Ethiopia
30 Dec 2022Ethiopia's tax landscape overview highlights the country's tax landscape together with other regulatory considerations of setting up an entity in Ethiopia.
Doing business in country
The Ethiopian tax system is based on residency.
Private limited and share company.
The Company's Act requires that 50% of the directors should be residents.
If an individual is present for more than 183 days in Ethiopia he/she will be considered as a resident.
A Company can open a bank account by submitting its incorporation documents to a bank of its choice and can use the services in an instant.
Corporate income tax
Taxpayers are obliged to pay CIT at the same rate (i.e. 30%) under both options.
Foreign companies are subject to minimum capital requirements of up to USD 200k to register an office in Ethiopia. Further, they shall submit authenticated incorporation documents to the Trade Registry to establish the branch or subsidiary.
Within four months from the end of the financial year.
The normal corporate tax rates for both are 30% (2022). Rates vary depending on the industry a company is operating and if they have tax incentives.
Any branch profits distribution is taxed at 15%.
WHT is at the rate of 15% for residents and 20% for non-residents.
CGT is applicable on the transfer of immovable assets (15%) and shares (30%).
Value-Added Tax (VAT)
15%.
VAT is applicable on every taxable transaction by a registered person including the import of goods and services.
Electronic filing.
An exporter is required to obtain an export permit from relevant authorities and shall bring all the export earning to the country.
If taxable activities at the end of any period of 12 calendar months exceeded ETB 1,000,000 or is expected to exceed ETB 1,000,000, then VAT registration is mandatory.
There is no VAT on electronic services provided from outside Ethiopia.
Company registration documents and certificates will be required when registering for VAT. There is no group registration in Zambia, each company must be registered separately.
There is no refund for foreigners.
Companies are required to maintain documents in soft and hard copies for ten years.
Employees Tax
8 July - 7 July.
Yes, employers withhold income tax from employees and remit the same to the tax authority.
Even though these funds are not available in Ethiopia, the tax authority acts as a collecting agent for pension fund.
Employers and employees shall register with the tax authority to obtain a Tax Identification Number (TIN).
Within thirty days after the payroll month.
Not applicable.
Yes, the Ethiopian tax law follows the progressive taxation rates where the tax rate increases upon the increase of an individual's income.
No.
Electronic filing.
Transfer pricing
Yes.
The annual turnover threshold to prepare and maintain TP documentation is K50 million.
Within 30 days of the written request being duly issued by the Commissioner-General.
Yes, K24,000,000.
International tax
Furnishing of services, including consultancy services by a person, through employees or other personnel engaged by the person for such purpose, but only when activities of that nature continue for the same or connected project for a period or periods aggregating more than 183 days in any one-year period is considered as a permanent establishment.
A place of management, branch, office, factory, warehouse or workshop will create a PE risk.
No.
No.