It is an important and most significant source of revenue of the government. Now, therefore, in accordance with article 55 1 and 11 of the constitution of the federal democratic republic of ethiopia it is hereby procloaimed as follows. May 2020 salary income tax calculation in ethiopia. This is direct tax, which a person pays from any income he gets. Of the federal democratic republic of ethiopia 22nd year no. In addition to raising revenue, the mor is responsible to protect the society from adverse effects of smuggling.
Business profit schedule c tax rates, calculation, rates. House approves revised vat proclamation ethiopian news. Rate of turnover tax is 2% on goods sold locally and 10% on others. Vat withholding regimes are tax collection mechanisms implemented by tax authorities to enforce and shorten the time in which vat is collected from certain taxpayers and specific economic sectors. This proclamation may be cited as the income tax amendment proclamation no. Published on 01 jul 17 by australian tax forum journal article.
The revised draft income tax proclamation, drafted by the ministry of finance and economic cooperation mofec and ethiopian revenue and customs authority ecra, proposed a revision of. Accordingly, the house decided the new income tax proclamation to be effective as of ethiopias new budget year july 1, 2009 the house also approved the newly revised tax administration and business registration and licensing proclamation. 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. Tax is a compulsory payment made by an individual or a corporate establishment legal entity to the government. Setting up your business in ethiopia issues to consider employees contribution 7% it is the employers legal responsibility to pay over employees tax and pension deductions to the ethiopian tax authorities with in 30 days following the end of the month of pay. Withholding agent means a person liable to withhold tax from a payment. Ethiopian chamber of commerce ecc, ethiopian business development services network ebdsn, on behalf of. In simple terms custom duty is tax tax imposed on goods entering and leaving the country. Corporate businesses are required to pay 30% flat rate of business income tax. It seizes and takes legal action on the people and vehicles involved in the act of smuggling while it facilitates the legitimate movement of goods and people. Whereas, it has become necessary to amend the value added tax proclamation no. House approves newly revised income tax proclamation. In addition, the costs of vat administration were briefly examined in the case of jantschers 1990 study.
Ethiopian tax system strikes one as random, disorganized, and incoherent in places. Excise tax proclamation no 3072002 or 3071994 ec and its amendment. This proclamation may be cited as the income tax proclamation no. Now therefore, in accordance with article 55 i of the constitution of the federal democratic republic of ethiopia, it is hereby proclaimed as follows. Limited fiscal capacity poses a significant challenge in ethiopia. This study is, hence, to assess the vat withholding system in ethiopia and the implications for revenue collection and refunds. The number of proclamations, regulations and directives makes it to some extent difficult to understand this area of law. Gain on transfer of property declaration for building.
A reflection of problems 147 of filing and payments, refunds, audits and penalties. The following new article 28 is added after article. Similarly, the house approved the revised labor proclamation no. Whereas, it has became necessary to amend the mining income tax proclamation. 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.
The direct and indirect taxes applicable in ethiopia. Ethiopian revenue and customs authority withholding tax on payment declaration income tax proclamation no. Income taxable under the ethiopian income tax proclamation no. Development introduced draft tax laws that are aimed to streamline the process of tax administration in ethiopia.
Ethiopian revenue authority may raise vat withholding. 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. Federal income tax proclamation exclusive document. Issued under the authority of the house of peoples representatives of the federal democratic republic of ethiopia federal tax administration proclamation federal negarit gazette extraordinary issue proclamation no. Definitions a term used in this proclamation that is defined in the tax administration proclamation shall have the meaning in the tax administration proclamation unless defined otherwise in this proclamation. Definitions for the purpose of this proclamation, unless the context otherwise requires.
Corporate tax in ethiopia is imposed at a standard rate of 30%. This proclamation may be cited as the federal income tax proclamation no. Taxation in ethiopia direct and indirect taxes categories of tax payers declaration of income and assessment of taxes tax incentives addis ababa 12005 published by. The withholding agent shall withhold or collect the tax and account to the tax authority. Definitions in this proclamation, the meanings of terms defined in other laws of ethiopia apply unless a different meaning is expressly provided herein. If the person is not resident of ethiopia gets his income which has its source in ethiopia also should pay tax. Since the jurisprudence of ethiopian taxation is yet to develop fully, this. Withholding tax in ethiopia is viewed and administered according to the following legal documents. By the tax authority, we mean the ethiopian revenues and customs authority erca head office or any of its.
This payment is usually a small percentage of a total earning, made to assist the government in offsetting its. Fair market value 1 for the purposes of the tax laws and subject to article 76 of the income tax proclamation, the fair market value of goods, an asset, service, or. They are subjected to presumptive tax, based on a percentage of turnover. The 1 other indirect taxes mainly refer to excise taxes 2 world bank 2015, how to collect more and better revenue. Vat withholding is the application of the reverse charge mechanism on transactions carried out within a. In this article, we look at the ethiopian tax system, types of taxes in ethiopia applicable to everyone.
The new income tax in ethiopia new income tax calculations. As of the new budget year, which starts at hamle 2008 e. The tax laws which are expected to come into force any time in 2016 are a new income tax proclamation and the tax administration proclamation. C the ministry of finance and economic cooperation mofec has announced this new tax proclamation the new income tax proclamation has employees and low earners at its benefiters. 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. Setting up your business in ethiopia issues to consider. For the purposes of this proclamation the following terms shall have the meanings given to them hereunder. An ethiopian tax and customs law is characterized by frequent repeal and amendments. Ethiopian revenue authority may raise vat withholding december 22, 2016 the growing number of requests for tax refunds is causing the government to consider increasing the withholding percentage from value added tax vat, reports capital. Recently, ethiopia has implemented a valueadded tax vat withholding system on payments for acquisitions by governments and government bodies with the aim of mitigating evasion and increasing revenue collection. As per income tax proclamation no 9792016, here are the business profit tax rates in ethiopia. This proclamation may be cited as the value added tax proclamation no.
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