Rwanda Seeks to Promote Electric Vehicles by Revising Hybrid Tax Policy

Rwanda is revising its tax policy on hybrid vehicles to promote eco-friendly transportation, reinstating an 18 percent VAT on hybrids to address concerns over aging imports. Minister Godfrey Kabera emphasized the environmental impact of older hybrids and proposed structured excise duties based on vehicle age. The goal is to encourage the import of newer models and advance the use of full electric vehicles.

Rwanda is planning to amend its tax policy concerning hybrid vehicles to promote eco-friendly transportation. Godfrey Kabera, the Minister of State for National Treasury, informed Members of Parliament on March 19 that the bill would reinstate an 18 percent VAT on hybrids, previously exempt since 2021. This shift is aimed at addressing environmental concerns surrounding the aging fleet of imported hybrid vehicles.

Kabera highlighted that between July 2021 and July 2024, 45 percent of hybrids imported were between 10 to 14 years old, which hampers their intended environmental benefits. The Rwanda Revenue Authority reported that out of 7,172 hybrid and electric cars imported from 2020 to 2024, only 512 were all-electric, while the overwhelming majority, 6,660 units, were hybrids. He voiced that the current trend seems to encourage purchasing older, less efficient vehicles, thereby contributing to environmental pollution.

Member of Parliament Odette Uwamariya acknowledged the government’s attempts to boost financial contributions from citizens but raised concerns regarding the withdrawal of VAT exemption for hybrids. She suggested that measures could allow for the exclusion of older hybrid models while still fostering the import of newer, cleaner alternatives to reduce emissions.

Kabera pointed out that the initial VAT exemption for hybrids was to spur their adoption in Rwanda. However, he expressed that as hybrids age, their reliance on petrol or diesel increases, undermining environmental objectives. He emphasized that the focus should be on importing newer hybrid models to ensure they are effectively contributing to e-mobility.

In alignment with this initiative, the government has proposed a bill to amend the 2023 excise duty law, aiming to incentivize newer hybrid models through structured excise duties based on vehicle age. Under this proposal, a vehicle manufactured within three years would incur a 5 percent excise duty, while older vehicles would be taxed at higher rates of 10 or 15 percent, depending on their age. This legislation has received parliamentary approval and will undergo further analysis before being voted on in plenary sessions.

In conclusion, Rwanda’s initiative to revise the tax policy on hybrid vehicles aims to foster a more environmentally sustainable transportation sector. While reinstating VAT for hybrids and introducing structured excise duties based on vehicle age, the government underscores its commitment to promoting newer models, mitigating environmental pollution, and enhancing the adoption of fully electric vehicles. The proposed changes reflect a strategic approach to improve Rwanda’s ecological footprint and transition towards a cleaner automotive ecosystem.

Original Source: www.newtimes.co.rw