Ethiopian Business Development Services Network (EBDSN)

 Taxation

Home  I  FeMSEDA  I  ReMSEDAs  I  Chambers  Finance  I   BDS providers  Networks I  Associations  I  NGO/Projects  I  Print-out info

 

 Business Environment
 Legislation 
 Support Institutions
 Photos+Success Stories
 Approach+Strategy
 Lessons learnt
 Library
 BDS News
 BDS relevant Links
 Sitemap
 Contacts

 

 Sector Development
 Textile and Garments
 Leather and Footwear
 Food processing
 Construction
 Sector-Library

 

 Business Information
 Start your Business
 Write a business plan
 Accounting
 Cost calculation manual
 Marketing guide
 Export-Import guide
 Trade fair guide
 Trade opportunities
 Investment guide
 Tender guide
 Women and business
 Organize MSE exhibition
 Loan conditions
 Vocational training
 Improve your
 business association
 Taxation
 Appropriate Technology
 Standards and Quality
 Country Info,
 Business environment

 

 

Website Statistics

 

 

 

More details on taxation and custons please find on the webpage
of the Ministry of Revenue www.mor.gov.et


 


TAXATION  top


For personal taxes, the first 120 birr ($15) earned per month is tax-free. Salaries and wages above 120 birr are taxed progressively at rates of 10% to 40% (the latter applies at 3001 birr ($375) per month and above). Transportation allowances, medical treatment expenses, travelling expenses and insurance premiums provided for in the employment contract are deductible insofar as they constitute a reasonable proportion of total income. Expatriates are subject to personal income tax on income derived from local sources.

For sales tax, the rate of sales tax is 4% for selected lists of agricultural and essential goods, such as live animals and products, vegetables, fruits, printed materials and hides. A levy of 12% is charged on all other products.

Excise tax is levied on selected items when produced locally or imported from abroad. The tax rate ranges from 10% in the case of textiles and television broadcasting receivers to 50% in the case of alcohol. Excise tax is payable on goods produced locally by the producer within a period of three days from the date of production, and on goods imported from abroad by the importer at the time of clearing the goods from the customs net.

Customs duties are payable on imports by all persons and entities without duty-free privileges. The main regulation on customs duty is Proclamation No. 38/1993, which has introduced a harmonised system of classification of goods. The rate of customs duty ranges from 0 to 40%.

There are no taxes on export products (except coffee) or services from Ethiopia.

Ethiopia has treaties with Italy and Kuwait to avoid double taxation, and discussions on similar treaties are under way with several other countries. Intra-company charges, involving the local subsidiary and the parent company abroad, are allowed, provided they are incurred through arm’s-length transactions.

Incentives
To encourage investment, the Ethiopian government has developed a range of incentives for investors engaged in new enterprises and expansion across a range of sectors. The incentives include:

Customs Import Duty
A 100% exemption from the payment of import customs duties and other taxes levied on imports is granted to all investment capital goods, such as plant, machinery and equipment, as well as spare parts worth up to 15% of the value of the imported investment capital goods, provided that the goods are not produced and not available locally in comparable quantity, quality and price.

Investment capital goods imported without the payment of import customs duties and other taxes levied on imports may be transferred to another investor enjoying similar privileges.

Exemptions from customs duties or other taxes levied on imports are granted for raw materials necessary for the production of export goods. Taxes and duties paid on raw materials are drawn back at the time of export of finished products. The duty drawback scheme applies to all taxes at the time of import and to those paid on local purchases.

Income Tax Holiday
As illustrated in Table 14, any income derived from an approved new investment (made pursuant to Proclamation No. 37/1996) is exempted from income tax for periods ranging from 1 to 5 years, depending upon the priority of investment activity and the location in which the investment is undertaken.

Income derived from an expansion whose invested capital is in accordance with the Council of Ministers Regulation No. 7/1996, Article 6 (2), is exempted from income tax for a period of two years for pioneer activities and one year for promoted activities.

Research & Development Incentives
An investor is entitled to deduct expenditure on research, improvement studies or training from taxable income.

Remittance of Capital
Any remittance made by a foreign investor from the proceeds of the sale or transfer of shares or assets upon the liquidation or winding up of an enterprise is exempted from the payment of tax.

Losses carried forward
Business enterprises that suffer losses during the tax holiday period can carry forward such losses following the expiry of the exemption period under the conditions specified in Table 15.
 

 


Exemption from import custom duties  top
www.ethioinvestment.org\regulation7\two.htm
external webpage 


  • Pionneer investment activities

  • Promoted investment activities

  • Expansion and upgrading of existing enterprise

  • Minimum capital

  • Commencement of period of exemption of income tax

  • Carry forward of losses

 


Income Tax Proclamation  top


Please find in the following the new Income Tax Proclamation from July 2002. Hereafter we document the most important topics. The entire Proclamation text with 35 pages is to long for this webpage. So, please find it as Winword.doc for download here below.

Income Tax Proclamation - Contents:

  • Topic 1: Definitions

  • Topic 4: Obligation to pay income tax

  • T 6: Source of income

  • T 8: Schedules of income

  • T 11: Tax rate schedule A

  • T 15: Tax rate schedule B

  • T 19: Tax rate schedule C

  • T 38: Powers and duties of tax authority

  • T 40: Code of conduct for tax authority employees

  • T 45: Business licences

  • T 48: Record keeping requirement

  • T 52: Collection of tax on imports

  • T 58-63: Tax accounting principles

  • T 64-71: Declaration and assessment

  • T 74-76: Payment

  • T 77-83: Collection

  • T 86-91: Penalties

  • T 92: Appeal against penalties

  • T 94-98  Criminal offences

  • T 99: Offences by tax authority employees

  • T 100: Unauthorized tax collection

  • T 104-117: Appeal procedures

 

Income Tax Proclamation
is availabe for 5 Birr at the Birhaneas Selam Printing Press, Addis Ababa, in Amharic and English

 

Income Tax Proclamation
in Winword.doc version for download

income-tax-proclamation.doc 340 KB

 

More details on taxation and custons please find
on the webpage of the Ministry of Revenue www.mor.gov.et

 

top

 

 

 

Business Development Services (BDS) Forum
www.bds-forum.net edited by Dieter Gagel, freelance consultant, providing information on BDS strategies, networking
and practical BDS case studies as well as business information on marketing, business planning, bookkeeping and
cost calculation, import-export, trade fairs and access to finance.

New BDS Portal in Senegal www.senegal-entreprises.net .
One of the biggest national BDS portals world wide!

Value Chain Development in Ethiopia www.business-ethiopia.com

 

www.foutapedia.org    www.ageval.org