The Rwanda government is looking to spur investment into early-stage ventures through alternative financing. This will be handled by a new draft law relating to investment promotion and facilitation. The bill found its way to parliament last week as the government seeks to incentivize local individual investors investing in startups.
Angel investors are people who offer capital to startups and other small entrepreneurs in exchange for equity ownership. They can be friends, family, or high net-worth individuals. The drive to incentivize angel investment is weighed on the fact that conventional sources of financing for startups such as commercial institutions are not working properly.
According to comments made by Louise Kanyonga, the Chief Strategy and Compliance Officer at Rwanda Development Board, to The New Times, she highlighted the lack of any clear mechanism that determines the economic impact and role of angel investors in Rwanda. In short, angel investors were not accorded any form of special treatment.
Under the new law, any angel investor who invests a maximum of $500,000 will be exempted from capital gains tax once he or she sells their shares. This only applies if the share purchase was part of a primary equity issuance.
Other incentives within the startup ecosystem are:
- 150% tax education on qualifying expenses on market expansion and internationalization activities
- Tax deduction on research and development and training expenditure
- Dedicated visa for startup entrepreneurs, remote workers, high net-worth individuals, and students graduating from top Rwanda universities.
- The flexible work-visa regime for employees of foreign headquartered investors and other designated talent-based industries.
- A new R&D funding window – Rwanda Seed Innovation Program – run by the Ministry of ICT and Innovation.