Offshore loans and external borrowing: no BNR approval to borrow abroad under Article 26 of Regulation N° 42/2022, the 15% withholding tax on interest and its exemptions for development finance institutions and bank lenders, the four-to-one related-party debt limit and foreign exchange losses, repaying and repatriating debt service under Article 12 of the Investment Code, and the 120% tests for foreign-currency loans from Rwandan banks under Directive N° 46/2026

Borrowing from abroad needs no approval

Rwanda has no approval regime for external borrowing. Article 26 of Regulation N° 42/2022 of 13/04/2022 governing foreign exchange operations (the FX Regulation) provides that residents may freely contract loans in foreign currency from non-resident banks, international financial institutions or other non-residents to finance their activities. The same article tells borrowers to pay attention to the interest rate and to ensure that foreign exchange risk is mitigated, and requires banks to record information on the repayment of offshore borrowing for reporting purposes. Bank and credit transactions and the payment of interest and amortisation are capital account operations under Article 2(2°), and the regulation states in Article 1 that its aim is the liberalisation of the capital account. No provision requiring the borrower to obtain BNR approval, register the loan or report it to the National Bank of Rwanda (BNR) has been found in the FX Regulation, the 2025 amendments or the BNR directives in force at 10 October 2026.

The loan must nevertheless move through the banking system. Article 20 requires all payments to non-residents and all transfers to or from abroad by residents to pass through licensed intermediaries or the BNR, so the drawdown is received into the borrower's account with a Rwandan bank, and interest and principal are paid out through that bank. The bank records the repayments and reports them, and it will ask for the loan agreement when the first payment is made. Keeping the loan agreement, the drawdown notice and the bank's credit advice together from the start is what makes later repayments routine.

The 2025 rules on pricing and transacting in foreign currency, described in Foreign exchange rules, concern prices for goods and services. A foreign-currency loan from a non-resident is a capital account operation that Article 26 expressly permits, so the borrower may receive and repay it in dollars or euros even if it is not itself authorised to transact in foreign currency. What the borrower may not do is pass the currency on to its Rwandan customers by pricing its own sales in dollars without permission.

Loans between residents, guarantees and currency risk

Article 26 covers loans from non-residents. Lending in foreign currency by financial institutions resident in Rwanda is governed by Article 27 and Directive N° 46/2026, described below. The position of a resident company that is not a financial institution lending in foreign currency to another resident, for example a Rwandan holding company lending dollars to its Rwandan subsidiary, is less clear: the FX Regulation defines foreign exchange business to include any account facility, credit extension, lending, issue of guarantee or counter-guarantee involving a foreign currency (Article 2(7°)), and only licensed intermediaries may carry on foreign exchange business (Article 3). Such a loan, and a guarantee in foreign currency given by a Rwandan company, for instance in support of its foreign parent's borrowing, should therefore be discussed with the company's bank, and if necessary the BNR, before it is signed. A loan between residents in Rwandan francs raises no foreign exchange question.

Currency risk falls on the borrower. A company whose income is in francs and whose debt is in dollars must buy dollars from its bank for each payment, at the rate the bank sets freely under Article 5, and a United States government guide of March 2026 reports investors' accounts of foreign-currency shortages in the Rwandan market. The tax rules add to the risk: unrealised foreign exchange losses are never deductible under Article 25 of the income tax law, so a fall in the franc can increase the company's liabilities in its accounts without any tax relief until the loss is realised, and realised losses on related-party loans above the four-to-one limit are not deductible either. Lenders and borrowers commonly address this by lending in francs where a franc source of funding exists, by hedging with a Rwandan bank, or by matching dollar debt to dollar revenue, such as export proceeds.

Withholding tax on interest paid abroad

Interest paid by a Rwandan resident to a non-resident lender is subject to withholding tax at 15% under Article 60 of Law N° 027/2022 of 20/10/2022 establishing taxes on income (the Income Tax Law), computed on the gross interest and declared and paid within 15 days after the month of payment (Article 64). The payer is personally liable for tax it fails to withhold, with penalties and interest (Article 66). Article 60 itself excludes three kinds of interest: interest on deposits held with financial institutions for at least one year; interest on loans granted by a foreign development finance institution exempt from income tax under the law of its country of origin; and interest that banks and deposit-taking microfinance institutions operating in Rwanda pay to banks or other foreign financial institutions. The second exclusion makes loans from development finance institutions particularly attractive for project and infrastructure finance; the lender should be asked to evidence its tax-exempt status at home. The third means that a Rwandan bank can fund itself abroad without withholding tax, which matters when a foreign bank lends to a Rwandan bank that on-lends to the borrower.

Article 60 also provides that an amount recorded in the books as a liability to a creditor, which reduced taxable income, is treated as paid if it is still outstanding six months after the end of the tax period. Accrued but unpaid interest on a shareholder loan therefore triggers withholding tax within that time even if the parent agrees to defer payment. Lower rates are available in three ways. Treaties reduce the rate on interest, typically to 10% (8% under the treaty with China), where the lender is the beneficial owner and its tax residence certificate is submitted with the withholding tax declaration under Articles 22 and 101 of Law N° 020/2023 of 31/03/2023 on tax procedures. The Investment Code sets 0% on interest paid by investors on its 3% regimes and by licensed financial-services investors on its 15% regime, and 10% on interest on foreign loans paid by a specialised park developer. And interest on securities listed on a capital market paid to residents of Rwanda or the East African Community, and interest on Treasury bonds of at least three years, bear 5%. The full rules are in Withholding taxes and tax treaties (FAQ 23).

Deductibility: the four-to-one rule and exchange losses

Interest is deductible for corporate income tax if incurred for the business, but Article 25 of the Income Tax Law sets three limits that matter for foreign financing. Item 10° disallows interest arising from loans between related persons, paid or due, on total loans in excess of four times the paid-up equity, which excludes provisions, reserves and retained earnings as shown in the balance sheet prepared under generally accepted accounting principles. Item 11° disallows realised foreign exchange losses arising from related-party loans in excess of the same four-to-one ratio, and item 12° disallows all unrealised foreign exchange losses. The interest limitation in item 10° does not apply to commercial banks, insurance companies and other financial institutions. There is no separate cap based on earnings before interest, tax, depreciation and amortisation (EBITDA).

Because the ratio counts only paid-up equity, a profitable company with large retained earnings gains no extra borrowing capacity from them. Converting retained earnings into share capital would raise the ceiling, but profit after tax or retained earnings converted into shares is itself a payment subject to 15% withholding tax under Article 60(7°), except in a financial institution whose capital is below the BNR minimum, so the cost of a capitalisation should be weighed against the value of the extra deductions. Related persons are defined broadly in the Income Tax Law, as anyone who acts or is likely to act in accordance with the directions or wishes of another, and include group companies. Related-party loans must also carry an arm's length interest rate under the transfer pricing rules in Ministerial Order N° 003/26/10/TC of 29/04/2026, which require documentation of intra-group financing; see Transfer pricing and international tax (FAQ 28).

Repaying the loan and paying interest abroad

Article 12 of Law N° 006/2021 of 05/02/2021 on Investment Promotion and Facilitation (the Investment Code) entitles an investor, upon fulfilling tax obligations in Rwanda, to repatriate capital, profits, debt and interest on foreign loans, liquidation proceeds and other assets (FAQ 61). The FX Regulation implements the right through the banks: interest is one of the payments a licensed intermediary may transfer abroad on presentation of relevant supporting documents indicating the source of the funds (Article 24), and before repatriating a return on investment the intermediary must request supporting documents (Article 25). The documents that answer those requests are the loan agreement, evidence that the principal was actually received in Rwanda, the interest calculation or amortisation schedule, and the withholding tax declaration and receipt. Article 33 allows the BNR to prohibit transfers abroad in the framework of Rwanda's obligations under international agreements.

Principal repayments bear no Rwandan tax, but the bank will want to see that the loan was received, so a loan advanced in kind, or paid by the parent directly to the borrower's suppliers abroad, should be documented with equal care. No rule in the FX Regulation restricts early repayment or refinancing of a foreign loan. Where interest is capitalised or rolled up, the six-month rule in Article 60 may bring the withholding tax forward even though no cash moves. The wider repatriation process, including the bank's checks and timing, is in Repatriating profits and capital.

Foreign-currency loans from Rwandan banks: Directive N° 46/2026

A company that wants to borrow dollars locally meets a stricter regime. Article 27 of the FX Regulation allows resident financial institutions to lend in foreign currency to residents and non-residents under conditions set by a BNR directive, now Directive N° 46/2026 of 08/04/2026 on lending in foreign currency, which repealed Directive N° 2500/2018-09 of 27/12/2018 and entered into force on its signature on 4 May 2026. It applies to lending institutions, meaning banks and deposit-taking microfinance institutions, and covers any loan denominated or repayable in foreign currency, including facilities where principal or interest is payable in foreign currency (Article 2).

Under Article 4 a lending institution may grant a foreign-currency loan only if: the borrower is an individual earning in foreign currency or a legal entity authorised to transact in foreign currency; its foreign-currency income derives from lawful business permitted to generate foreign currency; its net foreign-currency cash flow is sufficient to service the loan and is at least 120% of the total annual repayment of principal and interest, or of total instalments for loans under one year; repayment will be in the loan currency until maturity; foreign exchange risk is mitigated; collateral pledged by non-residents is easily accessible and realisable and worth at least 120% of the loan, or 100% where it is cash or a guarantee in the loan currency; and prudential rules on related parties, concentration and large exposures are respected. The lender must assess and periodically reassess the borrower's capacity to service the loan in foreign currency.

Under Article 5 the lender needs the BNR's prior non-objection for every foreign-currency loan by a deposit-taking microfinance institution, and for any on-balance-sheet foreign-currency lending by a bank exceeding 20% of its core capital. The application describes the borrower, amount, currency, purpose, tenor, risk assessment, terms, risk mitigation and security, and the BNR responds within 10 working days of a complete application. The BNR may restrict an institution's foreign-currency lending if it fails to mitigate the risks (Article 6), lenders report regularly on these loans (Article 7), and breaches attract regulatory penalties (Article 8). The link to the foreign exchange rules is direct: a borrower is eligible if it earns foreign currency, such as an exporter, or is a deemed or authorised dealer under Directive N° 4230/2025-00042, such as an RDB-licensed hotel or a KIFC entity. Foreign-currency loans were 27.6% of bank loans in March 2026, with a non-performing ratio of 0.2%, according to the BNR's Financial Stability Report of June 2026.

Security for lenders

Foreign lenders commonly take security over the borrower's Rwandan assets. Mortgages over land and buildings are governed by Law N° 10/2009 of 14/05/2009 on mortgages and registered with the Registrar General through RDB's electronic mortgage registration system, a filing made by the lender, so an offshore lender needs a local agent or security agent able to file and later enforce; security over movable assets such as equipment and receivables is governed by Law N° 34/2013, which repealed Law N° 11/2009 on security interests in movable property, and registered with the same office. The rules on mortgages, leasehold land as security and enforcement are in Mortgages, security and real estate business, and the ranking of secured creditors in insolvency in Insolvency and restructuring. For a Rwandan bank lending in foreign currency, Directive N° 46/2026 adds that collateral pledged by non-residents, such as a guarantee or pledge from a foreign parent, must be easily accessible and realisable and cover at least 120% of the loan, or 100% for cash or a guarantee in the loan currency.