What Rwanda is doing is developing an international financial centre with a clear proposition to investors: direct access to multiple African markets and a centralized, holding presence for investors to locate all their financial activities across Africa, within a safe, fully compliant, transparent environment underpinned by the rule of law and serviced by Rwanda’s fast-growing, high-quality financial services industry.
Under the Investment Promotion and Facilitation Law number 006/2021 dated 5 February 2021, KIFC Members have been granted tax incentives.
The common theme for KIFC incentives is that for investors to access them, they have to fulfill both minimum economic substance requirements and also demonstrate that management and control resides in Rwanda. The new positioning of Rwanda at regional and Pan African levels requires Rwanda to comply with international standards from the EU and OECD, in particular the assessments of preferential tax regimes conducted by the Forum on Harmful Tax Practices (FHTP), comprising more than 130 member jurisdictions of the Inclusive Framework.
In line with the new compliance standards on harmful tax activities, Rwanda’s new investment law has been designed with the following key principles and objectives:
- No competition on aggressive tax incentives that will be detrimental to the reputation of Rwanda,
- No (minimum) erosion of the existing tax revenue and
- Full compliance with international tax standards with the development of incentives requiring minimum economic substance.
For an investor to qualify for certain incentives under KIFC, they must demonstrate minimum economic substance and also show that the governance, management and control of the investment resides in Rwanda. Regarding management and control, for example, investors will need to demonstrate that:
- At least (minimum quorum) one director or twenty-five percent of directors reside in Rwanda,
- 50% of board members should be in Rwanda for board meetings. Virtual meetings are acceptable,
- Board meetings for strategic decisions should occur in Rwanda,
- Board resolutions should be in Rwanda for safe keeping,
- The Board must include at least two professional or qualified Rwandan residents,
- A physical office of the company in Rwanda,
- At least 30% of the professional staff are Rwandan,
- Threshold set for minimum annual expenditure in Rwanda and
- Threshold set for total assets to be consolidated in Rwanda.