Rwanda is yet to experience amendments in Law no16/2005 of 18/08/2005 on direct income taxes and all its first legal provisions as the lawmakers, and Rwanda Revenue Authority (RRA) met to discuss the changes. The proposed amendments made other members of parliament question the reason for the introduction of such changes.
The new Income Tax Bill stipulates that a levy of 5% should be imposed on the sale or free transfer of immovable property. The tax is only imposed if the value exceeds the threshold set by the Ministry of Infrastructure. The threshold has been set to homes which are worth more than Rwf30 million. The bill, however, has four exceptional cases which include the transfer of immovable property to surviving spouse under the regime of community irrespective of age. Besides, the transfer of immovable property to a child under 21 years, sale of property by a registered real estate developer and sale of an affordable residential house whose value is determined by order of the minister in charge of infrastructure are exceptional cases.
The Parliamentary Standing Committee required further details from Amb. Claver Gatete, the Minister for Finance and Economic Planning and Richard Tusabe, RRA Commissioner-General who responded appropriately. Amb. Gatete defended the move saying that some individuals generate profit from selling of houses without paying taxes to the government. He further added that citizens should be principled and be ready to pay taxes on capital gains since all countries collect capital gain taxes.
Considering the set threshold of homes which are worth more than Rwf30 million, MP Theobald Mporanyi perceived that this set threshold was low since other people use Rwf50 million in the construction of family houses and its transfer should not be perceived that the individuals are making money. Besides, he said that for an affordable house, the investor incurs between Rwf30 million and Rwf50 million considering factors like its location or subsidized funds from the government. Therefore, from his view, he said that if one takes into account the cost of installing electricity and water, the threshold should be Rwf50 million.
MP Theobald Mporanyi also requested to know why the reason behind imposing the tax on people who sell their homes for social purposes or transfer to relatives.
The MPs, however, said the exceptions specified in the bill should be broadened for instance there should be no limitation for transfer of property to relatives. Besides, the sale of property during a public auctioning process and a sale made as a result of an expropriation process for public interest should be excluded from the new taxation. Responding to the raised concerns, RRA’s Tusabe said that the suggestions would be considered before passing the bill into the law.
