Rwanda has introduced sweeping updates to its transfer pricing framework, establishing formal advance pricing agreements, stricter arm's length requirements, and simplified accounting relief for small businesses — with the changes taking effect under the country's 2022 income tax law.
Rwanda has published Ministerial Order No. 003/26/10/TC of 29 April 2026 in the Official Gazette, introducing updated transfer pricing rules under Law No. 027/2022 of 20 October 2022, the country’s new income tax law, accounting for small businesses, and tax loss management in Rwanda.
The Order establishes rigorous guidelines for transfer pricing between related entities to ensure transactions reflect fair market value. It introduces the arm’s length principle and outlines specific methodologies, such as the resale price and cost plus methods, to maintain fiscal transparency.
It provides a simplified accounting method tailored for small business owners to ease their administrative burden.
The Order also clarifies the conditions under which a taxpayer may carry forward business losses for a period exceeding five years.
Finally, the gazette addresses Value Added Tax (VAT) adjustments for digital services and offers tax exemptions for materials essential to the industrial sector.
Advance pricing agreements (APAs)
A major addition is the formal framework for Advance Pricing Agreements (APAs), which are agreements between a taxpayer and the tax administration (and potentially foreign authorities) to pre-determine the application of the arm’s length principle for specific controlled transactions.
To apply, a taxpayer must have an annual turnover of at least RWF 600,000,000 and controlled transactions valued at at least RWF 100,000,000.
Taxpayers must submit a written proposal to the Commissioner General via a designated portal and pay a non-refundable processing fee of FRW 6,000,000. Pre-application meetings may be held to discuss necessary information before the formal filing.
Agreements are generally valid for three years and can be renewed once. Taxpayers can also request a rollback of the agreement terms to cover up to two prior tax years.
Taxpayers must submit an annual APA compliance report along with their income tax return. The agreement may be declared null and void if the taxpayer engages in tax evasion, breaches agreement provisions, or if the actual business situation deviates significantly from the agreed facts.
General rules on transfer pricing
The Ministerial Order No. 003/26/10/TC establishes comprehensive rules for transactions between related persons, ensuring they adhere to the arm’s length principle (prices equivalent to those between independent parties).
These rules apply if one party is located in Rwanda or if a transaction involves a permanent establishment in Rwanda. They also apply to transactions with persons in “beneficial tax regimes”—jurisdictions where income is not taxed or taxed at a maximum rate of 15%.
The Order specifies five standard methods for determining arm’s length prices: Comparable Uncontrolled Price (CUP), Resale Price, Cost Plus, Transactional Net Margin, and Transactional Profit Split. Alternative methods may be used only if the tax administration is satisfied that none of the approved methods are reasonable.
Taxpayers must maintain a transfer pricing policy, a local file, and a master file. Documentation should be prepared before the income tax declaration deadline and provided to the tax administration within seven days of a written request.
Taxpayers with an annual turnover below FRW 600,000,000 are generally exempt from preparing this documentation, provided their controlled transactions do not exceed specific value thresholds.
Simplified accounting for small businesses
Small businesses that choose to pay tax on actual profits are permitted to use a simplified accounting method. This method requires maintaining three primary records:
- A record of all daily sales (cash and credit).
- A record of all daily purchases of goods or services.
- A record of all cash transactions, showing entries and expenditures. Standardised forms for these records are provided in the annexes of the Order.
Loss carryforward extensions
While standard tax losses are carried forward for a limited period, taxpayers can apply for authorisation to extend this for more than five tax periods.
The taxpayer must prove that the loss resulted from investments, provide certified financial statements, and demonstrate they have not distributed profits or been guilty of tax evasion in the previous five years.
The request must be submitted at least 60 days before the end of the year in which the application is filed.
The extension is limited to a maximum of five additional years. Authorisation can be withdrawn if the taxpayer fails to pay taxes on time, distributes profits, or is found guilty of tax evasion.
