October 5, 2021: To better position Rwanda as a financial hub, a broader treaty network is a prerequisite. On Wednesday 29th September 2021, the Grand Duchy of Luxembourg and the Government of Rwanda signed an agreement for the elimination of double taxation with respect to tax on income and the prevention of tax evasion and avoidance (DTAA). This marked another milestone towards securing a certain and conducive business environment for cross border income.

In addition to attracting foreign investors in Rwanda, the move will play an invaluable role in encouraging the outflow of investment by ensuring the protection from discriminatory tax measures, providing an attractive withholding tax rate and a robust framework for dispute resolution.

Currently, more than twelve (12) DTAAs have been signed and several others are under negotiation. The Government’s target is to conclude around ten (10) DTAAs in FY2021/22 in a bid to widen the DTAA network. 

The existing DTAAs already in place have shown a big impact in terms of boosting the inflow of investment and trade from treaty partners. It is pertinent to note that we have seen a pattern in terms of where investors are coming from vis a vis to countries that we have concluded a DTAA with. Good examples include, but are not limited to, large numbers of investors coming from Turkey, Qatar, UAE, Mauritius, Morocco, South Africa, Singapore and Jersey.

Rwanda has been negotiating, and will continue to negotiate, with countries that have a sound tax system to avoid the treaty shopping practice. This practice is commonly used by multinational enterprises as a profit-shifting window for foreign investors routing investments through a conduit entity in the low tax jurisdiction hub, or by domestic investors “round-tripping” their investments through the low tax jurisdiction hub.