Last week, Rwanda signed and ratified the Convention on Mutual Administrative Assistance in Tax Matters (MAAC).  MAAC is a multilateral treaty instrument used by countries to exchange information for tax purposes to better enforce their domestic laws. The treaty will enable Rwanda to exchange tax information with 141 countries that are currently signatory to the MAAC and boost co-operation in tax matters with regard to countering international tax evasion and avoidance. 

By signing MAAC, Rwanda commits to comply with international standards on tax transparency and exchange of information as observed by the European Union and Organization for Economic Cooperation and Development (OECD).

With only 10 Agreements for Elimination of Double Taxation with respect to Tax on Income and the Prevention of Fiscal Evasion and Avoidance (DTAA) in force, Rwanda has a limited network concerning exchange of tax information and therefore exposed to international tax evasion, possible illicit financial flows and profit shifting. By Signing the MAAC, Rwanda reaffirmed its commitment to fight offshore tax evasion and avoidance by implementing the OECD transparency standards.

The multilateral treaty will enable Rwanda to increase its tax revenue mobilization using different standards. These include all forms of Exchange of Information (EOI), namely exchange of information on request (EOIR), automatic exchange of information (AEOI), spontaneous exchange of information (SEOI) as well as simultaneous tax examinations, and tax examinations abroad, the assistance in recovery of tax claims and the assistance in the service of documents.

Rwanda will access the capacity building and support provided by the Global Forum on Transparency and exchange for tax purposes secretariat to help in implement the standards of EOIR and AEOI as provided for under MAAC. It will also have access to Global Forum rating to attract foreign direct investments, given that a number of international financial institutions incorporate Global Forum ratings into their policies, determining the direction of investments. The move will reaffirm Rwanda’s profile as a reliable location in which to do business.

In a move to boost inbound investment and positioning Rwanda as a financial hub in Africa, Rwanda is putting the framework in place to launch the Kigali International Financial Centre (KIFC). Having a Financial Center as a country, it is prerequisite to comply with international standards. Furthermore, it is important to note that KIFC project will lead to more international financial players in Rwanda and the potential need for exchange of taxpayer information in and outside the country is inevitable. A comprehensive set of legal reforms, regulations and global initiatives are currently supporting the development of KIFC including becoming party to MAAC. 

MAAC will provide Rwanda with a robust framework for complying with international standards which is mandatory for success of KIFC. Those standards include but no limited to data safeguard and confidentiality which goes hand in hand with exchange of tax information on request, automatic exchange of financial account information, country by country reporting, and spontaneous exchange on tax ruling.   An attractive KIFC requires that a framework on confidentiality and safeguarding of data is implemented, and it requires tax authorities to have information security management arrangements that adhere to international best practice.

By becoming party to the MAAC, Rwanda will secure a conducive environment, which is key for attracting potential investors by offering certainty and assurance to investors regarding the country’s transparency and effort to comply with international standards. 

Rwanda is scheduled to be peer reviewed on the exchange of information on request standards in 2023, the outcome or “Rating” by the OECD/GF will send a signal to investors on Rwanda’s position vis a vis to the standards. This will play I huge role in investors decision making especially when deciding where to invest.