The new Law on Investment Promotion and Facilitation (Law No. 006/2021) was gazetted on 8 February 2021 and repeals and replaces the prior 2015 investment law. The new law provides that the following priority economic sectors may benefit from investment incentives:

Export;
Manufacturing in textiles and apparel, electronics, information and communication technology equipment, large scale agricultural operations excluding coffee and tea, pharmaceuticals, processing in wood, glass, and ceramics, processing and value addition in mining, agricultural equipment, and other related industries that fall in these categories;
Energy generation, transmission, and distribution;
Information and communication technologies, business process outsourcing, and financial services;
Mining activities relating to mineral exploration;
Transport, logistics, and electric mobility;
Construction or operation of specialized innovation parks or specialized industrial parks;
Affordable housing;
Tourism that includes hotels, adventure tourism, and agro-tourism;
Horticulture and cultivation of other high-value crops included on the list approved by the Board in charge of investment promotion;
Creative arts in the subsector of the film industry; and
Skills development in areas where the country has limited skills and capacity as determined by the Board in charge of investment promotion.

Incentives under the new law are provided to registered investors and international companies, subject to certain conditions.

International Companies

An 'International Company' is defined as a business company that owns or controls production or service facilities in one or more countries besides its home country. International companies having headquarters or regional office in Rwanda are eligible for a preferential corporate income tax rate of 0% provided the relevant company meets the following conditions:

Invests an amount equivalent to USD 100,000 or more in tangible and intangible assets in Rwanda;
Provides employment and training to Rwanda nationals;
Conducts international financial transactions equivalent to USD 5 million or more a year for commercial operations through a licensed commercial bank in Rwanda;
Incurs expenditure equivalent to at least USD 2 million per year in Rwanda; and
Sets up actual and effective administration and coordination of operations in Rwanda and performs at least three of the following services:

procurement of raw materials components or finished products;
strategic planning and business development;
marketing and sales promotion planning;
information and data management services;
treasury management services;
research and development work;
training and personnel management; or
other shared services.

Registered Investors

Registered investors are investors holding investment certificates issued by an appropriate authority. Under the new law, an investment certificate is valid for a period of 5 years from the date of its issuance, and can be extended by additional renewable 5-year periods.

The following incentives are available to registered investors, subject to certain conditions:

Reduced corporate income tax rate of 15% for registered investors undertaking the following activities:

energy generation, transmission, and distribution from peat, solar, geothermal, hydro, biomass, methane, and wind (excluding investor undertaking engineering procurement contract executed on behalf of the Government of Rwanda);
transport of goods and related activities;
mass transportation of passengers and goods;
manufacturing within the subsectors of textiles and apparels, electronics, information and communication technology equipment, large scale agricultural operations, processing in wood, glass, and ceramics, value addition, and professional operations in mining, and agricultural equipment;
information, and communication technology sector with an investment in one of the activities namely information and communication technology and knowledge-based services, manufacturing, or assembly (excluding information and communication technology retail, and wholesale trade, and information and communication technology repair industries, and telecommunications);
innovation research and development facility, information and communication technology training center, software build and test lab, information and communication technology, and innovation specialized institution of higher learning, business incubation center, and related activities in the areas of information and communication technology and innovation;
fund management entity, collective investment scheme, wealth management services, financial advisory commercial entity, family office services, fund administrator, financial technology commercial entity, Captive Insurance Schemes, private bank, mortgage finance institution, finance lease commercial entity, asset-backed securities, reinsurance company, trust, and corporate service providers;
construction of affordable housing;
electric mobility;
adventure tourism and agriculture tourism; and
other priority sectors as determined by Order of the Minister;

Reduced corporate income tax rate of 3% for the following registered investors:

operating as a pure holding company;
special purpose vehicles registered for investment purposes;
licensed as a Collective Investment Scheme;
operating as a global trading or paper trading company, in respect of foreign-sourced trading income; and
operating intellectual property company, in respect of foreign-sourced royalties.

Registered investors exporting goods and services are eligible for the following reduced corporate income tax rate for export investments:

corporate income tax rate of 25% for a period of 5 years commencing from the first year where at least 30% but less than 50% of total turnover is derived from export of goods and services; and
corporate income tax rate of 15%, where at least 50% of total turnover is derived from export of goods and services.

Custom duty exemption on products used in Export Processing Zones;
Tax deduction of 150% is available for small and medium investors or emerging registered investors involved in investment project related to exports. A maximum tax deduction of USD 100,000 is allowed per year. The qualifying expenditures related to internationalization include:

overseas marketing and public relations activities, including the launch of in-store promotions, roadshows, overseas business, or trade conferences;
participation in overseas trade fairs not supported by another existing initiative;
overseas business development costs; and
market entry and research costs such as costs of establishing a legal entity in a foreign market, salary costs of employees stationed in a foreign market, analysis of market opportunities, supply chain, and entry requirements.

Tax holiday for a period of 7 years is granted to registered investors (excluding for investors in private equity and venture capital) for investments of at least USD 50 million with a minimum 30% required to be made by way of equity in the specified sectors. The tax holiday commences from the first year and is provided for investments in the following specified sectors:

energy projects producing at least 25 megawatts (excludes investor having an engineering procurement contract executed on behalf of the Government of Rwanda and fuel produced energy);
manufacturing;
tourism;
health;
information and communication technology with an investment involving manufacturing, assembly, and service (excludes communication, information and communication technology retail and wholesale trade, and information and communication technology repair companies or enterprises and telecommunication companies);
export-related investment projects; and
other priority sectors as determined by an Order of the Minister.

Withholding tax exemption on dividends, interest, and royalties for investors benefitting from reduced corporate tax rates;
Reduced withholding tax of 5% on dividends and interest paid to an investor for investments in a company listed on the Rwanda Stock Exchange;
Capital gains tax exemption except on capital gains from the sale of commercial immovable property;
VAT refund within a period of 15 days for investors excluding those operating in VAT exempted sectors.

Specialized Innovation Park Developers and Specialized Industrial Park Developers

Specialized innovation park developers and specialized industrial park developers are eligible for the following incentives:

Tax holiday for a period of 5 years is available for specialized innovation park developer or specialized industrial park developer and commences from the first year of project’s positive net income. For licensed microfinance institutions, the tax holiday commences from the date of license and may be renewed subject to conditions prescribed by the Order of the Minister;
Reduced withholding tax of 10% for specialized innovation park developers or specialized industrial park developers on interest on foreign loans, dividends, royalties, and service fees, including management and technical service fees;
Property tax exemption for a period of 5 years from the date of issuance of the construction permit;
Exemption from payment of land transfer fees provided the transferor holds shares equivalent to the value of the immovable property transferred;
Carry-forward of accumulated tax losses in the event of change of ownership of share capital or voting rights of more than 25% in a given year;
Carry-forward of losses for a period of 7 years commencing from the first year of loss, with extension subject to request;
Accelerated depreciation of 50% in respect of capital expenditures incurred for a period of one year from the date of commencement of construction;
Expedited pre-approval and VAT refunds for professional and technical services procured outside Rwanda;
Zero (0%) VAT rate for construction materials and finished goods for construction projects within specialized innovation and industrial parks; and
Tax exemption including withholding tax and excise duty, if applicable, on the importation of construction materials and finished goods.

Mining Sector

Registered investors with a valid exploration license are eligible to carry forward losses for a period of 10 years from the first year of making loss with deduction of losses in the order they are incurred. The loss carry-forward incentive is available provided the mineral exploration accounts for at least 50% of the investor’s total expenditure during the years in which losses were made.

Research & Development (R&D) Incentives

Strategic investment projects, small and medium investors, or emerging investors may be eligible for financing under Rwanda’s Seed Innovation Fund. The fund provides a variety of instruments, including convertible grants, equity, and debt, for the following qualifying activities:

Qualifying manpower costs;
Training costs;
Costs for materials, equipment, software, and technology acquisition;
Professional services engaged; and
Costs incurred on intellectual property rights.

Incentives for Start-Ups

With the exception of private equity and venture capital funds, angel investors with a maximum investment of USD 500,000 in a start-up for a minimum period of 2 years are eligible for the following incentives:

Capital gains tax exemption on the sale of shares, provided the shares were initially purchased as a primary equity issuance by the start-up; and
Withholding tax exemption on dividends paid for five dividend issuances by the start-up.

Transitional Provision:

The new Law on Investment Promotion and Facilitation entered into force on 8 February 2021 and repeals and replaces the 2015 investment law. Incentives granted under the prior law that are not provided for by the new law or whose period of validity has not been fixed will remain valid for 12 months from the date of the new law's entry into force.

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