MAU is offering a tax advisory service that 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:- Main Taxes in Ethiopia:
Main Taxes in Ethiopia
|No||Type of Taxes||Rate|
|1||Corporate Income Tax||30%|
|2||Turn Over Tax||2% and 10%|
|3||Excise Tax||10% up to 100%|
|4||Customs Duties||0% up to 35%|
|5||Income Tax from Employment||0% up to 35%|
|7||Value Added Tax (VAT)||15%|
|8||Export Tax||Nil (with exception of hides and skins-150%)|
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 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 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.
There are no taxes on export products and services from Ethiopia.
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.
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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