Rwanda’s New Capital Gains Tax was recently legislated by the Rwandan Government implementing a new 29% Capital Gains Tax on profits from property sales which has brought substantial changes in the real estate landscape. This legislative change, signed into law on September 5, 2023, aims to regulate profits from property sales. In addition It introduces a new financial consideration for sellers.
Understanding the Basics.
How Does the Tax Work?
The essence of this new law is straightforward. If you sell your property for more than the purchase price, you’re subject to a 29% tax on the profits. However, there’s a clause designed to cushion the impact for smaller gains. If the 29% of your capital gains amounts to less than 2.5% of the total sale value, you’ll pay 2.5% of the sale value instead.
Who Does It Affect?
This tax applies specifically to property sellers who are making a profit compared to their original purchase price. Note that the seller must assume responsibility for this tax and settle it before the buyer can proceed with the transfer of ownership.
Implementation Details and Timeline
By the latest update on November 8, 2023, Rwanda has replaced the previous 8% transfer fee with the new capital gains tax for voluntary sale transactions that yield capital gains. While the government hasn’t officially announced the implementation date for the tax, staying updated through official channels is crucial.
Key Takeaways for Property Sellers
Tax Calculation: Calculate the tax by comparing the profit made from the property sale to the original purchase price.
Consideration for Smaller Gains: The provision allowing for a lower tax rate (2.5% of the sale value) for gains below a certain threshold provides relief for sellers with smaller profits.
Seller’s Responsibility: Sellers are accountable for paying the tax before the ownership transfer to the buyer can proceed.
Conclusion
The introduction of the 29% or 2.5% of Rwanda’s New Capital Gains Tax signifies a change in real estate. Property sellers must be proactive in understanding their tax obligations. You can achieve this by seeking professional advice when needed and staying updated on official announcements.
Disclaimer: This article is for informational purposes only and should not be considered as legal advice. For specific inquiries regarding the application of the capital gains tax to your situation, consult a qualified legal or tax professional.
