As published on allafrica.com, Tuesday 7 December, 2021.
China and Rwanda have signed an agreement that will see the two countries eliminate double taxation with respect to tax on income and the prevention of tax evasion and avoidance (DTAA).
The agreement was signed in Kigali by Uzziel Ndagijimana, the Minister of Finance and Economic Planning and Rao Hongwei, the Chinese Ambassador to Rwanda.
The agreement is expected to play an instrumental role in promoting bilateral trade and investment between both countries, by removing the burden of double taxation on investors from both countries.
Avoidance of double taxation is an agreement between two countries aimed at avoiding or minimizing territorial double taxation of the same income by the two countries.
For instance, if a Chinese entrepreneur transacts business in Rwanda. The profits or gains thus accruing to the Chinese entrepreneur would previously be likely to be subject to tax in China where they are based and as well as Rwanda where the gains were derived.
This would see them taxed twice, their profit eroded consequently reducing chances of further investment. Following the new agreement comes in to avoid or minimize territorial double taxation of the same income by the two countries.
The existing DTAAs already in place in Rwanda have shown a big impact in terms of boosting the inflow of investment and trade from treaty partners.
Among the factors that informed the development officials include, growing number of investors coming from China, robust cross border trade, growing appetite for Rwandans to invest in China, relevance of tax systems as well as warm economic ties between the two countries.
"This agreement marks an important milestone in our quest to position Rwanda as a financial hub. Rwanda is in process of increasing its DTAA network to attract investment to Rwanda and from Rwanda to the region and beyond," Dr. Uzziel Ndagijimana, the Minister of Finance and Economic Planning said.
Rao Hongwei, the Chinese Ambassador to Rwanda said that the signing of the agreement and its affiliated protocol will effectively reduce the tax burden of taxpayers investing in any either country and further facilitate bilateral economic and trade cooperation.
"It will also make a good beginning of the countries' future cooperation in different fields including improving the capability of tax administration, strengthening the prevention system of tax evasion and avoidance, safeguarding bilateral tax interests and the international tax order," he said.
Nick Barigye, CEO of Rwanda Finance Limited said that the agreement signing marks another important step towards further strengthening this relationship to better support the expansion of Chinese businesses through Kigali International Financial Centre (KIFC)."
Currently, more than twelve (12) DTAAs have been signed and several others are under negotiation. The Government's target is to conclude more DTAAs in FY2021/22 in a bid to widen the DTAA network and improve the ease of doing business in Rwanda.
There has been a rise in numbers of investors entering the Rwandan market from countries where have previously entered DTTA agreement with Rwanda such as Turkey, Qatar, UAE, Mauritius, Morocco, South Africa, and Singapore.