Rwanda’s Initiative to Promote Electric Vehicles through Tax Reforms

Rwanda’s government is revising tax policies on hybrid vehicles to promote eco-friendly transportation. Key changes include reintroducing an 18% VAT on hybrids and introducing age-based excise duties to encourage newer models. These measures aim to reduce environmental pollution and align with Rwanda’s commitment to sustainable practices.

Rwanda is revising its tax policy on hybrid vehicles to promote eco-friendly transportation, as communicated by Godfrey Kabera, the Minister of State for National Treasury, during a parliamentary session on March 19. The proposed changes involve reintroducing an 18 percent VAT on hybrid vehicles, which had been exempt since 2021, aimed at addressing concerns over the environmental impact of older imported hybrids.

Kabera indicated that a significant percentage of imported hybrids are aged, with 45 percent between 10 and 14 years old, jeopardizing their environmental benefits. Data from the Rwanda Revenue Authority shows that only 512 out of the 7,172 hybrids and electric cars imported between 2020 and 2024 were electric, emphasizing the dominance of hybrid vehicles.

Member of Parliament Odette Uwamariya raised concerns about the removal of VAT exemptions for hybrids, questioning if there might be a way to allow newer models while excluding older ones to minimize environmental pollution. Kabera acknowledged the intention behind the VAT exemption but expressed worries about older hybrids’ reliance on fuel, thus counteracting the push for e-mobility.

He emphasized that the focus is now on introducing newer hybrid models as Rwandans have become accustomed to hybrid technology. The introduction of a bill to amend the excise duty law includes structure changes that incentivize the importation of newer hybrids, enforcing duty charges based on vehicle age. Approved by Parliament, this legislation is set to promote environmental sustainability in Rwanda’s automotive sector.

In summary, Rwanda’s government is taking significant steps to revise tax policies on hybrid vehicles, including the reintroduction of VAT and new excise duties based on vehicle age. This move aims to mitigate environmental degradation caused by older hybrid imports, while encouraging the adoption of newer, more sustainable electric vehicles. The government continues to align its transportation policy with broader environmental protection goals.

Original Source: www.newtimes.co.rw