Rwanda VAT Reform 2025: Key Amendments for Businesses Under Law No. 009/2025

On May 27, 2025, Rwanda enacted Law No. 009/2025, amending the Value Added Tax (VAT) Law No. 049/2023. This reform introduces significant changes aimed at enhancing tax compliance, broadening the tax base, and aligning with Rwanda’s economic development goals. We are going to outline the key amendments and their implications for businesses operating in Rwanda.

Overview of Law No. 009/2025

Law No. 009/2025 serves as a strategic update to Rwanda's VAT framework, reflecting the government's commitment to fiscal modernization and economic growth. The amendments focus on:

• Expanding VAT exemptions to essential goods and services.

• Clarifying taxable supplies.

These changes aim to balance revenue generation with social equity and economic development.

1.      Key Amendments and Their Implications

Expanded VAT Exemptions

The law broadens the scope of VAT-exempt goods and services, including:

• Medical services and pharmaceutical products.

• Sanitary pads.

• Educational materials, including online learning tools.

• Books and newspapers.

• Raw agricultural products.

• Electric vehicles and their charging infrastructure (exempt until June 30, 2028).

• Machinery and raw materials for industries (exempt until June 30, 2026).

These exemptions aim to reduce the cost burden on essential goods and services, promoting accessibility and supporting key sectors.

Clarification on Taxable Supplies

The amendment clarifies that VAT applies to:

• Products manufactured in Rwanda.

• Imported products.

• Services supplied within Rwanda.

This clarification ensures a comprehensive understanding of taxable activities under the VAT regime, particularly for local and cross-border services.

2. Sector-Specific Implications

Industrial and Manufacturing Sectors

The temporary VAT exemptions for machinery and raw materials aim to stimulate industrial growth. Businesses in these sectors should leverage these exemptions to reduce operational costs and enhance competitiveness.

Health and Education Sectors

Exemptions for medical services, pharmaceutical products, and educational materials are expected to lower costs for consumers and encourage investment in these critical sectors.

Freight and Logistics

Commercial transport of goods by land and water is no longer VAT exempt. Operators are required to charge 18% VAT on transport services and should now be able to recover input VAT. Operators should adjust pricing and contracts to reflect these changes.

E-Mobility

The VAT exemption for fully electric vehicles, batteries and charging infrastructure remains in place until 2028. Hybrid vehicles are no longer eligible as the government sharpens its focus on fully electric mobility.

Tourism and Hospitality

Log- term stays at hotels, Airbnbs and other tourist rentals may now be VAT exempt. The amendment removes the previous exclusion of hotels and tourists’ rentals from VAT exemption on continuous stays for more than 90 days, meaning long -term stays in such properties may now qualify for exemption. This may be intended to align the VAT regime with evolving accommodation models such as extended stay rentals and serviced apartments and to promote greater flexibility for the tourism and hospitality sector in attracting long-term guests.

3. Compliance and Administrative Considerations

Businesses must proactively adjust to the updated regulations. To ensure compliance and maximize opportunities, companies should assess their operations by addressing the following key questions:

·         Are your goods or services still eligible for VAT exemption under the new law?

·         Do your tax registrations and compliance processes meet the updated requirements?

·         Is your business model adaptable enough to remain competitive under the revised rules?

·         Are you fully leveraging available exemptions before potential adjustments or phase-outs?

Staying ahead of these changes will not only mitigate risks but also position businesses to benefit from the reformed tax framework.

4. Conclusion

These reforms are part of Rwanda’s medium-term strategy which aims to broaden the tax base, boost domestic revenue and streamline VAT exemptions with government priorities. These changes have far reaching implications for logistics, energy, ICT, manufacturing, real estate, e-mobility and agriculture. Reflecting a targeted policy shift to fast-track Rwanda’s transition to zero- emission transport and achieve its net zero ambition by 2025.

The reforms also marks a major advancement in creating a fairer and more streamlined tax system. Through expanded exemptions and simplified compliance measures, the law fosters economic growth while supporting national development goals. Businesses should assess their processes to ensure adherence to the new regulations and leverage the benefits of the updated provisions.

Sources:

• Rwanda Revenue Authority – VAT Laws and Policies

• Official Gazette of Rwanda – Law No. 009/2025