Rwanda preparing to launch and implement its Startup Act, which the government hopes will spur the development of the country’s tech ecosystem.
Details
The Rwandan government hired the Innovation for Policy Foundation (i4Policy), a firm that has been central to the development of other startup Acts including in Tunisia and Senegal to help with its Startup Act.
The government launched a Policy Hackathon in May which brought together key local founders and investors to ensure the Rwanda Startup Act is informed by their experiences building and growing businesses.
Incentives
Here are some of the proposed incentives in the Startup Act:
1. Zero-rated PAYE increased to Rwf1 million (~$830)
This reduces the cost to startups of employing talent, meaning that PAYE is charged at 0 percent for a portion of salary less than Rwf1 million. According to the draft Act, this protects employees earning more than Rwf1 million.
2. Accelerated depreciation (100% per year)
Using accelerated depreciation allows startups to fully account for expenditure on research and development as well as asset acquisition, which in the long run reduces corporate income tax (CIT) obligations.
By using accelerated depreciation, an asset with a tax basis may now be written off more quickly. By doing this, a business’s taxable income can be reduced, and businesses can use those tax savings to invest back into their business.
3. VAT and CIT taxes exempted
One proposal will exempt players in the ecosystem from paying value-added tax, and corporate income tax to limit administrative costs and increase working capital.
If eventually approved, industry players would be exempted from paying both taxes for a period of five years.
4. Credit guarantee scheme
This provides more access to credit and attracts investments.
5. Intellectual property support
This will provide technical support to acquiring trademarks and patents, in order to support startups to monetize their innovations and to serve national welfare.
6. Seed innovation fund
Provides more working capital, easier to attract investments.
7. Immigration incentives
To attract talent and promote growth.
8. Leave for the creation of startups
Encourage startup creation by minimizing risks for an individual founder in case the startup fails.
9. Exemption from the payment of tax on shares
Exemption of all taxes chargeable on shares owned by its founders and its employees for the whole duration of the startup certificate.
