Rwanda’s Tax Policy Revision: A Step Towards Promoting Electric Cars

Rwanda plans to revise its tax policy on hybrid vehicles to promote eco-friendly transportation. Proposed measures include reintroducing an 18% VAT on hybrids exempted since 2021. The government aims to phase out older vehicles to meet environmental goals, emphasizing a shift towards newer models and fully electric vehicles.

Rwanda is aiming to enhance its eco-friendly transportation initiatives through a revision of tax policies concerning hybrid vehicles. On March 19, Godfrey Kabera, Minister of State for National Treasury, addressed Members of Parliament regarding these changes, which focus on reintroducing an 18 percent VAT on hybrid vehicles, a status that had been exempt since 2021.

The motivation behind this tax revision stems from a concern about the aging fleet of imported hybrid vehicles, which, according to Kabera, poses a challenge to the nation’s environmental protection goals. He emphasized that a significant portion, 45 percent, of hybrid vehicles imported between July 2021 and July 2024 were between 10 to 14 years old, thus limiting their environmental benefits.

Data from the Rwanda Revenue Authority highlights that among 7,172 imported hybrid and electric cars from 2020 to 2024, only 512 were electric, illustrating a significant reliance on older hybrid technology. Kabera remarked, “This seems like we are encouraging the purchase of old vehicles, yet it comes with other issues including environmental pollution.”

Member of Parliament Odette Uwamariya expressed support for the government’s financial strategies but raised concerns about the removal of the VAT exemption for hybrid vehicles. She proposed a solution that would limit the exemption to newer hybrid models to support emissions reduction efforts.

Kabera acknowledged the original purpose of the VAT exemption was to promote the adoption of hybrid vehicles but noted their aging impacts. He stated, “When these hybrid cars get very old, they only operate using the fuel-powered part. As a result, we are not fully achieving our goal of promoting e-mobility.”

Moving forward, he outlined that the government will encourage the importation of newer hybrid technologies, as familiarity with hybrids has increased among Rwandans. To facilitate this, the proposed excise duty structure will charge based on vehicle age, incentivizing the importation of newer hybrids with longer battery lives.

Under the proposed duties, vehicles less than three years old will incur a 5 percent excise duty, while those aged three to eight years will face a 10 percent duty, and those over eight years will be subject to a 15 percent duty. Parliament has already approved the necessity of this legislation, which will undergo further examination by a parliamentary committee before a final vote.

Rwanda’s initiative to revise its taxation on hybrid vehicles aims to foster environmentally sustainable transportation by reducing reliance on older models. The proposed measures emphasize the importance of encouraging newer hybrid imports and shifting towards fully electric vehicles, thereby aligning with the nation’s broader environmental goals. Through structured taxation based on vehicle age, the Rwandan government seeks to modernize its automotive market while continuing to prioritize ecological considerations.

Original Source: www.newtimes.co.rw