Taxation

The principal taxes currently in place are profit tax, turn over tax (TOT), value-added tax (VAT), excise tax, customs duty and income tax from employment. VAT has replaced sales tax. TOT and withholding taxes have been introduced recently. Other taxes include corporate tax, dividend income tax, royalties and stamp duties.

The Government has recently been introducing a series of measures to reform the tax system with a view to encouraging investment and foreign trade. On the whole, the reform process is to reduce the rates but broaden the base.

Corporate Income Tax

The corporate income tax (tax on profit) in Ethiopia is 30 per cent.

Turn Over Tax (TOT)

A 2 per cent tax is payable from supplying of goods to the local market and rendering of construction, grain mill, tractor, combine harvesting services undertaken in the country. A 10 per cent tax is payable on other sectors excluding the above mentioned services.

Excise Tax

Excise tax is levied on selected items when produced locally or imported from abroad. The tax rate ranges from ten per cent to hundred per cent.

Customs Duties

Customs duties are payable on imports by all persons and entities which have no duty-free privileges. The main regulation on customs duty has introduced a harmonized system of classification of goods and the rate of customs duty ranges from 0 to 35 per cent.

Income Tax from Employment

Personal income tax is payable as per Proclamation No.286/2002. According to this law, the first Birr 150 of monthly personal income is exempted from payment of income tax. For monthly income of Birr 151 and above the marginal tax rates range from 10 per cent to 35 per cent with 7 income brackets as shown below.

Income tax from employment

Monthly income (Birr)
Tax rate(%)

Up to 150
Nil

151-650
10

651-1400
15

1401-2350
20

2351-3550
25

3551-5000
30

Above 5000
35

Export Taxes

There are no taxes on export products and services from Ethiopia.

Withholding Tax

Withholding tax is payable on import of goods and is set at 3 per cent of the same cost, insurance and freight. In case of organizations, having legal personality, government agencies, private non-profit institutions, and non-governmental organizations (NGOs), the amount withheld is 2 per cent of the gross amount of payment.

Value Added Tax

Value added tax is levied on those businesses whose turnover is over and above Birr 500,000 per year. They are expected to pay 15 per cent VAT. All export goods and basic services, however, are exempted from VAT

Principal Taxes
Tax Rate

Corporate Income Tax
30%

Turn Over Tax (TOT)
2% and 10%

Excise Tax
10% up to 100%

Customs Duties
0% up to 35%

Income Tax from Employment
0% up to 35%

Export Taxes
---

With holding Taxes
2%

Value Added Tax
15%

Tax Treaties

Ethiopia has concluded tax treaties with a number of countries and is also ready to conclude similar treaties with other countries for the purpose of avoidance of double taxation.


 
       

 
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Last updated 23-01-07 11:30 CEF DST
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