The law applies a progressive tax rate, except for corporate tax, which is flat 30%. In ethiopia, the corporate income tax rate is a tax collected from companies. Constitution of the federal democratic republic of ethiopia, it is hereby proclaimed as follows. Global mobility services taxation of international.
Profit before income tax 287,840 222,811 522,484 income tax expense 71,960 55,703,621 net profit for financial year 215,880 167,108 391,863 balance sheet usd 2012 20 2014 assets current assets cash 152,993 82,426 211,043 receivables and prepayments trade receivables 125,000 166,669 229,169. May 2020 business profit tax in ethiopia latest ethiopian. Ease of doing business in ethiopia region subsaharan africa income category low income population 109,224,559 city covered addis ababa 159 db rank db score 48. Business profit schedule c tax rates, calculation, rates and. Short title this proclamation may be cited as the federal income tax.
This is the tax imposed on the taxable business income net profit realized from entrepreneurial activity. The corporate income tax tax on profit in ethiopia is 30% percent. The impact of tax reform on private sector development 1. The draft proclamation was prepared by a team drawn from the ministry of finance and economic cooperation mofec, ethiopian revenues and customs authority erca and regional finance bureaus. Ethiopia fiscal guide 20152016 2 business income income tax is charged on all the income of an entity having a permanent establishment in ethiopia. In the same way an income from rent of house is treated under direct tax. Jul, 2017 as per income tax proclamation no 9792016, here are the business profit tax rates in ethiopia. Adding tax on income if the tax on income from employment, instead of being deducted from the salary or wage of the employee, is paid by the employer in whole or in part, the amount so paid shall be added to the taxable income and shall be considered as part thereof. New car vehicle excise tax rate for new cars to be reduced from 30% to 5%. Jan 21, 2020 the personal income tax rates in ethiopia stands at 35 percent. The personal income tax rate in ethiopia stands at 35 percent.
The types of taxes in ethiopia makes interesting reading for those who may be thinking of emigrating to ethiopia, for work, or to start a business. In addition to raising revenue, the mor is responsible to protect the society from adverse effects of smuggling. Profit taxes are assigned on the basis of the legal status of the business enterprise subject to profit. Uncorporate or individual businesses are taxed in accordance with the following schedule below. As per income tax proclamation no 9792016, here are the business profit tax rates in ethiopia. Chapter three will introduce you with vat new area of taxation. In the determination of business income subject to tax in ethiopia, deductions shall be allowed for expenses incurred for the purpose of earning, securing, and maintaining that business income to the extent that the expenses can be proven by the taxpayer and subject to the limitations specified by this proclamation. Previous afrotsion construction wins yirgalem integrated agroprocessing.
The impact of tax reform on private sector development. In the case of a business located and operating in ethiopia as the branch, subsidiary or associated company of a business located and operating abroad, no payment of any kind made to the holding or associated company of the business in ethiopia shall be accepted as deduction from gross income in calculating the taxable income unless. From this, one can infer that corporate business began to play a role in the. An administrative branch, factory, workshop, mine, quarry or any other place for the exploitation of natural resources, and a building site or place where construction andor assembly works are. On income of bodies share companies, plcs for example thirty percent 30% of taxable income, 2. If you are a business company intending to open a new business here in ethiopia or an already established business, here is alist of taxes imposed on business companies operating in ethiopia. Constitution of the federal democratic republic of ethiopia, it is hereby proclaimed as. Taxable business income of bodies is taxable at the rate of 30%. To register a company in ethiopia, an entity must select a company name and submit.
Since the jurisprudence of ethiopian taxation is yet to develop fully, this article will draw. 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 system strikes one as random, disorganized, and incoherent in places. Organizations operating a unitary business must use combined reporting in filing their new hampshire business tax return. List of taxes imposed on business companies operating in ethiopia. The new income tax proclamation has employees and low earners at its benefiters.
Principal taxes tax rate corporate income tax 30% turnover tax tot 2% and 10% excise tax 10% up to 100% customs duties 0% up to 35% income tax from employment 0% up to 35% export tax with holding taxes 2 % value added tax 15% tax treaties ethiopia has concluded tax. Bear in mind that income tax is applicable to anyone who owns landed property, has an apartment rented out, has a business, or works in ethiopia, regardless of what his country of origin is. The principal taxes currently in place are profit tax, turn over tax tot, valueadded tax vat, excise tax, customs duty and income tax from employment. No estate duty or other death duties are levied in ethiopia. C the ministry of finance and economic cooperation mofec has announced this new tax proclamation. New income tax rates in ethiopia, salary income tax calculation. Income tax in ethiopia can be a burden, and you need to be sure you are placed in the correct tax brackets. Federal income tax proclamation exclusive document from the. Chapter two will introduce the students to the income tax in ethiopia. Since the jurisprudence of ethiopian taxation is yet to develop fully, this. Short title this proclamation may be cited as the federal income tax proclamation no. Pdf on jan 18, 2016, wollela yesegat and others published business peoples views of paying taxes i n ethiopia find, read and cite all the research you need on researchgate.
The new taxation will be effective as of hamle 1, 2008 or july 08, 2016. Dec 20, 2019 graph and download economic data for gross national income for ethiopia mktgnieta646nwdb from 1981 to 2018 about ethiopia and gni. The employees income tax system divides taxable income into different tax bands. According to the federal income tax proclamation no. For multistate businesses, income is apportioned, using a weighted sales factor of two and the payroll and property factors. Ethiopia corporate tax rate 20042020 data 20212022. The wbg would like to thank the ethiopian revenue and customs authority for their support in conducting the tax compliance. 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. According to the above tax rate schedule, employees who earn up to 150 birr a month are below the threshold for paying employment income. Using an umbrella company for income tax in ethiopia contractors in ethiopia are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option.
Jul 08, 2016 new salary income tax in ethiopia as of the new budget year, which starts at hamle 2008 e. Chamber of commerce and ethiopian business development services network, taxation in. Business income, more than etb 60,000, is charged 35 percent. Chapter 16, taxation of income from business and investment 2 ii. This proclamation may be cited as the federal income tax proclamation. Definitions a term used in this proclamation that is defined in the tax. Ethiopia personal income tax rate 20062020 data 2021. The 2002 income tax proclamation governs income tax from employment, from rental of buildings and from business. Ids is a charitable company limited by guarantee and registered in england no.
Then after, it will look at the different schedules of income taxation followed by the country. The findings of this study reveal that business age, tax liability and tax complexity consistently influence the likelihood of tax noncompliance behaviour in the areas of underreporting income. Taxable business income of other taxpayers shall be taxed in accordance. However, the amount of income and the corresponding tax rate has been static for more than a decade, despite inflation. Federal income tax this regulation is issued by the council of ministers pursuant to article 5 of the definitions of powers and duties of the executive organs of the federal democratic republic of ethiopia proclamation no. Taxable business income of companies is taxed at the rate of 30% percent. Below is a schedule that specifies tax bands and their tax rates. The new income tax in ethiopia new income tax calculations. If the income is from legal persons, the owner should pay 30% of the income if it is from an individual, it should be paid according to table b of the proclamation no 28694. Pdf business peoples views of paying taxes in ethiopia. Income tax shall impose on taxable business income realized from entrepreneurial activity.
Federal income tax proclamation 2016 ethiopian business portal. The proclamation under article 21 states that business income of a taxpayer for a tax year shall include the following. Categories of tax payers, declaration of income and assessment of taxes, tax incentives jira jebessa ethiopian chamber of commerce, 2005 taxation. Other business taxpayers, with business income ranging from etb 1,801. As per the proclamation, the tax rates are as follows. Income tax is imposed on the income from rental of buildings and collected at the following rates. For unincorporated or individual businesses the business income tax ranges from 10% 35 %. It will start with a brief look at the history of income taxes in ethiopia and will go on to look at different concepts and definitions involved in income taxation. Gross national income for ethiopia mktgnieta646nwdb fred. Ethiopia personal income tax rate data, historical chart, and calendar of releases was last updated on february of 2020 from its official source. These are a range of income bands with different tax rates. Jul 15, 20 license fees including lease payments, and royalties paid by a resident or paid by a nonresident through a permanent establishment that he maintains in ethiopia. The new income tax law also allowed deductions for business expenditures.
The law of corporate taxation in ethiopia ethiopian legal brief. The proclamation reduces deductibles from this groups. Now, therefore, in accordance with article 551 a nd 11 of the constitution of the federal democratic republic of ethiopia, it is hereby proclaimed as follows. The direct and indirect taxes applicable in ethiopia.
Corporate businesses are required to pay 30% flat rate of business income tax. Income tax summary question answer basic information 1 the dates of the tax year 8 july to 7 july 2 types of income that are liable to tax for expatriates working in ethiopia, taxable income includes, but is not limited to income from employment to the extent that it is derived in respect of employment exercised in ethiopia, wherever paid. The direct and indirect taxes applicable in ethiopia fikadu. Business income the characterization of an amount as business income is important in both schedular and global income tax systems.
Computation of business profit tax business net profit per yeartaxable income 70,500. Business profit schedule c tax rates, calculation, rates and deductions in ethiopia jul, 2017 0 as per income tax proclamation no 9792016, here are the business profit tax rates in ethiopia. Wgt 4 business income has the meaning in article 21 of this proclamation. Business profit schedule c tax rates, calculation, rates. Its amount is based on the net income companies obtain while exercising their business activity, normally during one business year. On income of persons according to schedule b shown below of the income tax proclamation no. Ethiopian ministry of revenues mor is the body responsible for collecting revenue from customs duties and domestic taxes. The benchmark we use refers to the highest rate for corporate income. Official pdf, 80 pages world bank documents world bank group. Salary income tax calculation in ethiopia, pension, gross. For taxable periods ending on or after december 31, 2016, the bpt rate is reduced to 8.