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Property Taxes in Rwanda: Selling and Renting

In Rwanda, property taxes apply to both the sale and rental of immovable property. Here’s a breakdown of the key property taxes:

1. Property Transfer Tax (on Sale of Property)

Since September 2023, a tax is levied on the sale of immovable property. The tax is calculated on the sale price exceeding RWF 5 million.

• Tax Rate:
  • 2% for property sold by a taxpayer registered for income tax.
  • 2.5% for property sold by a person not registered for income tax.
• Taxable Amount: The tax applies to the balance of the sale value after deducting the first RWF 5 million from the sale price.

2. Rental Income Tax

The rental income tax is applicable to individuals earning income from renting out properties, including land, buildings, and improvements.

• Tax Rates:
  • 0% for annual rental income up to RWF 180,000.
  • 20% for rental income between RWF 180,001 and RWF 1,000,000.
  • 30% for rental income exceeding RWF 1,000,000.
• Taxable Income: The taxable rental income is computed after deducting 50% of the gross rental income as expenses for maintenance and upkeep. For loans used to purchase or construct the rental property, actual bank interest payments can also be deducted.

3. Property Ownership Taxes

The immovable property tax is assessed on the market value of the property and is paid by the owner, or anyone considered the owner.

• Tax Rates on Buildings:
  • 0.5% of the market value for residential properties.
  • 0.3% for commercial properties.
  • 0.1% for industrial properties and those owned by small businesses.
• Tax Rates on Land:
  • Taxed on the total area of land, varying from RWF 0 to RWF 80 per square meter, depending on the land’s use.
  • Undeveloped land is taxed at 100% of the normal rate.
• Special Rates: Residential buildings with three or more floors may be eligible for lower tax rates depending on their size.

4. VAT on Property Sales (Business-related)

Businesses that sell or rent properties are subject to 18% VAT on property income (both sales and rentals). This applies to companies and businesses that meet the VAT registration threshold of RWF 20 million in taxable turnover.

5. Tax Filing and Payment Deadlines

• Rental Income Tax: Property owners must file their rental income tax by 31st January each year.
• Property Transfer Tax: The tax on property sales must be declared and paid to the Rwanda Revenue Authority (RRA) by the end of the month following the sale.
• Immovable Property Tax: Property owners must file their tax declaration by 31st December of the first year of the tax assessment cycle, with subsequent declarations filed at the end of each 5-year cycle.

By staying informed about these taxes, property owners and investors can ensure compliance with Rwandan tax laws, avoid penalties, and optimize their real estate investments.

For more information about taxes in Rwanda, please visit the Rwanda Revenue Authority website at https://www.rra.gov.rw/en/home.