Adama (Nazareth) Chamber of Commerce

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Ethiopian Chamber
of Commerce

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see www.ethiopianchamber.com/registration.html

 Taxation  [top]                                                                                                                

For personal taxes, the first 150 birr earned per month is tax-free. Salaries and wages above 150 birr are taxed progressively at rates of 10% to 35% (the latter applies at 5001 birr per month and above). Transportation allowances, medical treatment expenses, traveling 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 harmonized 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 and 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

• Pioneer 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  

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