Corporate income tax: the 28% rate, residence and the effective-management test, permanent establishment, deductions and their limits, depreciation, losses, quarterly prepayments, certified accounts and the small-business regimes

Who pays corporate income tax, and on what

Corporate income tax (CIT) is levied under Law N° 027/2022 of 20/10/2022 establishing taxes on income (the Income Tax Law), published in the Official Gazette n° Special of 28/10/2022 and in force on publication. It replaced Law N° 016/2018 and has been amended twice in ways that matter to companies: by Law N° 051/2023 of 05/09/2023, which cut the rate to 28% and rewrote the filing rules in Article 9, and by Law N° 014/2025 of 27/05/2025, gazetted on 29 May 2025, which recast the list of exempt persons, the capital gains tax and the taxation of gaming, and inserted the digital services tax. The Rwanda Revenue Authority (RRA), referred to in the statutes as the Tax Administration, administers the tax through its e-tax portal.

A company resident in Rwanda is taxed on its business profit from all sources, in Rwanda and abroad, with a credit for foreign income tax under Article 7. A non-resident company is taxed only on the profit of its permanent establishment in Rwanda. Dividends received by a resident company from another resident company are excluded from the recipient's profit, so profits are not taxed twice inside Rwanda, and unrealised foreign exchange gains on loans are also outside the base. Article 6 defines Rwandan-source income broadly: it includes activities performed in Rwanda by anyone, activities performed abroad by a Rwandan resident, digital services, and, unless the service is consumed abroad, payments by residents for services performed outside Rwanda. A foreign supplier paid by a Rwandan customer therefore has Rwandan-source income even if it never sends staff to Kigali, which is why the withholding tax described in Withholding taxes and tax treaties applies to many cross-border fees.

Certain persons are exempt from CIT under Article 45, as replaced by Law N° 014/2025: the Government, the City of Kigali and the Districts, the National Bank of Rwanda (BNR), qualifying non-profit organisations, international organisations, qualified pension funds, the social security body, the Development Bank of Rwanda, the Agaciro Development Fund, the Business Development Fund (BDF; on 31 July 2025 the Government decided to integrate BDF into the Development Bank of Rwanda (BRD), which took over BDF's services at the end of 2025, but no amendment of Article 45 reflecting the merger had been located at 16 October 2026), special purpose vehicles (unless their revenue exceeds their expenses), common-benefit foundations, resident trustees on the income of foreign trusts and, since the gaming rules took effect about 29 August 2025, companies carrying out gaming activities other than the national lottery, which instead pay a tax of 40% of wagers less winnings each month.

Residence and the effective-management test

Under Article 4 of the Income Tax Law, a person other than an individual is resident in Rwanda during a tax period if it is established under Rwandan law or if it has its place of effective management in Rwanda at any time during that period. The article leaves it to a Ministerial Order to say where effective management lies, and that Order is now Ministerial Order N° 009/26/10/TC of 24/09/2026, published in the Official Gazette n° Special of 25/09/2026 and in force on publication. Its four conditions are not new: they already appeared in the 2019 Ministerial Order on income tax. Article 2 of the Order deems a company to have its place of effective management in Rwanda if it meets any one of four conditions: its day-to-day control or management is carried out in Rwanda; its shareholders' meetings are held in Rwanda; its books of account are kept in Rwanda; or its main shareholders or directors are resident in Rwanda.

The test is wider than the international norm, which looks for the place where key management and commercial decisions are in substance taken. Read literally, a company incorporated in Mauritius, Dubai or Delaware whose books are kept by a Kigali accountant, whose annual meeting is held in Kigali, or whose principal shareholder lives in Rwanda is resident in Rwanda and taxable here on its worldwide profit. That matters to regional holding companies, to founders who relocate to Kigali, and to groups that centralise bookkeeping in a Rwandan shared-service team. A treaty with the other state may contain a tie-breaker, but Rwanda has treaties with only a limited number of states, and RRA has not published guidance on how the Order will be applied. Groups that intend a foreign company to remain non-resident should keep its books, meetings and management outside Rwanda and document that they do.

Permanent establishment: when a foreign company is taxed in Rwanda

A foreign company that does not become resident is still taxable on the profit of a permanent establishment (PE) in Rwanda. Article 5 defines a PE as a known fixed place of business through which the business is wholly or partly carried out, and lists a place of management, a branch, a factory or workshop, a mine, quarry or other place of exploitation of natural resources, and a construction, assembly or supervision site. It adds a services PE: a place where services, including consulting services, are provided through employees or other personnel for more than 90 days in any twelve-month period, continuously or intermittently. A foreign company also has a PE if a person acting on its behalf has authority to negotiate or conclude contracts in its name, or plays the principal role leading to their conclusion.

Storage, display or delivery facilities, stocks held for processing by others, purchasing or information-gathering offices and other activities of a preparatory or auxiliary character do not create a PE, and nor does an independent broker or agent acting in the ordinary course of its business, unless it works wholly or almost wholly for the foreign company on non-arm's length terms. Control of a Rwandan subsidiary does not of itself make the subsidiary a PE of its parent. An insurer that collects premiums or insures risks in Rwanda through a person other than an independent broker or agent has a PE, reinsurance apart. A PE is taxed at 28% on its attributable profit and, under Article 60, its profits repatriated to the head office bear a further 15% withholding tax (FAQ 67); the choice between a branch and a subsidiary is discussed in Branches of foreign companies.

Computing taxable profit: what is deductible and what is not

Taxable profit is accounting profit adjusted under the Income Tax Law. Expenses are deductible if they are incurred for the purpose of the business, supported by documents and actually incurred; payments recorded as liabilities that remain unpaid six months after the end of the tax period are treated as paid for withholding tax purposes under Article 60, so the withholding tax becomes due even if the creditor has not been paid. Article 25 lists what may not be deducted: dividends and other distributions; reserves and provisions not allowed by the law; fines and penalties; donations, except to non-profit organisations within a limit of 1% of turnover; income tax and recoverable VAT; personal consumption; entertainment, except general sporting activities for employees; and 20% of overheads such as telephone, water, electricity and fuel whose business and private use cannot practically be separated.

Three limits target groups. First, management, technical service and royalty fees paid to a non-resident related person are deductible only up to 2% of the taxpayer's turnover in aggregate. Second, interest on loans between related persons, and realised foreign exchange losses on such loans, are not deductible to the extent that total related-party loans exceed four times paid-up equity, which excludes provisions, reserves and retained earnings; commercial banks, insurers and other financial institutions are outside this rule. Third, unrealised foreign exchange losses are never deductible. There is no general cap on interest by reference to earnings. All related-party pricing must also meet the arm's length standard and be documented under Ministerial Order N° 003/26/10/TC, explained in Transfer pricing and international tax.

Depreciation and losses

Under Articles 27 and 28, buildings, heavy industrial equipment and machinery are depreciated individually on a straight-line basis at 5% a year, and intangible assets bought from third parties and information and communication systems with a life of ten years or more at 10%. Other assets are pooled: computers and short-life information systems at 50% and other business assets at 25% of the pool's written-down value, and a pool worth RWF 500,000 or less may be written off. Investors registered under the Investment Code in eligible sectors may claim 50% accelerated depreciation in the first year on qualifying assets, as described in Investment incentives.

A tax loss may be deducted from the business profit of the next five tax periods, earlier losses first (Article 31). Foreign-source losses cannot be set against Rwandan profit. If the direct or indirect ownership of the share capital or voting rights of a company whose shares are not traded on a recognised exchange changes by more than 25% by value or number during a tax period, the company loses its losses brought forward, unless the change results from an internal reorganisation that keeps all the shareholders and those shareholders have held their shares for at least three years. A buyer of a loss-making Rwandan company should therefore assume the losses will not survive the acquisition. A taxpayer that expects not to use its losses within five years may apply under Articles 33 and 34 of Ministerial Order N° 003/26/10/TC to carry them forward for longer: the application is made at least 60 days before the end of the tax period, RRA's silence counts as approval for one year, the extension cannot exceed a further five years in total, and the applicant must not have distributed profits or been found guilty of tax evasion in the previous five years.

Prepayments, returns and certified accounts

CIT is paid in advance during the year. Under Article 33, a taxpayer pays quarterly prepayments by 30 June, 30 September and 31 December, each equal to the previous year's tax divided by the previous year's turnover, multiplied by the turnover of the current quarter, less any withholding tax suffered in that quarter, including the 5% paid at customs on commercial imports. A taxpayer with a different approved accounting year pays by the last day of its sixth, ninth and twelfth months, and a business in its second year computes the previous year's turnover on an annualised basis. The annual return and the balance of tax are due by 31 March of the following year under Article 9 as replaced by Law N° 051/2023, and a return must be filed even if the result is a loss.

Article 9 also requires financial statements to be certified by a qualified professional approved by RRA where turnover reaches the threshold set by a Ministerial Order. Since 25 September 2026, Article 3 of Ministerial Order N° 009/26/10/TC sets that threshold at RWF 1,000,000,000 of annual turnover. Authorised distributors of beer, lemonades, soda, juice and cement, petrol and petroleum products dealers, forex bureau owners, air ticket dealers, tour operators, farming and livestock cooperatives and independent agents are not bound unless their income, rather than their turnover, exceeds the threshold. A taxpayer above the threshold may apply to RRA to file provisionally by 31 March, with uncertified statements and payment of the tax, and then submit its return and certified statements within three months (Article 9(3)). No annual return is needed by a person whose turnover is below RWF 2,000,000, whose only income is employment income, or whose only income is investment income already taxed by withholding (Article 9(5)). The wider calendar is in Compliance calendar after registration.

Small businesses, incentives and the anti-abuse rule

Businesses with modest turnover are taken out of the profit-based system. Under Articles 14 and 49, a micro-enterprise with turnover up to RWF 12 million pays a flat annual amount by band: nil up to RWF 2 million, RWF 60,000 from RWF 2 million to 4 million, RWF 120,000 from RWF 4 million to 7 million, RWF 210,000 from RWF 7 million to 10 million and RWF 300,000 from RWF 10 million to 12 million. A small business with turnover above RWF 12 million up to RWF 20 million pays 3% of turnover, but may elect for the real regime if it keeps accounts; the election is irrevocable for three years, and Article 32 of Ministerial Order N° 003/26/10/TC sets the simplified accounting method it may use. Road transport operators pay flat amounts set in the Annex to the Income Tax Law, without prejudice to the real regime.

Article 69 of the Income Tax Law gives effect to the tax reductions and exemptions in Law N° 006/2021 of 05/02/2021 on Investment Promotion and Facilitation (the Investment Code), available to investors registered with the Rwanda Development Board (RDB) that meet the sector and size conditions in its Annex (FAQ 31). Article 68 contains a general anti-abuse rule: where an arrangement has as its principal purpose obtaining a tax benefit, lacks commercial substance in whole or in part, creates rights and obligations that would not arise between persons at arm's length, or may result in the abuse of the tax laws, RRA may determine the tax by disregarding or recharacterising it. Incentive structures and holding arrangements should therefore have business reasons that can be shown on paper.

The annual corporate income tax cycle for a calendar-year company

1. Register and obtain the TINThe Registrar General at RDB issues the taxpayer identification number on registration. Register any changes with RRA within seven days and set up access to RRA's e-tax portal.
2. Pay the three quarterly prepaymentsBy 30 June, 30 September and 31 December, declare and pay a prepayment computed under Article 33 from last year's tax-to-turnover ratio and this quarter's turnover, less withholding tax suffered in the quarter.
3. Apply for any loss extension before year endIf losses risk expiring, apply under Ministerial Order N° 003/26/10/TC at least 60 days before 31 December; silence by RRA counts as approval for one year.
4. Close the accounts and prepare transfer pricing filesPrepare the financial statements and, where the thresholds are met, the transfer pricing policy, local file and master file, which must be ready by the filing deadline.
5. Certify the accounts if turnover is RWF 1 billion or moreHave the financial statements certified by a professional approved by RRA. If certification cannot be completed by 31 March, apply for provisional filing and submit the certified statements within three months.
6. File and pay by 31 MarchFile the annual return through e-tax and pay the balance of tax after deducting prepayments and creditable withholding tax. Keep the records for ten years.