With the goal of attracting more foreign investment and spurring growth, in 2015, Rwanda released a new investment code. Law No. 6/2015 of 28 March 2015 Relating to Investment Promotion and Facilitation (“Law No. 6/2015”) replaces Law no. 26/2005 of 17 December 2005. The new law departs from the old law in important respects. The new law inter alia spells out investor rights and investor guarantees in greater detail (Chapter II), offers qualifying registered investors significantly more fiscal and non-fiscal incentives (Annex 1), makes it easier and faster to obtain an investment certificate in Rwanda, and makes provision for investor aftercare services. Furthermore, the new law addresses investment registration (Chapter III), defines the obligations of a registered investor (Chapter IV), and addresses change, suspension or termination of investment operations (Chapter VI). With Law No. 6/2015, the Rwandan Government is clearly signaling to foreign investors that Rwanda is ready for business. The stated purpose of the new law is “to promote and facilitate investment in Rwanda.” Foreign investors will be encouraged to learn that all business sectors are open to private investment regardless of the origin of the investor. Thus, while foreign investors are encouraged to invest in certain priority sectors, no sector is off limits.
Who is a Foreign Investor? Who is a Registered Investor?
Both natural and legal persons qualify as ‘foreign investors’ under Law No. 6/2015. A foreign investor is defined as either: (1) “a natural person who is not a citizen of Rwanda or of a member State of the East African Community (EAC) or the Common Market for Eastern and Southern Africa (COMESA),” (2) “a business company or a partnership not registered in Rwanda, a member state of the East African Community (EAC) or Common Market for Eastern and Southern Africa (COMESA),” or (3) “a business company or a partnership registered in Rwanda whose foreign capital from countries other than East African Community (EAC) or Common Market for Eastern and Southern Africa (COMESA) member States is at least fifty-one percent (51%) of the invested capital.”
Registration of investment is important under the new law. A ‘registered investor’ is defined as “[a]n investor who holds an investment certificate.” Only qualifying registered investors are entitled to the special incentives that the new law offers. Furthermore, the arbitration provision of the new law applies only to registered investment enterprises.
Investor Rights & Guarantees
Under the old law, the Rwandan Government had “the responsibility of protecting the capital invested” and registered investment enterprises were generally protected against expropriation. The new law spells out much broader rights and protection for foreign investors and is more detailed and specific about the rights and entitlements. Specifically, the new law:
- contains an unequivocal declaration of openness for business (Article 3);
- provides for the protection of the investor’s capital and assets (Article 6);
- provides for the protection of intellectual property rights (Article 7); and
- guarantees investors the right to repatriation of capital and assets (Article 8).
Without prejudice to the provisions of other laws, an investor also has the right to:
- engage in economic activities of his/her choice;
- recruit or dismiss employees;
- market goods and services;
- freely establish business management methods;
- freely choose sources of supplies; and
- freely use property.
Foreign investors are guaranteed equal treatment with Rwandan investors “with regard to incentives and investment facilitation.”
Openness for Business
The new law declares unequivocally that “[a]ll business sectors shall be open to private investment regardless of the origin of the investor.” A foreign investor “may invest and purchase shares in an investment enterprise in Rwanda.” No economic sector is off limits although the law identifies some sectors as “priority economic sectors.” Thus, while investors are encouraged to invest in priority economic sectors, investment in these sectors is not mandatory. The law explicitly identifies seven sectors as ‘priority economic sectors’ and these are: “export,” “industrial manufacturing,” as well as “investment in the sector of energy, transport, information and communication technologies, financial services and construction of low-cost housing.” The Minister in charge of finance is also authorized to establish by an Order, “other priority sectors, if deemed necessary.
Rwanda’s New Investment Law – Priority Economic Sectors
- Industrial Manufacturing
- Information and Communication Technology
- Financial Services
- Construction of Low-cost Housing
Source: Law No. 6/2015
Ease of Doing Business
The new law promises speedy registration of investment and details the registration procedure. The new law also specifies the timeframe for the issuance of investment certificate. According to Article 12, any applicant for investment certificate who fulfils specified registration requirements and is approved by the business sector in which he/she intends to operate, “shall be issued with an investment certificate within two (2) working days from the date of receipt of the application by the Board.” An applicant whose application for an investment certificate is rejected is also entitled to notification in writing within two (2) working days of the reasons for the rejection. Under the old law, investment certificates were to be issued within ten (10) working days from the date of receipt of the application.
Broad Definition of Investment
Investment is broadly defined as the “use of tangible or intangible assets for profit-making purposes with the exception of all retail and wholesale trade.” In turn, an investor is defined as “natural or legal person that invests in an investment enterprise in Rwanda.” Unlike the old law that specified a minimum amount an investor had to invest to qualify as a “foreign investor,” the new law does not specify a minimum. However, higher levels of investment qualify investors for more special incentives.
“Foreign Investor” Defined
New Law: “Foreign investor means “(a) a natural person who is not a citizen of registered in Rwanda, a member state of the East African Community (EAC) or Common Market for Eastern and Southern Africa (COMESA); (b) a business company or a partnership registered in Rwanda whose foreign capital from countries other than East African Community (EAC) or Common Market for Eastern and Southern Africa (COMESA) member States is at least fifty-one percent (51%) of the invested capital; registered in Rwanda, a member state of the East African Community (EAC) or Common Market for Eastern and Southern Africa (COMESA); (c) a business company or a partnership registered in Rwanda whose foreign capital from countries other than East African Community (EAC) or Common Market for Eastern and Southern Africa (COMESA) member States is at least fifty-one percent (51%) of the invested capital.”
Old Law: “Foreign investor” means a physical person, a business company or a partnership that invests a minimum financial capital equivalent to at least two hundred and fifty thousand American Dollars (US$ 250,000) in foreign capital in an investment enterprise to which this Law applies
Source: Law No. 6/2015 and Law No. 26/2005.
Although the new law does not use the term ‘national treatment,” it does protect investors against discrimination. Article 5 declares that a foreign investor “shall be given equal treatment with Rwandan investors with regards to incentives and investment facilitation.” The law does not appear to explicitly guarantee most-favored nation treatment, however.
Old Law: “Foreign investor” means “a physical person, a business company or a partnership that invests a minimum financial capital equivalent to at least two hundred and fifty thousand American Dollars (US$ 250,000) in foreign capital in an investment enterprise to which this Law applies.”
Old Law: “Local investor” means “a physical person, a business company or a partnership that invests a minimum capital of at least one hundred thousand American Dollars (US$100,000) in an investment enterprise to which this law applies.”
Source: Law No. 26/2005.
Property Rights and Protection
With regards to property rights and protection, the new law guarantees to investors “the right to own private property, whether individually or in association with others,” and declares that “[p]rivate property, whether individually or collectively owned, shall be inviolable.”
Intellectual Property Rights
Departing from the old law, the new law provides explicitly for the protection of intellectual property rights. Article 7 declares that “[t]he investor’s intellectual property rights and legitimate rights related to technology transfer shall be guaranteed in accordance with relevant laws.” The law does not define “intellectual property rights” and answers to that will have to be found in other laws in operation in Rwanda.
Article 6 of Law No. 6/2015 declares unequivocally that “No investment, interest in or right over any property forming part of [an] investment shall be seized or confiscated except where provided under relevant laws.” Expropriation in the public interest is permissible but must be provided by law and must be accompanied by “fair compensation in accordance with relevant laws.”
Repatriation of Capital
Departing from the old law, Law No. 6/2015 explicitly provides for the repatriation of capital and assets. This right is conditioned on an investor “fulfilling all tax obligations in Rwanda.” Foreign investors are entitled to repatriate: capital; profit derived from business activities; debt and interest on foreign loans; proceeds from the liquidation of investment; and any other assets of an investor.
Protection Against Arbitrary Measures
Law No. 6/2015 protects investors against arbitrary measures in at least six ways.
- First, it specifies the time-frame within which an application for an investment certificate should be approved or denied.
- Second, an investor is entitled to a written reasoned response whenever an application for an investment certificate is rejected.
- Third, it spells out clear grounds for the cancellation of an investment certificate and the procedures for such cancellations.
- Fourth, in the event that a decision is made to cancel an investment certificate, it requires that Board provide “a written notice to the investor providing details of grounds for the proposed cancellation” and provide an opportunity for the investor to offer written explanations regarding proposed cancellation.
- Fifth, an investor who is threatened with the revocation of an investment certificate has ten (10) working days from the date of receipt of the request for explanation to respond to such a request; and
- Sixth, an investor whose investment certificate is cancelled has a right to appeal the decision and may do so within ten (10) working days of the Board’s decision.
Investor Aftercare Services
The new law affords investors a host of aftercare services. The law stipulates that the Rwanda Development Board (“Board”) “must facilitate investors” with procuring a number of services including: acquiring visas and work permits, water and electricity connection, getting environmental impact assessment, obtaining necessary licenses, and “any other appropriate investment-related support that may be required.” The Board is also tasked with facilitating amicable settlement of disputes that may arise between an investor and one or more public organs.
Investor-State Dispute Settlement Mechanism
Law No. 6/2015 provides for investor-State dispute settlement (ISDS). Pursuant to Article 9, “dispute arising between a foreign investor and one or more public organs in connection with a registered investment enterprise shall be amicably settled.” In the event that amicable settlement cannot be reached, parties are entitled to “refer the dispute to an arbitration agency as agreed upon in a written agreement between both parties.” Law No. 6/2015 further provides that “[w]here no arbitration procedure is provided under a written agreement, both parties shall refer the matter to the competent court.” Investment agreements thus remain very important under the new law and determines whether a matter is referred to arbitration and on what terms. Regarding dispute settlement, it is equally important to note that Rwanda has ratified the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) as well as the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (“New York Convention”). In 2012, the Government of Rwanda launched the Kigali International Arbitration Center.
Obligations on Investors
The new law imposes some obligations on investors. Chapter IV of the law is titled “Obligations of Registered Investor.” First, investors are expected to pay their taxes and to file their tax returns. The right of an investor to repatriate capital, profits, and other assets out of Rwanda is contingent on the investor “fulfilling all tax obligations in Rwanda.” Second, a registered investor has an obligation to inform the Rwanda Development Board (“Board”), in writing and in a timely fashion, before changing the nature of investment operations, suspending investment operations, or terminating investment operations. Additional obligation on registered investors includes the obligation:
- “to implement his/her proposal in accordance with his/her business plan submitted in the application for an investment certificate;”
- “to properly keep financial and accounting records of the investment enterprise and submit a copy of a certified financial report to the Board within three (3) months following the preceding financial year;”
- “to keep data relating to operations of the investment enterprise for a period of five (5) years;”
- “to facilitate employees of the Board in the performance of their monitoring duties;”
- “to respond in a period prescribed by written notice to any query from the Board in connection with operations of the investment enterprise;” and
- “to register with the tax administration and file timely tax returns even in case of entitlement to tax exemption.”
Annexed to Law No. 6/2015 is a document titled “Special Incentives for Registered Investors.” Compared to the old law, the new law offers an impressive array of fiscal and non-fiscal incentives. The special incentives are available only to registered investors that meet stipulated conditions. The special incentives include:
- Preferential corporate income tax rate of zero per cent (0%);
- Preferential corporate income tax rate of fifteen percent (15%);
- Corporate income tax holiday of up to seven (7) years;
- Corporate income tax holiday of up to five (5) years;
- Exemption of customs tax for products used in Export Processing Zones;
- Exemption of Capital Gains Tax;
- Value Added Tax refund;
- Accelerated depreciation; and
- Immigration Incentives.
Regarding immigration incentives, the old law stipulated that “[a]ny investment enterprise that invests at least a capital of one hundred thousand United States Dollars (USD100, 000.00) shall automatically give the owner the right to recruit three expatriates.” The old law also allowed a foreign investor and his or her expatriates “a free initial work permit and a free residence visa valid for a period of one (1) year.” To acquire a permanent residence status under the old law, an investor needed to deposit an amount equivalent to five hundred thousand United States Dollars (USD 500,000.00) in an account with one of the commercial banks in Rwanda for a period of not less than six months. The new law goes over and beyond. The new law offers residence permits to registered investors and their dependents. Furthermore, a registered investor who invests an equivalent of at least two hundred and fifty thousand (USD$250,000) can recruit three (3) foreign employees “without necessarily demonstrating that their skills are lacking or insufficient on the labour market in Rwanda.”
Corporate Social Responsibility and Sustainable Development
Law No. 6/2015 does not explicitly address corporate social responsibility (“CSR”), business and human rights (“BHR”) or sustainable development. However, some of the obligations imposed on investors (e.g. obligation to pay taxes) and some of the special incentives available under the law appear to be created with CSR and sustainable development in mind. For example, an international company which has its headquarters or regional office in Rwanda is entitled to a preferential corporate income tax rate of zero per cent (0%) if it inter alia invests ten million United States Dollars (USD 10,000,000) in Rwanda and provides employment and training to Rwandans. Preferential corporate income tax rate of fifteen percent (15%) is available to registered investors that export at least fifty percent (50%) of turnover of goods and services produced in Rwanda excluding “unprocessed minerals, tea and coffee without value addition.”
Cancellation of An Investment Certificate
The new law provides for the cancellation of investment certificates. Article 18 spells out grounds for cancelling an investment certificate, Article 19 addresses “effects of revocation of investment certificate,” and Article 20 details “procedures of cancelling the investment certificate.” Pursuant to Article 18, investment certificate may be cancelled on one of three grounds. First, an investment certificate may be cancelled if the investor fails to fulfil obligations outlined in the new law. Second, an investment certificate may be cancelled if it was issued on the basis of false or fraudulent declarations of an investor. Third, an investment certificate can be cancelled “material changes detrimental to investment occurred in investment operations.” Where an investment certificate is cancelled on the grounds of false or fraudulent declarations of an investor, the said investor “Shall be liable to refund an amount equivalent to the incentives he/she was given in his/her capacity as a registered investor.”
Rwanda’s new investment code will make it easier and faster for foreign investors to do business in Rwanda and will undoubtedly reaffirm Rwanda’s image as an attractive destination in Africa for businesses. With its emphasis on investment liberalization, investor protection and investor aftercare services, the new law is clearly in line with global trends. However, it remains to be seen whether the new law will indeed attract foreign investors to the priority sectors of the Rwanda’s economy, enable emerging sectors of the economy to grow and thrive, and help the Rwandan Government to achieve its goal of significantly increasing foreign investment in the country. “This year we aim to achieve $1.2 billion worth of private investment into the economy and to grow that annually by 20 per cent,” Francis Gatare, CEO of Rwanda Development Board, is quoted as saying.
Despite its laudable qualities, the new law is bound to garner criticisms from businesses and civil society groups alike. On the one hand, Law No. 6/2015 appears to be missing some of the guarantees and protection found in traditional bilateral investment treaties. On the other hand, the law does not explicitly address corporate social responsibility or business and human rights and lacks provisions explicitly directed at encouraging sustainable development. The extensive tax incentives available under the new law are likely to draw criticisms from some quarters. Organizations like the Institute of Policy Analysis and Research (Ipar) and ActionAid International already critical of the extensive tax incentive that the Rwandan government offers foreign investors are bound to be even more critical of the new law. In a 2011 report, ActionAid claimed that the Rwandan Government lost over US$234 million (about a quarter of its potential tax revenue) as a result of tax incentives. According to ActionAid, Kenya, Uganda, Tanzania and Rwanda are losing $2.8 billion each year through their use of tax incentives such as tax holidays for foreign businesses. Without doubt, Law No. 6/2015 will resurrect debates about the role of incentives in attracting investments and whether a country can attract investment without tax incentives.
Law No. 6/2015 does not exist in vacuum. Supporting the new investment law is the Government’s sustained effort at improving investment climate in Rwanda, a host of multilateral treaties that Rwanda has ratified, and two major regional economic communities that Rwanda is a part of. Regarding treaties, Rwanda is a member of the World Trade Agreement and has also ratified notable treaties such as the ICSID Convention, the New York Convention, the Paris Convention for the Protection of Industrial Property, and the Berne Convention for the Protection of Literary and Artistic Works. Rwanda is part of the East African Community and the Common Market of Eastern and Southern Africa, two of the regional economic communities that are considered the building blocks of the African Economic Community. On 10th June, 2015, the COMESA-EAC-SADC Tripartite Agreement, also known as Tripartite Free Trade Area (TFTA) was officially launched. The TFTA sets the stage for a single market for the 26 African countries in the Eastern and Southern African Region. Regarding investment climate, Rwanda already enjoys very high and strong rankings in the World Bank’s Ease of Doing Business Index. Out of 189 countries assessed in Doing Business 2015, three countries in Africa including Rwanda are among the top 50: Mauritius (28th), South Africa (43rd) and Rwanda (46th). Finally, Law No. 6/2015 must also be read against the backdrop of Rwandan laws and regulations covering policy areas such as labour, environmental protection, access to land, competition and trade.
Law No. 6/2015 shuns investment protectionism and can go a long way towards encouraging foreign investment in Rwanda. The rights, protection, and guarantees that the new law offers can go a long way in calming investor anxiety about investing in Rwanda. While the special incentives that the law offers appear to be designed with sustainable development in mind, many questions remain about the new law.
- Will Law No. 6/2015 boost employment and export and contribute to sustainable development?
- Is Law No. 6/2015 a reflection of the so-called “incentive epidemic” that critics claim is destroying the economies of countries in Africa?
- Will the cost of the incentives that Law No. 6/2015 outweigh the cost of such incentives?
- Does Law No. 6/2015 address, exhaustively and comprehensively, the potential negative side-effects of foreign direct investment?
- Is Law No. 6/2015 appropriately embedded in Rwanda’s broader development strategy?
- Is Law No. 6/2015 designed to support responsible investment and sustainable development in Rwanda?
- Are the necessary institutions in place and equipped to implement Rwanda’s investment policy and ensure the effectiveness of the policies that Law No. 6/2015 is implicitly advancing?
- How will the effectiveness of Law No. 6/2015 be measured and reported and how often will effectiveness be assessed?
- Will Law No. 6/2015 promote the participation of Rwandan companies in global value chains?
- Does it strike an appropriate balance between regulation and openness?
*Professor of Law, University of Arkansas School of Law, Affiliate Faculty Member, The J. William Fulbright College of Arts and Science, Univ. of Arkansas
 Rwanda Development Board, The Law on Investment Promotion and Facilitation 2015, Official Gazette No. Special of 27/05/2015.
 Id., Article 24 (stating that “The Law n° 26/2005 of 17/12/2005 relating to investment and export promotion and facilitation and all prior legal provisions contrary to this Law are hereby repealed.”).
 Id., Article 1.
 Id., Article 3.
 Id., Article 2.
 Id., Article 2(23).
 Id., Article 4.
 Id., Article 3.
 Id., Article 5.
 Id., Article 3.
 Id., Article 11.
 Id., Article 12.
 Id., Article 2 (16).
 Id., Article 2 (22).
 The old law defined a ‘foreign investor’ as “a physical person, a business company or a partnership that invests a minimum financial capital equivalent to at least two hundred and fifty thousand American Dollars (US$ 250,000) in foreign capital in an investment enterprise to which this Law applies.” See Law N° 26/2005 of 17/12/2005 Relating to Investment and Export Promotion and Facilitation, Article 2 (hereinafter “Law N° 26/2005”).
 Law No. 6/2015, supra note 1, Article 6.
 The old law called for the “prior payment of adequate compensation, in foreign convertible currency, in a period not exceeding twelve (12) months from the date of acquisition.” Emphasis added. See Law N° 26/2005, supra note 21, Article 30.
 Law No. 6/2015, supra note 1, Article 8
 Id., Article 12.
 Id., Article 18.
 Id. Article 20.
 Id., Article 21.
 Emphasis added.
 Id., Article 14.
 Ratified October 15, 1979.
 Ratified 31 October 2008.
 Law No. 6/2015, supra note 1.
 Id., Article 15.
 Id., at Article 13.
 Id., at Article 4.
 “Special Incentives for Registered Investors,” Annex to Law No. 06/2015 of 28/03/2015 Relating to Investment Promotion and Facilitation.
 Law No. 26/2005, supra note 19, Article 20.
 Id., Article 21.
 Law No. 6/2015, supra note 1, Annex.
 Id., Article 19.
 Peterson Tumwebaze,. Govt launches business friendly investment code. The New Times, 3 July 2015. http://www.newtimes.co.rw/section/article/2015-07-03/190278/ (“The rational of this investment code was to have more targeted incentives that will not only aid investment promotion but also provide an opportunity for the emerging sectors to grow and thrive.”).
 http://rwandacg.org.au/new-rwanda-investment-code-released/ and Reuters: Rwanda targets $1.2 bln foreign investment in 2015. (July 2, 2015).
 East African taxation project: Rwanda country case study, Institute of Policy Analysis and Research/ActionAid Rwanda, 2011. http://bit.ly/1bDRpGe
 Tax Justice Network-Africa & ActionAid International, Tax Competition in East Africa: a Race to the Bottom? 12 April 2012.
 Accession: November 3, 1983. http://www.wipo.int/treaties/en/ShowResults.jsp?lang=en&treaty_id=2
 Accession: November 3, 1983. http://www.wipo.int/treaties/en/ShowResults.jsp?lang=en&treaty_id=15
 http://www.comesa.int/. See also COMESA Member States, available at: http://about.comesa.int/index.php?option=com_content&view=article&id=123&Itemid=121
 South African Development Community, COMESA-EAC-SADC Tripartite Free Trade Area Launched, https://www.sadc.int/news-events/news/comesa-eac-sadc-tripartite-free-trade-area-launched/
 The World Bank, Doing Business 2015 5 (2015)