Rwanda’s Tax Revisions to Foster Adoption of Electric Vehicles

Rwanda is revising its tax policy on hybrid vehicles to promote eco-friendly transportation, reinstating an 18% VAT to combat the environmental issues posed by aging hybrids. The government aims to encourage the importation of newer hybrid models and electric vehicles through an amended excise duty structure. Stakeholders support sustainable initiatives while discussing solutions for the challenges posed by older vehicles.

Rwanda is initiating changes to its tax policy regarding hybrid vehicles to foster eco-friendly transportation. Godfrey Kabera, the Minister of State for National Treasury, presented this information to Members of Parliament on March 19. A proposed bill amending the 2023 VAT law includes the reimplementation of an 18% VAT on hybrid vehicles that had previously been exempt since 2021.

Kabera justified this legislative shift by highlighting concerns about the aging fleet of imported hybrid vehicles, adversely impacting environmental efforts. Between July 2021 and July 2024, it was noted that 45% of hybrid vehicles imported were between 10 and 14 years old, which diminishes their ecological benefits. Data from the Rwanda Revenue Authority indicated that among 7,172 imported hybrid and electric cars from 2020 to 2024, merely 512 were electric, showcasing a predominant reliance on hybrids.

Moreover, MP Odette Uwamariya acknowledged the government’s initiative aimed at strengthening financial capability but expressed concern regarding the removal of hybrid vehicles from VAT exemption. She suggested a possible solution to promote newer models while excluding aging hybrids from the exemption list, aiming to reduce atmospheric pollution.

Kabera reflected on the original intention of the VAT exemption on hybrids, noting that while it encouraged adoption, aging hybrids increasingly depend on their conventional fuel components. He stated, “When these hybrid cars get very old, they only operate using the fuel-powered part.” Thus, he emphasized a shift toward newer hybrid imports to ensure the promotion of electric mobility.

He further stressed that since Rwandans are now accustomed to hybrid technology, the emphasis is on new models entering the market. The government is also proposing amendments to the excise duty law to encourage newer hybrids by adjusting excise duties based on the vehicle’s age. Under this structure, vehicles less than three years old will incur a 5% excise duty, while those aged between three to eight years will be subject to a 10% duty, and vehicles over eight years will be taxed at 15%. The legislation has been approved by Parliament and will undergo further analysis by a relevant committee before being voted on in plenary.

In summary, Rwanda’s tax policy revisions aim to promote environmentally friendly transportation by reinstating VAT on hybrid vehicles and adjusting excise duties based on age. These changes reflect the government’s commitment to reducing emissions and encouraging the adoption of newer electric vehicles. Stakeholders express support for sustainability, while also addressing the challenges posed by aging hybrid vehicles in the context of environmental protection initiatives.

Original Source: www.newtimes.co.rw