Renegotiated Double Taxation Avoidance Agreement between the Republic of Rwanda and Mauritius (“DTAA”).

Two years back, Rwanda requested a revision of its tax treaty with Mauritius through diplomatic channels.

Renegotiations started to bring along accommodation of sharing of taxing rights, rectifying issues on permanent establishment as well as sharing information insofar as tax matters as well as collection of taxes.

The new DTAA replaces the Mauritius-Rwanda Income Tax Treaty (2001), which was signed on 20 April 2013 and was ratified on 4 August 2014. The DTAA has retroactive application as from 1 January 2013 for Rwanda and as from 1 July 2013 for Mauritius.

The salient features of the DTAA are as follows:

  • 10% withholding tax on dividend;
  • 10% withholding tax on interest, with exception to governmental bodies; and institutions which are exempt;
  • 10% withholding tax on royalties.


Highlights of the main articles of the tax treaty

Article 4 - Resident

In addition to the standard tie-breaker rule in case of dual residence for persons other than individuals, which is usually the place of effective management, a new paragraph has been added, which infers that, in case of doubt in establishing where the person would be resident, the competent authorities of the contracting state would settle dual residence situation by mutual agreement procedure.


Article 7 – Business Profits

Includes a paragraph whereby no profits are attributed to a permanent establishment (PE) by reason of the mere purchase by that PE of goods or merchandise for the enterprise. This inclusion is beneficial for trading entities.
 

Article 14 - Capital Gains

Capital gains by a Mauritian resident Company from the alienation of immovable property in Rwanda may be taxed in the source state, that is, Rwanda. 
 

Article 21 – Other income 

Under the revised treaty, where income cannot be categorised under other articles, the taxing right remains with the state where the recipient is resident.
 

Article 24 – Mutual Agreement Procedure

A new paragraph has been added in Article 24, which provides that the competent authorities of the contracting states may through consultations develop appropriate procedures, conditions, methods and techniques for the implementation of the mutual agreement procedure. 


Conclusion

Despite the amendments of the DTAA, benefits of reduced withholding tax on dividends, interest and royalties remain. Further, in Mauritius, the company will be eligible to claim as credit the foreign tax paid against its tax liabilities. In addition, article 23 of the DTAA provides that Mauritius grants an indirect tax credit for the underlying corporate tax paid by a Rwanda resident company in which the Mauritius company controls directly or indirectly, at least, 5% of the capital. There is no withholding tax on dividend, interest and royalties payment by a GBC 1.