Trade & Investment
With a stable and democratic government, improving infrastructure and one of the fastest growing economies in the world, Ethiopia is fast-becoming a prime investment destination for businesses across the globe. Strategically located at the cross-roads between Africa, the Middle East and Asia, Ethiopia is the second most populous country in Africa and offers
untapped resources, a vast domestic market and a large, young workforce. Recent government reforms and incentives are unlocking investment and business opportunities in a variety of export-oriented sectors including manufacturing, agriculture and agro-processing and industrial zones development, amongst others..
Incentives
Customs duty payment exemption on capital goods and construction materials, and on spare parts whose value is not greater than 15% of the imported capital goods’ total value Income tax exemption from two to seven years for manufacturing or agro-processing and agricultural investments Carry forward of losses for half of the tax holiday period Several export incentives, including the Duty Draw-Back, Voucher, Bonded Factory and Manufacturing Warehouse, and Export Credit Guarantee schemes Government guarantees the remittance of profit, dividends, principals and interest payments on external loans, and The provision of land at competitive lease prices
Licensing And Registering A Business
Ethiopia’s new Business Licensing and Registration process is straightforward and can be completed in a few simple steps:
from Information and Investment Promotion Directorate at Ministry of Trade
from Ethiopia Investment Commission Information Desk
with current passport and visa to Licensing and Registration Department
submit company documents to National Bank of Ethiopia
deposit minimum capital requirement at National Bank of Ethiopia
confirming opening of bank account and depositing of minimum capital
from Licensing and Registration Department
Taxation
Tax Rate
| Corporate income tax | 30% |
| Turn over tax | 2% and 10% |
| Excise tax | 10% up to 100% |
| Customs duties | 0% up to 35% |
| Income tax from employment | 0% up to 35% |
| Withholding tax | 2% |
| VAT | 15% |
| Export tax | 0% (with exception of hides and skins -150%) |
| Royalty tax | 5% |
| Dividend tax | 10% |
Business Income Tax
Business income tax is charged on all income of an entity having a permanent establishment in Ethiopia.
Income tax applies to residents with respect to their worldwide income, and non-residents with respect to their Ethiopian-sourced income.
In the case of a corporate person, the latter is considered a resident when any of the three conditions below are present:
- If the principal office is located in Ethiopia;
- If the effective management of the company is in Ethiopia; or
- If the company is registered by the Ministry of Trade and Industry
| Employment monthly income (Birr) | Tax rate (%) |
|---|---|
| The first 150 | Exempt |
| 151 – 650 | 10 |
| 651 – 1,400 | 15 |
| 1,401 – 2,350 | 20 |
| 2,351 – 3,550 | 25 |
| 3,551 – 5,000 | 30 |
| Over 5,000 | 35 |
Both foreigners working in Ethiopia and Ethiopian citizens are subject to personal income tax. Income tax is levied on any income derived from employment, including any payments or gains in cash or in kind.
Table Business Income Tax
| Taxable business income/Birr | Tax Rate (%) |
|---|---|
| 0 – 1,800 | Exempt |
| 1,801 – 7,800 | 10 |
| 7,801 – 16,800 | 15 |
| 16,801 – 28,200 | 20 |
| 28,201 – 42,600 | 25 |
| 42,601 – 60,000 | 30 |
| Over 60,000 | 35 |
For further information on taxation in Ethiopia, please visit Investment Commission Website.
Investor Resources
Ethiopia’s new Business Licensing and Registration process is straightforward and can be completed in a few simple steps: