As Rwanda continues pushing toward a greener economy, hybrid vehicles have long benefited from a favourable tax regime—import duty, VAT, and excise duty exemptions.
However, under the new tax reforms effective fiscal year 2025/2026, this incentive structure is changing, particularly for those considering purchasing older hybrid models.
What’s changing?
According to the latest tax reform document released by the Ministry of Finance, the government is introducing a tiered excise duty on hybrid vehicles based on their age:
- 5% excise duty for hybrids under 3 years old
- 10% for those aged 4 to 7 years
- 15% for hybrids 8 years and older
Additionally, the government will reinstate an 18% VAT and 5% withholding tax on all hybrid vehicles—significantly increasing their final retail price.
Why This Matters
According to the Ministry of Finance and Economic Planning, the government observed that a large portion of imported hybrids were older models, which are less environmentally efficient than newer ones. This policy shift aims to discourage the importation of ageing hybrids that offer minimal carbon reduction benefits, the Finance Ministry says.
Cost Implications
For instance, an 8-year-old hybrid vehicle with a CIF (Cost, Insurance, and Freight) value of Rwf20 million could now attract:
- 15% excise duty = Rwf 3 million
- 18% VAT = Rwf 3.6 million
- 5% withholding tax = Rwf 1 million
Total in new taxes: Rwf 7.6 million, significantly inflating the purchase price.
Cost-Insurance-Freight (CIF) is a key valuation method used by the Rwanda Revenue Authority (RRA) to calculate import duties and taxes.
Advice for Buyers
If you’re planning to purchase a hybrid vehicle:
- Opt for newer models (preferably under 3 years) to benefit from the lower excise bracket. This means if you are planning to buy a Hybrid car this year, buy a 2022 model and above.
- Compare the total cost of ownership with electric vehicles, which remain tax-exempt.
- Be prepared for additional upfront costs compared to previous years.
While hybrid vehicles remain an environmentally conscious choice, they are no longer as tax-advantaged as before, especially older models. If your budget allows, going for a newer hybrid or switching to a fully electric vehicle could be a smarter move under Rwanda’s new green mobility strategy.
