Key Shifts Introduced by Rwanda's New Excise Duty Act

The Imperative for Reform

The background to this regulatory update lies within Rwanda's broader tax overhaul strategy, a cornerstone of the Vision 2050 agenda. According to this tax overhaul strategy, Rwanda's tax revenues have not kept pace with GDP growth, public expenditure, and debt service requirements. To address this challenge and fortify domestic revenue mobilisation, targeting 21.5% of GDP by 2035 to finance the National Strategy for Transformation (NST2), a revision of the excise duty law became necessary.

Key objectives of the changes include broadening the tax base and boosting tax compliance. The reform also seeks to encourage local value addition, improve income distribution, and curb excessive consumption of certain products or services.

The Repealed Excise Duty Act, enacted just over a year prior, established excise duty primarily on imported and locally manufactured products. The New Excise Duty Act builds upon this by incorporating lessons learned from the implementation of The Repealed Excise Duty Act.

Notable Changes Introduced by New Excise Duty Act

The New Excise Duty Act brings several key changes compared to the previous Repealed Excise Duty Act and introduces new elements to the excise duty regime.

Expansion of Excise Duty to Services

One of the most substantial changes, is the extension of excise duty to services supplied in Rwanda. While the Repealed Excise Duty Act focused solely on imported and locally manufactured products, the New Excise Duty Act now explicitly includes services in its scope. The annex to the New Excise Duty Act lists specific services subject to excise duty, such as the amount or commission charged on financial transactions, taxed at 15%.

"The expansion of excise duty to services represents a significant shift in Rwanda's tax policy, broadening the tax base to capture revenues from previously untaxed service sectors while supporting the country's domestic revenue mobilization goals."

Revised Tax Declaration and Payment Period

The New Excise Duty Act changes the tax declaration and payment frequency from three times per month to once per month. Under the New Excise Duty Act, the tax period is a calendar month, and taxpayers are required to declare and pay excise duty within five days after the end of each month.

This indicates a clear departure from the previous system under the Repealed Excise Duty Act, which required declarations and payments within five days after each of three periods within a month. According to the Repealed Excise Duty Act, the earlier system involved three payments per month, including June, to avoid revenue being carried into the next fiscal year.

Adoption of HS Codes

The New Excise Duty Act revises the approach to listing taxable products by referencing the HS (Harmonised System) Code from the EAC common external tariff. This approach, outlined in Article 4 of the New Excise Duty Act and detailed in the annex, aims to simplify interpretation and avoid misclassification of products.

Key Change	Previous Approach	New Approach	Impact
Scope	Products only	Products and services	Broader tax base
Payment Frequency	Three times per month	Once per month	Simplified compliance
Product Classification	General descriptions	HS Code references	Improved clarity
Cosmetics Taxation	No excise duty	15% excise duty	New revenue stream

Clarifications and Updates on Tax Base and Registers

The New Excise Duty Act clarifies the tax base for cigarettes as a combination of the specific base and the retail price tax inclusive.

The New Excise Duty Act includes specific requirements for the sales register, specifying that it must indicate the price and quantity offered to every customer, their name, and address. While a similar requirement existed in the Repealed Excise Duty Act within the daily register obligations, the New Excise Duty Act reiterates and potentially clarifies this requirement in its dedicated article 10 on keeping registers.

Specific Product/Service Rate Adjustments

The annex to the New Excise Duty Act details the specific products and services subject to excise duty and their corresponding rates. The New Excise Duty Act specifically introduces a 15% excise duty on cosmetics, perfumes, and beauty products. In the Repealed Excise Duty Act, cosmetics, perfumes, and beauty products had no excise duty. The annex to the New Excise Duty Act also lists various other products (like juices, vehicles, confectionery) and services (like financial transactions) with their rates.

The annex to New Excise Duty Act also lists various other products, such as juice from fruits, vegetables, or other plants, various vehicle categories, sweets and chewing gums, and chocolates, along with their respective rates. Services are also listed in the annex, including telephone communications with escalating rates over three years (12%, 14%, then 15%), and an amount or commission charged on financial transactions at a rate of 15%.

The New Excise Duty Act formally repeals the Repealed Excise Duty Act and came into force on the date of its publication in the Official Gazette, May 29th, 2025.

Implications of the New Excise Duty Act to the Existing Tax Payers

The inclusion of services within the New Excise Duty Act broadens the tax base, capturing revenues from previously untaxed or differently taxed activities. The simplification of the tax period and payment frequency to a monthly basis is a positive administrative change that should ease compliance for businesses, although the requirement for payment within five days remains rigorous. The adoption of HS codes is a practical measure to improve consistency and clarity in product classification for tax purposes.

These changes will have direct implications for manufacturers, importers, and now, providers of specific services in Rwanda. Businesses must understand which of their products or services are now subject to excise duty, at what rates, and how to properly classify them using the HS codes. The shift to monthly filing requires adjustments to internal tax compliance calendars.

Given the introduction of services to the excise duty and the detailed HS code classification, seeking expert advice from tax professionals is highly recommended to ensure full understanding and accurate compliance with the New Excise Duty Act, thereby avoiding potential penalties.