The controversial provisions of the new property tax law that could see rates paid by homeowners and tenants rise steeply across Rwanda’s urban areas are to be repealed by Parliament, RwandaPost has learnt.

The much-disputed immovable property tax hike in the 2018 law had not been brought into force as the treasury suspended its enforcement twice amid public uproar and concerns from low income property owners.

With effects of the pandemic and subsequent shocks still running deeper into the lives of households, there are growing concerns that a rise in property tax could exacerbate plight of tenants as landlords would factor new rates in rents.

It could worsen the housing crisis and generally the cost of living in the capital Kigali and secondary cities with ever-rising housing supply deficits.

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Repeal

In a Bill before Parliament, the executive wants at least five articles of the 2018 property tax legislation repealed. The articles in question have been subject of controversy.

Among them is the provision on land tax threshold, and the punitive tax applicable on both unexploited or excess land parcels. For instance, the land tax threshold, which District councils had leeway to set at as higher as at Rwf300 per square metre will be capped at Rwf80 per square metre in proposed amendments.

This is expected to offer reprieve to landowners in Kigali and other urban Districts where authorities had more than doubled rates charged per square metre to between Rwf200 and Rwf220, or beyond.

The proposed changes will equally see the 100 per cent punitive tax rate for undeveloped land parcels scrapped. The same applies to the additional 50 per cent tariff charged on each square metre exceeding the standard plot size of 300 square metres.

The provisions on the punitive tax rates on unexploited land, and additional rates for land exceeding the standard size permissible for construction of buildings are among those that are going to be repealed in proposed amendment.

Tax burden

“The law has been reviewed in order to respond to the request of taxpayers for a review of the tax on immovable property and trading licence,” the executive indicated in the explanatory attached to the Bill sent to Parliament.

The note further indicates that several other tax related legal instruments, including one on excise duty and income tax, are being reviewed, and key changes being proposed aim at reducing tax burden to boost compliance.

However, Government is introducing a new tax on sale of immovable property at 2 per cent of commercial value if the seller is a taxpayer registered for income tax, and at 2.5 per cent for the person not registered for income tax.

Immovable property transactions not exceeding Rwf5 million shall, however, be exempted.

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Exemption

Tax exemption also applies to building intended by the owner to be occupied as his or her dwelling and its annex buildings located in a residential plot for one family are exempted for property tax, as well as immovable property determined by the District Council as owned by vulnerable persons.

Exemption also apply for land used for agricultural, livestock or forestry activities whose area is equal to or less than two hectares.