The direct and indirect taxes applicable in ethiopia fikadu. Generally, resident is defined in the civil code and the tax law has also provided grounds for acquiring residence in ethiopia. This proclamation may be cited as the federal tax administration proclamation no. Jun 10, 2016 the law applies a progressive tax rate, except for corporate tax, which is flat 30%. The volume of import has also increased from 4,932,925 metric tons in 200405 to more than 8 metric tons in 20092010. Ethiopia ethiopias ministry of finance has presented a bill to the council of ministers to amend the nations excise tax law in an effort to standardise taxation of alcoholic products, soft beverages and other luxury goods the new bill, which has been sent to the council of ministers for deliberation, will tax goods such as soft drinks based on the selling price to suppliers, albeit.
Definitions in the tax laws i ncluding this proclamation, unless the context otherwise requires. A word or term in these regulations shall have the same meaning that it has in the. Enable participants understand constitutional provisions for tax. It is therefore worth clarifying the ethiopian tax system and the rationales.
By the tax authority, we mean the ethiopian revenues and customs authority erca head office or any of its branch offices established in any part of ethiopia and the tax authorities of the regional state. New income tax rates in ethiopia, salary income tax calculation. Taxation in ethiopia direct and indirect taxes categories of tax payers. Domestic tax regulation ethiopian ministry of revenues. If the person is not resident of ethiopia gets his income which has its source in ethiopia also should pay tax. Whereas, the declaration on economic policy of the government of the federal democratic republic of ethiopia inaugurates a new era in social and economic relations and institutions in this country. The new income tax law also allowed deductions for business expenditures. So an individual foreigner, who lives in ethiopia for more than 183 days in a period of twelve calendar months, whether continuously or intermittently, is regarded as being resident for the entire tax period and is taxed in accordance with the provisions of income tax proclamation no. This payment is usually a small percentage of a total earning, made to assist the government in offsetting its. Tax this page presents links to guide you on types of taxes, tax rates, exemptions, tax filing procedures and other information you need when you start up a business as a selfemployed person, a partnership or a limited company. Under ethiopian tap, pursuant to art231tax means tax imposed under tax lawsunder art 236 tax law is defined to mean federal income tax proclamation, tax administration proclamation, value added tax, turn over tax proclamation, etp,stp. In ethiopia, the personal income tax rate is a tax collected from individuals and is imposed on different sources of income like pensions, labor, interest and dividends. Schedule a all incomes from employment shall be taxed based on this schedule.
Model by law for civil society organizations based on new law new proclamation no. New income tax rates in ethiopia, salary income tax. It is therefore worth clarifying the ethiopian tax system and the rationales behind for the business owners through the relevant institutions that have access to and ability to understand this booklet. In this article, we look at the ethiopian tax system, types of taxes in ethiopia applicable to everyone. Mar 24, 2014 the volume of import has also increased from 4,932,925 metric tons in 200405 to more than 8 metric tons in 20092010. Tax revenue to gdp ratio is very low in ethiopia as compared to some of subsaharan african countries. The new income tax in ethiopia new income tax calculations. Rate of turnover tax is 2% on goods sold locally and 10% on others. Schedules of income 12102012 0 comments the ethiopian income tax system follows a scheduler approach as a result income from different sources shall be taxed and treated separately. Tax regulations in ethiopia details written by administrator published on 30 april 2008 category. In a moment of dismissive hubris, the ethiopian tax system may be. The ethiopian economy is still largely on subsistence level, and in spite of some progress made, ethiopia has only taken the very first steps towards economic and social development. Ethiopian tax laws who is required to pay an income tax. According to the new changes to be introduced to the amendment, an excise tax levy which was proposed on imported new vehicles cars with production dates not exceeding two years and with engine capacity of 0 horsepower and less was to be reduced from 30 percent down to 5 percent, according significant cost advantage to local car assembles and new car importers.
The book discusses the major principles of ethiopian business law with practical examples. It seizes and takes legal action on the people and vehicles involved in the act of smuggling while it facilitates the legitimate movement of goods and people. Tax law lecturer and a consultant on ethiopian tax laws. Jul 15, 20 rate of turnover tax is 2% on goods sold locally and 10% on others. This guide provides vital information on ethiopian tax law and practice and is not intended to substitute professional advice given with full knowledge of the specific circumstances of each case and proficiency in the law of ethiopia such as might be provided by a tax attorney or tax lawyer in ethiopia. Since it was considered unseemly for a woman to serve in her own right, ras tafari, the son of ras makonnen and a cousin of menilek, served as zauditus regent and heir apparent. Whereas, in consequence of these developments, the existing system of income tax needs to be changed and adjusted to the basic principles of fiscal treatment in a free market economy. Ethiopian law creates barriers to the establishment of charities and societies through mandatory registration and excessive agency discretion in the registration process.
Ethiopia introduced vat as a replacement to sales tax in the year 2003. Consistency of the practice with the ethiopian transfer pricing rules. Revenues from the personal income tax rate are an important source of income for the ethiopian government. Unless the payment is tax exempt, the employer is responsible for calculating and withholding the tax from every payment to an employee and to forward it to the tax authority. If the person is not resident of ethiopia gets his income. This is direct tax, which a person pays from any income he gets. It further requires foreign organizations to obtain a letter of recommendation from the ethiopian. Previous afrotsion construction wins yirgalem integrated agroprocessing. The prince developed the rudiments of a modern bureaucracy by recruiting the newly. The benchmark we use refers to the top marginal tax rate for individuals.
The direct and indirect taxes applicable in ethiopia. Csp article 68 requires all charities and societies to register. Ethiopian tax laws who is required to pay an income tax in. Pdf taxes and tax reform in ethiopia, 19902003 researchgate. The law clearly provides the following this proclamation shall apply to residents of ethiopia with respect to their worldwide income. Ethiopian customs guide ethiopian revenues and customs authority march 2017. Ethiopian ministry of revenues mor is the body responsible for collecting revenue from customs duties and domestic taxes. Severance pay and compensation fikadu and associates law. We are more accustomed to talking if ever about income taxes even then, of specific income taxes, the value added tax, or customs duties than of the ethiopian tax system as a whole. Income taxable under the ethiopian income tax proclamation no. New salary income tax in ethiopia as of the new budget year, which starts at hamle 2008 e. Unless the tax payer maintains books of account, if the amount of rent paid to the lessor or sub lessor covers a period longer than one 1 year, the total amount of income from such rent shall be attributable to the fiscal year in which the payment was made, but the tax on such income payable.
By the tax authority, we mean the ethiopian revenues and customs authority erca head office or any of its. Current as of september 2019 download print version pdf this describes the legal framework of nonprofit organizations also known as nongovernmental organizations or ngos in ethiopia, along with translations of legislative provisions relevant for a foundation or advisor undertaking an equivalency determination of a foreign grantee under irs revenue procedure 9294. Jun 19, 2019 in this article, we look at the ethiopian tax system, types of taxes in ethiopia applicable to everyone. Therefore, the user of this guide required to refer to the customs proclamation and other customs related laws and regulations for obtaining legally binding information. Imperial ethiopian government, ethiopiastatistical abstract. In addition to raising revenue, the mor is responsible to protect the society from adverse effects of smuggling. Therefore, the user of this guide required to refer to. Ethiopia the rise and reign of haile selassie i 191674. Valueadded tax vat or goods and services tax gst as termed in some countries has become a major tax instrument in a large number of countries worldwide.
Constitution of the federal democratic republic of ethiopia, it is. Since the jurisprudence of ethiopian taxation is yet to develop fully, this. It is an important and most significant source of revenue of the government. Official pdf, 80 pages world bank documents world bank group. However, the amount of income and the corresponding tax rate has been static for more than a decade, despite inflation. Accordingly the income tax proclamation has introduced four kinds of schedules. Ethiopia drafts bill to amend excise tax law on alcoholic. Jul 08, 2016 new salary income tax in ethiopia as of the new budget year, which starts at hamle 2008 e. Direct tax according to proclamation no 28694 any person whose permanent residence is in ethiopian, has to pay tax from the income that he gets within. Accordingly, this teaching material tries to address, even though briefly, the basic component of tax law, especially in ethiopia. Accordingly, the material deals with the following.
Salary income tax calculation in ethiopia, pension, gross. Tax evasion under ethiopian tax laws conceptual introduction. As important sources of public revenue, taxes are very important part of the daily functioning of a government. Tax regulations in ethiopia ethiopian business portal. In present study an attempt is made to analyze empirically the determinants of tax revenue and assess the response of tax revenue to changes in its. C the ministry of finance and economic cooperation mofec has announced this new tax proclamation. Severance pay and compensation fikadu and associates law office. Tax is a compulsory payment made by an individual or a corporate establishment legal entity to the government. According to proclamation no 28694 any person whose permanent residence is in ethiopian, has to pay tax from the income that he gets within ethiopia or abroad. The law applies a progressive tax rate, except for corporate tax, which is flat 30%. Therefore, ethiopias jurisdiction to tax extends in case of residents to all incomes earned in ethiopia and in case of no residents with respect to ethiopian source income only. May 2020 new vehicle car excise tax rates in ethiopia. Fikadu asfaw and associates law office is a fullfledged corporate and commercial law firm in addis ababa, ethiopia with highly professional attorneys providing legal advice and services to clients throughout the surrounding areas of ethiopia as well as all around the world. Pdf in most developing countries, income inequality tends to worsen during.
Ethiopian tax system strikes one as random, disorganized, and incoherent in places. Jan 21, 2020 in ethiopia, the personal income tax rate is a tax collected from individuals and is imposed on different sources of income like pensions, labor, interest and dividends. Apr 30, 2008 tax regulations in ethiopia details written by administrator published on 30 april 2008 category. In time, though, the tax came to be accepted as a vital price for winning the war against napoleon. Income tax proclamation ethiopian chamber of commerce and. There is a paradox in the ethiopian tax system in general and in the income tax system in particular. The ethiopian income tax system follows a scheduler approach as a result income from different sources shall be taxed and treated separately. Ethiopia ethiopia the rise and reign of haile selassie i 191674. The application of ethiopian transfer pricing rules on multinational enterprises. Tax law is a branch of public law that shares the attributes of legality principle. The draft legislation proposed a revision of the exemption threshold and the tax rates applied. The ethiopian income tax law uses resident as a defining criteria in order to determine the tax jurisdiction of the country.
1461 1029 502 760 812 680 469 1009 674 398 1456 468 993 347 1346 1381 245 99 291 1504 1506 1019 1378 806 748 825 368 206 244