, the fuel levy will shift from a fixed fee of Frw 115 per liter to 15% of CIF, a move expected to generate more funds for road maintenance.
A new 3% tourism levy will be imposed on accommodation costs to support investments in the tourism and hospitality sector. Meanwhile, hybrid vehicles will continue to benefit from a 25% import duty exemption, but excise duties will be applied based on the vehicle’s age—5% for those under three years, 10% for four to seven years, and 15% for eight years and above. VAT and a 5% withholding tax will also be reinstated on hybrid cars, while electric vehicles remain fully exempt.
Excise taxes on cigarettes, beer, and airtime have also been revised. The tax on cigarettes will increase from Frw 130 to Frw 230 per pack, representing a 36% rise in the retail price. The tax on beer will rise from 60% to 65% of the factory price. Airtime tax will increase from 10% to 12% in 2024/2025, with a gradual increase to 15% in the medium term.
Additional tax measures will affect sectors such as financial services, transportation, and ICT. New levies will be imposed on single-use plastics, selected fee-based financial services, fossil fuels, and road transportation of goods.
The government has pledged to educate taxpayers on these changes to ensure a smooth transition. Officials maintain that the reforms are part of a broader strategy to enhance domestic resource mobilization and ensure Rwanda’s continued economic growth.
