Taxation

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Taxation

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MAU is offering a tax advisory service which focuses on the country’s different tax proclamations, regulations and directives. The advisory service targets the manufacturing sectors. The tax related advisory service includes 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 VAT, customs duty, excise and turn over taxes. The tax related advisory service includes the following. You can find the new income tax proclamation here Income tax Proclamation.pdf

Type of Taxes Rate
Corporate Income Tax 30%
Turn Over Tax 2% and 10%
Excise Tax 0% up to 35%
Customs Duties Fusce scelerisque
Income Tax from Employment 0% up to 35%
Withholding Tax 2%
Value Added Tax (VAT) 15%
Export Tax Nil (with exception of hides and skins-150%)
Royalty Tax 5%
Dividend Tax 10%

 

Business Income Tax Rates

The corporate income tax (tax on profit) in Ethiopia is 30 per cent.The rates of business income tax applicable to an individual range from 10 per cent to 35 and presented below.

 

 Individual Business Income Tax Rates

Taxable Business Income (Per Year) Birr

Business Income Tax Rate

0-7200

0

1201-19800

10

19801-38400

15

38401-63000

20

63001-93600

25

93601-130800

30

Over 130800

35

 

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.979/2016. According to this law, the first Birr 600 of monthly personal income is exempted from payment of income tax. For monthly income of Birr 601 and above the marginal tax rates range from 10 per cent to 35 per cent with 7 income brackets as shown below.

Employment Income Tax Rates

Employment Income (Per Month) Birr

Employment Income Tax Rate

0-600

0

601-1650

10

1651-3200

15

3201-5250

20

5251-7800

25

7801-10900

30

Over 10900

35

   

 

Rental Income Tax

According to Proclamation No.979/2016 the rate of rental income tax applicable to a body is 30% while the rates of rental income tax applicable to an individual range from 10 per cent to 35 per cent. The first Birr 7200 of annual rental income is exempted from payment of income tax.

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.

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.

Do you need further information, please contact us.