Rwanda Revises Tax Policies to Promote Electric Vehicles and Address Aging Hybrids

Rwanda is revising its tax policy to promote eco-friendly transportation by amending VAT and excise duties on hybrid vehicles. The government is concerned about the environmental impact of aging hybrids, with 45% of imported models being between 10-14 years old. A new tax structure will incentivize the import of newer hybrids while encouraging a shift towards electric vehicles, aligning with the country’s environmental goals.

Rwanda is revising its tax policy on hybrid vehicles to promote eco-friendly transportation. Godfrey Kabera, the Minister of State for National Treasury, announced this plan during a parliamentary session on March 19. The proposed amendments, included in a new bill targeting the 2023 VAT law, seek to reintroduce an 18% VAT on hybrid vehicles, which had been tax-exempt since 2021 due to concerns about the aging fleet’s environmental impact.

Kabera highlighted that between July 2021 and July 2024, 45% of imported hybrid vehicles were aged between 10 and 14 years, restricting their environmental benefits. This is a significant concern considering hybrid vehicles were initially exempt from VAT to encourage adoption. Current data from the Rwanda Revenue Authority indicates that out of 7,172 hybrid and electric cars imported from 2020 to 2024, only 512 were electric, while 6,660 were hybrid, indicating a preference for older models.

MP Odette Uwamariya acknowledged the government’s intent to enhance financial capacity through citizen contributions but expressed a desire for a strategy that continues to promote newer hybrid models. She proposed maintaining the VAT exemption for newer hybrids to help reduce emissions from older, less efficient vehicles. In response, Kabera stressed that older hybrids tend to rely more on their petrol or diesel engines, defeating the purpose of promoting e-mobility.

Kabera detailed that VAT exemptions were originally established to encourage hybrid adoption, but as the vehicles age, their environmental efficiency diminishes. Therefore, his focus is on facilitating the entry of newer models into Rwanda’s automotive market. The government is amending the 2023 excise duty law to encourage newer hybrids, proposing excise duties that vary by vehicle age: 5% for vehicles up to three years old, 10% for those up to eight years, and 15% for older models.

Parliament has approved the relevance of this legislation, which will now be reviewed by a parliamentary committee before a final vote. This initiative underscores Rwanda’s broader environmental goals, aiming to make fully electric vehicles the preferred choice for its citizens.

Rwanda’s proposed revisions to tax policy on hybrid vehicles aim to combat the environmental challenges posed by an aging vehicle fleet. By reintroducing VAT and structuring excise duties based on vehicle age, the government seeks to promote the importation of newer, more efficient vehicles and ultimately encourage a shift towards electric vehicles. These changes reflect Rwanda’s commitment to enhancing eco-friendly transportation and reducing vehicle emissions.

Original Source: www.newtimes.co.rw