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Examination of the legal framework surrounding the Kigali International Financial Centre (KIFC) regarding Protected Cell Companies (PCCs) reveals gaps that could be exploited for tax avoidance.
A recent report titled "Protected Cell Companies as Potential Tax Avoidance Vehicles Under the Kigali International Financial Center" by TJNA, African Forum and Network on Debt and Development (AFRODAD), and East African Tax and Governance Network (EATGN) highlights the various ways in which PCCs can be used to evade taxes and shield assets from creditors, making them attractive to individuals and corporations seeking to engage in illicit financial activities.
The report authored by TJNA’s Policy Associate, Everyln Muendo, also notes that despite the existence of transparency mechanisms such as beneficial ownership in Rwanda, they are not adequate as the Rwandan laws have not made it clear whether in the case of PCCs, beneficial ownership information will be required both at the cellular level as well as at the entity level.
The report recommends that the Rwandan government takes concrete steps toward preventing tax avoidance using PCCs. This includes implementing legislation and regulations to establish transparency measures and foreign-controlled company regulations. The government should also evaluate each cell of PCCs for fiscal transparency, clarify tax treaty treatment of CIVs to avoid double non-taxation, and modify Company Laws to include more comprehensive disclosure of beneficial ownership information.
By taking these actions, Rwanda can safeguard its financial system and prevent illicit financial flows.
To access the full report, please visit https://bit.ly/3ySxKpQ
For more details on the report, please contact emuendo@taxjusticeafrica.net