Effective July 1, various tax types are coming into effect, including VAT, excise and withholding taxes on hybrid vehicles; VAT on land transport of goods, a tourism tax on accommodation, and an environmental levy on imported items packaged in plastic materials.
The laws establishing these taxes published in the Official Gazette on May 29, 2025, are part of ongoing tax policy reforms aimed at enhancing domestic revenue collection.
When fully implemented, the measures are expected to generate an additional Frw174.1 billion in the 2025/2026 fiscal year and up to Frw353 billion by the 2029/2030 fiscal year.
Here are a few things you need to know:
Hybrid vehicles, which previously benefited from major exemptions since 2021, are now subject to different taxes, though these remain lower than those applied to fuel-powered vehicles.
The applicable taxes include 18 percent VAT, 5 percent withholding tax, and an excise duty based on the year of manufacture.
However, Hybrid vehicles still enjoy the 25 percent import duty exemption.
Under the new excise law, vehicles with an engine capacity of less than 1500cc, as well as hybrid vehicles that are under three years old, are subject to a tax rate of 5 percent.
Vehicles with engine capacity between 1500cc and 2500cc or hybrids aged three to eight years, are taxed at 10 percent.
Vehicles with engine capacity above 2500cc or hybrids older than eight years are taxed at 15 percent.
Certain vehicles are exempt from excise tax. These include minibuses and buses with a capacity of more than 14 passengers, trucks and single-cabin pickups used for transporting goods, refrigerated vehicles, tourism vehicles, ambulances, and vehicles for persons with disabilities.
Electric vehicles, their batteries, and charging equipment remain VAT-exempt until 30 June 2028.
Land transportation of goods, which was previously exempt, is now subject to 18 percent VAT starting 1 July. International transport services, however, remain zero-rated.
Entities required to charge VAT include VAT-registered taxpayers, voluntary registrants, and businesses with a turnover of Frw 5 million over three months or Frw20 millionannually.
Transport services that remain VAT-exempt, when provided by licensed operators, include land transport of passengers in vehicles with a capacity of 14 or more, air passenger transport, transport by boat for passengers or cargo, and the collection and transportation of household solid waste.
Law Nº 015/2025 of 27/05/2025 introduces a 3 percent tourism tax on accommodation, defined as a service that provides a room or place to sleep or rest. Accommodation providers are required to register for the tax with the Tax Administration.
The tax becomes due upon receipt of payment and must be declared and paid within 15 days following the end of each declaration month.
Providers are also required to use the Electronic Invoicing System (EBM) to comply with tax regulations and ensure accurate reporting and declaration.
Law Nº 010/2025 of 27/05/2025 establishes a 0.2 percent environmental levy on imported items packaged in plastic materials, calculated based on their customs value.
The law identifies nine categories of items subject to the levy. These include bottled water; all types of juice, energy drinks and carbonated non-alcoholic beverages; peanut butter, honey and related products; body lotions, petroleum jelly and shampoos; mattresses; clothes; shoes; all types of soaps; and toilet paper.
Under Law Nº 013/2025 of 27/05/2025 establishing a levy on petrol, gas oil, and motor vehicles for road maintenance, owners of locally registered motor vehicles can now declare and pay the levy according to the following vehicle categories:
• Car and Jeep: Frw50,000
The levy on motor vehicles for road maintenance is declared and paid annually to the tax administration not later than December 31 of each year.
In recent weeks, the Rwanda Revenue Authority (RRA) has actively engaged with various sectors to clarify the newchanges, ensuring that stakeholders understand their responsibilities and the procedures for declaration and payment.
Many have expressed optimism following these consultations, which were designed to ensure effective implementation and compliance.
