Rwanda says it has put in place an incentive package that seeks to attract investors to invest in mining exploration activities, part of the drive to strategically reposition the country’s mining sector in the region.
The new incentive package was announced on Tuesday, November 10th, ahead of the Africa Mining Forum, by Francis Gatare, the Chief Executive Officer at Rwanda Mines, Gas and Petroleum Board (RMB).
“We are excited about a new incentive package for exploration companies that gives incentives for a 10 year-loss carry over,” he said during a press briefing. “This means that companies that invest in initial exploration can carry forward losses or expenses incurred during that period.”
According to Gatare, the incentive is a new provision in a revised Investment Code that targets to attract Junior Mining Companies, whose business model focuses on mineral exploration, and then sell their assets after making mineral discoveries.
The incentive will give them 10 years’ loss to carry forward. It means they can write off their losses for up to 10 years, because they are not generating much revenue but rather investing in exploration.
“We think that this is very competitive globally that should be attracting the so-called junior mining companies whose business model focuses primarily on exploration,” Gatare noted.
Previously, companies in exploration activities were given only five years of loss carry over.
Essentially, every company is obliged to file tax returns annually, irrespective of whether they made money or not.
The arrangement is that, if for example, a company invests £4 million in exploration in 2020, and they did not make any revenue, it means they made a loss of £4 million.
Assuming they keep investing, and only begin to make profit in year 5, after investing £10 million. It means they are allowed to deduct losses made every year, distributed up to maximum 10 years afterwards.
Technically, this is not tax exemption, but the chief executive indicated it is rather investments calculated as costs.