Rwanda has reintroduced value-added tax (VAT) on hybrid vehicles in an effort to encourage the transition to pure electric mobility, Finance and Economic Planning Minister Yusuf Murangwa announced Tuesday.
Speaking at a press conference, Murangwa outlined several tax policy reforms approved by the Cabinet, including the VAT adjustment for hybrid vehicles. A hybrid vehicle combines an internal combustion engine, powered by petrol or diesel, with an electric motor, making it more fuel-efficient and environmentally friendly than traditional petrol or diesel cars.
The Ministry of Finance stated that to promote green mobility and reduce carbon emissions, hybrid vehicles will continue to benefit from a 25% import duty exemption. However, they will now be subject to an 18% VAT, ending the exemption that had been in place since 2021.
“We want to encourage a transition that moves from hybrid to pure electric,” Murangwa said. “Pure electric cars will be very cost-effective going forward for almost everyone, but also for environmental reasons.”
Murangwa noted that electric vehicle technology is advancing, with prices gradually declining. Under the new reforms, hybrid cars will also be subject to a 5% withholding tax.
Electric vehicles, however, will remain fully exempt from VAT to promote green transportation. This measure is set to take effect in the 2025/2026 fiscal year. “We want to encourage people to go even faster to electric vehicles,” Murangwa added. “At the moment, fuel vehicles are relatively expensive in terms of taxes compared to hybrid cars. Electric vehicles, on the other hand, are very affordable.”
To incentivize the importation of newer hybrid vehicles with longer battery life, the new measures introduce an age-based excise duty structure: 5% for vehicles under three years old, 10% for those between four and seven years, and 15% for those eight years and older.
Murangwa emphasized that importing older hybrid vehicles poses environmental concerns and offers little benefit in terms of hybrid efficiency, making stricter regulations necessary. “In the past, we waived taxes on hybrid cars. Currently, almost 45% of cars being imported into the country are hybrid cars. But among them, about 43% of them are very old — they were manufactured over 10 years ago,” he said.
The minister noted that hybrid vehicles with battery life between eight and ten years are more prone to failure, often forcing owners to rely on petrol or diesel, which undermines the goal of promoting green mobility. As such, the country is encouraging the use of newer hybrid cars through a lower excise duty rate, with the goal of significantly reducing petroleum product consumption and protecting the environment.
According to data from the Rwanda Revenue Authority, of the 7,172 hybrid and electric cars imported into Rwanda from 2020 to 2024, only 512, or slightly over 7%, were electric, while 6,660, or more than 92%, were hybrid.