Key takeaways
- Tax losses can be carried forward for five tax periods, oldest losses first. They cannot be carried back.
- Each company uses only its own losses. Rwanda has no group relief and no consolidated returns.
- Going beyond five tax periods requires the Commissioner General's authorisation, under a Ministerial Order of 29 April 2026.
- If the ownership or voting rights of an unlisted company change by more than 25% in a tax period, the losses of that period and all earlier periods are lost.
- A narrow exception protects internal reorganisations that keep all existing shareholders, each holding their shares for at least three years.
Few businesses make a profit every year. Start-up years, expansion, a difficult market: losses are part of building a company. Rwanda's income tax law lets a business carry a tax loss forward and set it against later profits. But the relief has a time limit and a narrow extension route. It also has one condition that regularly catches businesses out: a significant change in who owns the company.
Article 31
The basic rule: five tax periods, oldest losses first
Under Article 31 of Law N° 027/2022 of 20/10/2022 establishing taxes on income (as amended), a business may carry a tax loss forward and deduct it from its profits in the following five tax periods. Earlier losses are used before later ones. Losses cannot be carried back to recover tax already paid. Any part of a loss not absorbed within the five-period window expires, unless an extension has been authorised.
5
tax periods forward
0
carry-back allowed
1
company, its own losses only
Each company stands alone. The income tax law provides no group relief and no consolidated return. A loss-making subsidiary cannot pass its losses to a profitable parent or sister company.
Beyond Five Years
Extending the window
A business can apply to the Commissioner General of the Rwanda Revenue Authority for authorisation to carry a loss forward for more than five tax periods. The requirements are now set out in Article 33 of Ministerial Order N° 003/26/10/TC of 29/04/2026, which replaced the 2019 order on the same subject. Article 34 of the same Order allows an authorisation to be withdrawn.
In broad terms, the business must:
- 1Apply in writing
- 2Explain what caused the loss and how it plans to return to profit
- 3Show that the loss arose from genuine investment
- 4Support the application with certified financial statements
- 5Have a clean tax compliance record
Separately, registered investors holding a valid exploration licence may carry losses forward for ten years from the first year of loss, subject to conditions.
The Trap
The 25% ownership rule
This is the rule that most often costs businesses their losses. Under Article 31, if the direct or indirect ownership of the share capital or the voting rights of an unlisted company changes by more than 25% during a tax period, the company cannot carry forward the losses of that tax period or of any previous period. The change is measured by value or by number.
>25%
change in ownership or voting rights in one tax period cancels the losses of that period and every earlier one.
Three features deserve attention
Indirect changes count
A sale further up the ownership chain, for example at holding-company level, can trigger the rule even if the Rwandan company's own share register does not change.
The current year is caught too
Forfeiture is not limited to losses from before the transaction. The loss of the year of change goes as well.
Several transactions may add up
In ALSM's reading, share movements within one tax period are likely to be aggregated towards the 25% threshold. Plan staged transactions with that in mind.
The Safe Harbour
The exception for internal reorganisations
Losses survive a change of more than 25% only if both conditions are met:
The change results from an internal reorganisation that maintains all the shareholders.
Those shareholders have held their shares for at least three years.
The exception is meant for genuine restructurings, not for a sale presented as a reorganisation. In ALSM's view, inserting a new holding company above the same owners is the typical qualifying case. A restructuring that brings in a new shareholder, or removes an existing one, falls outside the exception on a plain reading of the law.
Illustrative Figures Only
A worked example
Company A is an unlisted Rwandan company with a calendar tax year. It records tax losses of RWF 120 million in 2024 and RWF 80 million in 2025. In 2026 it issues new shares to an outside investor, who ends up holding 30%.
2024
RWF 120m loss
Usable until 2029
2025
RWF 80m loss
Usable until 2030
2026
30% to investor
Both losses forfeited, plus any 2026 loss
2027
RWF 42m tax
On a RWF 150m profit at 28%
With the losses intact, that 2027 profit would have been fully sheltered. Preferential rates, where they apply, would change the figures but not the principle.
On the Ground
Where this matters in practice
Fundraising
A funding round that gives an investor more than 25% can cancel years of start-up losses.
Mergers and acquisitions
Buyers should not assume they can use a target's historical losses after taking a significant stake.
Group restructurings
Keep records that show every shareholder is maintained and has held their shares for at least three years.
Due diligence
Every share transaction review should check whether unused losses exist and whether the deal structure will forfeit them.
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David MUSAFIRI
Account Manager
Chartered Accountant and Data Analyst