Taxation
The Ethiopian tax system comprises direct and indirect taxes. Direct taxes include personal income tax, rental tax, withholding tax and corporation tax, among others. The main types of indirect taxes are value added tax (VAT), customs duty, excise and turnover taxes.
Tax Rate
| Â | Â |
Corporate income tax | 30% |
Turn over tax | 2% and 10% |
Excise tax | 10% up to 100% |
Customs duties | 0% up to 35% |
Income tax from employment | 0% up to 35% |
Withholding tax | 2% |
VATÂ Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â | 15% |
Export tax | 0% (with exception of hides and skins -150%) |
Royalty tax | 5% |
Dividend tax | 10% |
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Business income tax
Business income tax is charged on all income of an entity having a permanent establishment in Ethiopia.
Income tax applies to residents with respect to their worldwide income, and non-residents with respect to their Ethiopian-sourced income.
In the case of a corporate person, the latter is considered a resident when any of the three conditions below are present:
- If the principal office is located in Ethiopia;
- If the effective management of the company is in Ethiopia; or
- If the company is registered by the Ministry of Trade and Industry
Employment monthly income (Birr) | Tax rate (%) |
The first 150 | Exempt |
151 – 650 | 10 |
651 – 1,400 | 15 |
1,401 – 2,350 | 20 |
2,351 – 3,550 | 25 |
3,551 – 5,000 | 30 |
Over 5,000 | 35 |
Both foreigners working in Ethiopia and Ethiopian citizens are subject to personal income tax. Income tax is levied on any income derived from employment, including any payments or gains in cash or in kind.
Taxable business income tax rates
Taxable business income/Birr | Tax Rate (%) |
0 – 1,800 | Exempt |
1,801 – 7,800 | 10 |
7,801 – 16,800 | 15 |
16,801 – 28,200 | 20 |
28,201 – 42,600 | 25 |
42,601 – 60,000 | 30 |
Over 60,000 | 35 |
