Rwanda is revising tax policies on hybrid vehicles to promote eco-friendly transportation. The proposed legislation includes reintroducing an 18 percent VAT on hybrids, due to aging vehicle concerns. The government aims to encourage the importation of newer models to support its environmental objectives and reduce emissions from older vehicles.
Rwanda is revising its tax policy on hybrid vehicles to promote environmentally friendly transportation, according to Godfrey Kabera, Minister of State for National Treasury. Recommendations in a proposed bill seek to reinstate an 18 percent VAT on hybrid vehicles that have been exempt since 2021, due to concerns about the environmental impact of aging imported hybrids. Kabera highlighted that 45 percent of hybrids imported between July 2021 and July 2024 were between 10 to 14 years old, which diminishes their intended ecological benefits.
Furthermore, data from the Rwanda Revenue Authority (RRA) indicates that a small fraction of the hybrid and electric vehicles imported—only 512 out of 7,172—were purely electric, with the majority being hybrids. Kabera articulated concerns about promoting older vehicles, noting, “This seems like we are encouraging the purchase of old vehicles, yet it comes with other issues including environmental pollution.” He reiterated the government’s commitment to fostering the use of electric vehicles.
MP Odette Uwamariya acknowledged the government’s rationale for increasing financial contributions from citizens but raised concerns about the disadvantages of removing hybrid vehicles from the VAT-exempt category. She proposed that efforts ought to be made to exclude older hybrids from this exclusion while encouraging the importation of newer, less polluting models to reduce overall emissions.
Kabera reflected on the initial introduction of the VAT exemption aimed at encouraging hybrid vehicle adoption but stressed that aging vehicles risk offsetting environmental goals. He stated, “When these hybrid cars get very old, they only operate using the fuel-powered part.” Consequently, the focus must shift towards newer hybrid models. To facilitate this, the government plans to implement an excise duty framework based on vehicle age.
The newly proposed excise duties are tiered by age: vehicles up to three years old will incur a 5 percent duty, those between three and eight years will receive a 10 percent duty, and vehicles over eight years old will face a 15 percent duty. Parliament has recognized the importance of the legislation, which will undergo further scrutiny before being put to a vote in plenary.
Rwanda is actively revising its tax policies to encourage the adoption of newer electric and hybrid vehicles and effectively reduce environmental pollution. The government emphasizes the importance of eliminating old hybrids from tax exemptions while designing incentives for newer models. This structured approach aims to increase the use of environmentally sustainable transportation and align with Rwanda’s environmental goals and commitments.
Original Source: www.newtimes.co.rw
