Pdf taxes and tax reform in ethiopia, 19902003 researchgate. Ethiopian tax laws who is required to pay an income tax in. Jul 08, 2016 new salary income tax in ethiopia as of the new budget year, which starts at hamle 2008 e. 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. Ethiopian tax system strikes one as random, disorganized, and incoherent in places. C the ministry of finance and economic cooperation mofec has announced this new tax proclamation.
In this article, we look at the ethiopian tax system, types of taxes in ethiopia applicable to everyone. Ethiopian law creates barriers to the establishment of charities and societies through mandatory registration and excessive agency discretion in the registration process. The direct and indirect taxes applicable in ethiopia. Official pdf, 80 pages world bank documents world bank group. Imperial ethiopian government, ethiopiastatistical abstract. The new income tax in ethiopia new income tax calculations. New income tax rates in ethiopia, salary income tax calculation. The direct and indirect taxes applicable in ethiopia fikadu.
The draft legislation proposed a revision of the exemption threshold and the tax rates applied. Tax law lecturer and a consultant on ethiopian tax laws. Ethiopia the rise and reign of haile selassie i 191674. Tax regulations in ethiopia ethiopian business portal. The law applies a progressive tax rate, except for corporate tax, which is flat 30%. The prince developed the rudiments of a modern bureaucracy by recruiting the newly. Generally, resident is defined in the civil code and the tax law has also provided grounds for acquiring residence in ethiopia. 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.
Domestic tax regulation ethiopian ministry of revenues. Revenues from the personal income tax rate are an important source of income for the ethiopian government. 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. Pdf in most developing countries, income inequality tends to worsen during. 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. 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. Since the jurisprudence of ethiopian taxation is yet to develop fully, this. Definitions in the tax laws i ncluding this proclamation, unless the context otherwise requires. Taxation in ethiopia direct and indirect taxes categories of tax payers. In a moment of dismissive hubris, the ethiopian tax system may be. Ethiopia ethiopia the rise and reign of haile selassie i 191674. 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. The book discusses the major principles of ethiopian business law with practical examples. Jul 15, 20 rate of turnover tax is 2% on goods sold locally and 10% on others.
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. Constitution of the federal democratic republic of ethiopia, it is. Severance pay and compensation fikadu and associates law. 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. It further requires foreign organizations to obtain a letter of recommendation from the ethiopian. 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. Previous afrotsion construction wins yirgalem integrated agroprocessing. Model by law for civil society organizations based on new law new proclamation no. New salary income tax in ethiopia as of the new budget year, which starts at hamle 2008 e. However, the amount of income and the corresponding tax rate has been static for more than a decade, despite inflation. 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. The volume of import has also increased from 4,932,925 metric tons in 200405 to more than 8 metric tons in 20092010.
Jun 10, 2016 the law applies a progressive tax rate, except for corporate tax, which is flat 30%. Tax regulations in ethiopia details written by administrator published on 30 april 2008 category. The benchmark we use refers to the top marginal tax rate for individuals. Rate of turnover tax is 2% on goods sold locally and 10% on others. 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. Ethiopian ministry of revenues mor is the body responsible for collecting revenue from customs duties and domestic taxes. A word or term in these regulations shall have the same meaning that it has in the. It is an important and most significant source of revenue of the government.
Tax evasion under ethiopian tax laws conceptual introduction. Ethiopian tax laws who is required to pay an income tax. Income taxable under the ethiopian income tax proclamation no. This proclamation may be cited as the federal tax administration proclamation no. This is direct tax, which a person pays from any income he gets. Therefore, the user of this guide required to refer to. 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. Schedule a all incomes from employment shall be taxed based on this schedule. Jun 19, 2019 in this article, we look at the ethiopian tax system, types of taxes in ethiopia applicable to everyone. Accordingly, the material deals with the following. Tax law is a branch of public law that shares the attributes of legality principle.
Tax is a compulsory payment made by an individual or a corporate establishment legal entity to the government. 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. If the person is not resident of ethiopia gets his income. Enable participants understand constitutional provisions for tax. This payment is usually a small percentage of a total earning, made to assist the government in offsetting its. 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. Csp article 68 requires all charities and societies to register. As important sources of public revenue, taxes are very important part of the daily functioning of a government. If the person is not resident of ethiopia gets his income which has its source in ethiopia also should pay tax.
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. In time, though, the tax came to be accepted as a vital price for winning the war against napoleon. 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. 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. 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. 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. May 2020 new vehicle car excise tax rates in ethiopia. 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. Salary income tax calculation in ethiopia, pension, gross. 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. Accordingly the income tax proclamation has introduced four kinds of schedules. 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. 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.
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. Apr 30, 2008 tax regulations in ethiopia details written by administrator published on 30 april 2008 category. The ethiopian income tax law uses resident as a defining criteria in order to determine the tax jurisdiction of the country. Ethiopia introduced vat as a replacement to sales tax in the year 2003. 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. 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.
Consistency of the practice with the ethiopian transfer pricing rules. Tax revenue to gdp ratio is very low in ethiopia as compared to some of subsaharan african countries. In addition to raising revenue, the mor is responsible to protect the society from adverse effects of smuggling. The law clearly provides the following this proclamation shall apply to residents of ethiopia with respect to their worldwide income. Ethiopia drafts bill to amend excise tax law on alcoholic. The ethiopian income tax system follows a scheduler approach as a result income from different sources shall be taxed and treated separately. New income tax rates in ethiopia, salary income tax. Ethiopian customs guide ethiopian revenues and customs authority march 2017. Accordingly, this teaching material tries to address, even though briefly, the basic component of tax law, especially in ethiopia. 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. 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. The new income tax law also allowed deductions for business expenditures.