Investment Laws and Regulations
Investment Laws and Regulations
A/ Proclamations and Regulations:
Mining Laws and Regulations
B/ Incentives & Requirements:
Customs duty exemption, Income Tax, Exemption, Loss Carry forward, Remittance, Land Cost Incentives
Guarantee & Protection
Ethiopia has adopted a free market economic policy in 1992, and in line with this has promoted private investment. With the introduction of market economy, Ethiopia has implemented a number of reforms including the privatization of state owned enterprises, liberalization of foreign trade, deregulation of domestic prices, and devaluation of the exchange rate. The Birr has been fairly stable undergoing a gradual devaluation from 6.8 Birr per U.S. Dollar. Ethiopia's exchange rate has remained fairly stable due to the government's appropriate monetary policies and considerable foreign exchange reserves.
With its enormous resources, the country has untapped investment opportunities, huge market access and low cost of doing business. The country has excellent climate, fertile soil and huge domestic raw material base. Its location is strategic that makes it close to the lucrative markets of the Middle East, Asia and Europe.
Ethiopia's current road density is 30% per thousand kilometers with a plan to further the road density by 41% between 2002 and 2007. This in effect brings about significant quality improvement in import-export routes and other all-weather roads on major national routes. The air transport and the shipping line are also providing efficient services. Air transport cost for general cargo export is about USD 4.26/kg and USD 5.26/kg to Europe and USD 8.35/kg to North America, whereas, for general cargo import the fare is USD 5.25/kg from Europe and USD 16.73/kg from North America.
The pre capita power production is 28 KWh and the government is planning to increase hydropower capacity of the country. The current tariff on electric power ranges between 0.41-0.57. Hydropower generation of electricity has also recently been opened up to private foreign investors. The state-owned telecommunication service envisages increasing the number of telephone lines over 760,000 with the aim of raising the lines to 12 lines per 1,000 persons.
The political situation of the country is stabilized. In Ethiopia, the labor force is estimated at 40 million, and labor remains readily available and inexpensive. The cost of labor is very low in Ethiopia with a wage of USD 1 a day for unskilled labor and average monthly salary of USD 90 for a fresh graduate. Ethiopia has enacted a liberal investment law and the Ethiopian Investment Commission has been established, which is making every effort in creating an enabling environment for investment. The conducive economic environment encouraged foreign direct investment. The data indicate that for the period between 1992 and 2005 a total of 13,125 investors with an aggregate capital of 151.5 billion Birr have been licensed; out of which 1,358 are foreigners with an aggregate capital of 38.9 billion Birr.
The country has currently reformed its investment code by broadening the sector coverage for foreign participation. Accordingly, the newly included sectors are telecommunication, power and air services. Thus, almost all sectors are open for foreign investors.
Nowadays, investors are no more expected to go to various government offices to get their applications approved. The Ethiopian Investment Commission (EIC) is now serving as one stop-shop facilitator, issuing investment permit, work permit, residence permit and allocation of land for investment.
Investors are eligible for investment incentives. Special incentive sectors and sub-sectors include agricultural development and agro-processing, agricultural production, manufacturing of equipment and machinery, spare parts, components and supplies, vehicle bodies, other products and assembly plants, and publishing of printed goods; large-scale road and building construction and other related works. Rural transportation facilities; and the purchase of spraying machinery, trucks fitted with refrigeration facilities, or other equipment for support services are also eligible for special incentive facilities.
An investor in one of these specified areas who meets the conditions for a qualifying investment certificate, and who produces evidence showing the exact amount of the capital invested within 30 days of commencement of operation, may qualify for incentives.
Exemption from payment of income tax for the period between 2 to 7 years depending on the area of investment, volume of exporting and the location of investment; 100% exemption from payment of import custom duties on all investment goods;
Duty-free imports of spare parts up to 15% of the value of capital goods imported;
Capital goods imported without the payment of import duties and other import taxes may be transferred to another investor enjoying similar privileges;
Exemption from custom duties or other import taxes are granted on raw materials that are required in the production of export goods. Taxes and duties paid on raw materials are drawn back at the time of export of finished products. The duty drawback scheme applies to all taxed at the time of import, as well as those paid on local purchases.
Exemption from any export taxes and other taxes levied on exports for Ethiopian products and services destined for export;
Carrying forward of losses during a tax exemption period for half of the tax holiday period after the expiry of the tax holiday;
Export products from Ethiopia to the European Union are entitled to duty reductions or exemptions and are free from all quota restrictions under the Lome Convention. Trade preferences include duty-free entry of all industrial products and a wide range of agricultural products including fruits, vegetables, pulses and oil seeds. Under the Generalized system of Preference (GSP), a wide range of Ethiopia's manufactured products are entitled to preferential duty treatment in the USA, Canada, Switzerland, Norway, Sweden, Finland, Austria and Japan, as well as most European Union countries. Furthermore, no quantitative restrictions are applicable to Ethiopian exports on any of the 3,000-plus items currently eligible for Act (AGOA) & Everything But Arms (EBA) are the respective US and Europe export market opportunities open for exports from Ethiopia. The country has also access to 23 African countries through COMESA.
Investment Protection and Guarantee
The Government encourages foreign investors to invest in a broad range of industries which allows foreigners to hold up to 100% equity ownership. According to the investment Proclamation, investors are legally protected against the expropriation and nationalization of assets. In addition to this, Ethiopia has ratified the convention establishing the Multilateral Investment Guarantee Agency (MIGA) of the World Bank Group. It has also signed bilateral investment promotion agreements with a number of OECD (Organization for Economic Cooperation and Development) countries.
The investment proclamation allows all foreign investors, whether they receive incentives or not, to freely remit profits and dividends, principal and interest on foreign loans, and fees related to technology transfer. Foreign investors may also remit proceeds from the sale or liquidation of assets, from the transfer of shares or of partial ownership of an enterprise, and funds required for debt service or other international payments. The right of expatriate employees to remit their salaries is granted in accordance with the foreign exchange regulations of the National Bank of Ethiopia.
Both foreign and domestic private entities have the right to establish, acquire, own, and dispose of most forms of business enterprises.
Land for investment purposes is obtained on lease and with prices set by periodic auctions. Land leasehold regulations vary in form and practice from region to region. Nonetheless, they all are best in attracting investments. Land could be obtained by paying nominal or fair charges. In some priority investment areas, land could be availed even free of charges. There are also industrial zones with adequate infrastructure facilities.
Ethiopia works hard to combat corruption through a combination of social pressure, cultural norms, and legal restrictions. Although corruption exists, it is not a significant hindrance to investment or trade in Ethiopia.
Ethiopia enjoys labor peace. The right to form labor associations and to engage in collective bargaining is granted by law. Workers who provide critical services like health care are not permitted to strike. The labour law has been revised to provide for strong work culture, discipline and efficiency while safeguarding basic labour rights.
Foreign firms are welcome to invest in privatization efforts of the Ethiopian government.Since Ethiopia has launched the new market-oriented Economic Policy in 1992, it has embarked upon the privatization of state-owned enterprises as an integral part of the broader macro-economic reform.
Domestic and Foreign investors are encouraged to participate in the privatization process. In order to accomplish the privatization process, the former Ethiopian Privatization Agency is fused with the Public Enterprises Supervising Authority and has been re-established as Privation and Public Enterprises Supervising Authority (PPESA) since August 2004. Under PPESA there are well over 110 public enterprises for partnership and privatization in almost all sectors of the economy.
PPESA is also working towards attracting foreign private partners for joint venture, management contract and lease arrangements with public enterprises. This is in addition to sale option for public enterprises.
PPESA is looking for domestic/foreign public/private partners for most of the public enterprises it is supervising. In this regard, textile and garment, leather & leather products, food processing, construction and agro-industries are given priority for partnership. Those who are capable, experienced and committed investors are seriously looked for partnership. It is believed that working with the existing enterprises would reduce investment requirement and risks to new partners. There is also huge profit potential to be earned by proper utilization of time and resources. Of course, there is a challenge to be overcome.
Privatization of public enterprises through competitive bidding and transparent negotiated sales are options available. Due considerations are given to expedite the process of privatization with ensuring transparency, fairness and public accountability. The sale option could be full or partial sale of shares as the case may be (see the annexed list of public enterprises for partnership and/or complete sale out options for shopping).
To encourage private investment and promote the inflow of foreign capital and technology into Ethiopia, the following incentives are granted to both domestic and foreign investors engaged in areas eligible for investment incentives:
Customs Import Duty
One hundred per cent exemption from the payment of import customs duties and other taxes levied on imports is granted to an investor to import all investment capital goods, such as plant machinery and equipment, construction materials., as well as spare parts worth up to 15% of the value of the imported investment capital goods, provided that the goods are not produced locally in comparable quantity, quality and price.
Investment capital goods imported without the payment of import customs duties and other taxes levied on imports may be transferred to another investor enjoying similar privileges.
Some investment areas such as hotels (other than star designated), whole sale, retail and import trade, maintenance service, etc. are not eligible for exemption from customs duty. (Please see schedule two).
Exemptions from customs duties or other taxes levied on imports are granted for raw materials necessary for the production of export goods. In accordance with the Proclamation No. 249/2001, three duty incentive schemes are available for exporters.
They are Duty Draw-Back Scheme, Voucher Scheme and Bonded Manufacturing Warehouse Scheme. Taxes and duties paid on raw materials are drawn back at the time of export of finished products. The duty draw back scheme applies to all taxes at the time of importation, and those paid on local purchases.
Exemption from Payment of Export Customs Duties
Ethiopian products and services destined for export are exempted from the payment of any export tax and other taxes levied on exports.
Income Tax Holiday
Any income derived from an approved new manufacturing and agro-industry investment or investment made in agriculture shall be exempted from the payment of income tax for the periods depicted in the following table, depending upon the area of investment, the volume of export, and the location in which the investment is undertaken.
Profit tax holiday is granted subject to Council of Ministers Regulation No.84/2003 issued on the basis of the Investment Proclamation No. 280/2002 as follows:
Areas and Periods of Tax Exemption
Profit tax exemption
Profit Tax exemption for investments made in underdeveloped regions
An investor engaged
If he exports at least 50% of its products
If he supplies at least 75% of its products, to an investor, as an input for the production of export items
If it exports less than 50% of its products
If the project is evaluated under a special circumstance by the BOI
up to 7
up to 8
If the production is for the local market
If the production mentioned above in (c) is considered by the BOI to be a special one
Expansion or upgrading of the above projects:
If the expansion or upgrading increases the existing production by 25% , in value and 50% of the production is to be exported
Board of Investment
Moreover, the Council of Ministers may also award profit tax holiday for greater than seven years. However, the Board may issue a directive to deny income tax exemption right granted to investors producing only for local market, as may be necessary. The period of exemption from profit tax begins from the date of the commencement of production or provision of services, as the case may be.
Loss Carried Forward
Business enterprises that suffer losses during the tax holiday period can carry forward such losses for half of the income tax exemption period following the expiry of the exemption period.
Ethiopia provides the following guarantees to foreign investors:
Repatriation of Capital and Profits
Capital repatriation and remittance of dividends and interest is guaranteed to foreign investors under the Investment Proclamation. Any foreign investor has the right, in respect of an approved investment, to make the following remittances out of Ethiopia in convertible currency at the prevailing exchange rate on the date of remittance:
profits and dividends accruing from an investment;
principal and interest payments on external loans;
payments related to technology transfer or management agreements;
proceeds from sale or liquidation of an enterprise;
proceeds from the sale or transfer of shares or of partial ownership of an enterprise to a domestic investor;
compensation paid to a foreign investor;
Expatriates employed in an enterprise may remit, in convertible foreign currency, salaries and other payments accruing from their employment in accordance with the foreign exchange regulations or directives of the country.
Guarantee Against Expropriation
The constitution of the Federal Democratic Republic of Ethiopia protects private property. The Investment Proclamation also provides investment guarantee against measures of expropriation and nationalization that may only occur for public interest and in compliance with the requirement of the law. Where such expropriations are made, the Government guarantees to provide adequate compensation corresponding to the prevailing market value of property and such payment shall be effected promptly.
Ethiopia is a member of the World Bank-affiliated Multilateral Investment Guarantee Agency (MIGA) which issues guarantees against non-commercial risks to enterprises that invest in signatory countries. Ethiopia is currently concluding bilateral investment promotion and protection agreements with a number of developed and developing countries, and it is ready to conclude such treaties with any country at any time. Ethiopia has also signed the World Bank treaty, "the International Convention on Settlement of Investment Disputes between States and Nationals of other States (ICSID)".
The Ethiopian Government launched a programme for the privatisation of state owned enterprises in early 1995. Accordingly, the Ethiopian Privatization Agency (EPA) was established to implement the privatisation programme in the same year. The Government has laid the ground to privatise most of the state owned enterprises to the private sector. Accordingly, EPA has received a stock of 113 state owned enterprises from the government for privatisation in the years ahead. As indicated in EPA's work schedule, out of these enterprises, a total of 43 state owned enterprises are in the pipeline for privatisation in the near future. Most of these enterprises fall under manufacturing, construction, agriculture and agro-industry, hotels, transport, trade, and mining sectors. There is a strong commitment from the Government side to fully privatise state enterprises in the coming in few years. Detailed information on the process of privatisation can be obtained from the Ethiopian Privatization Agency.
Agriculture is the main stay of Ethiopia's economy providing employment to 85 per cent of the population. The sector contributes about 45 per cent of the GDP and 62 per cent of total exports with coffee alone accounting 39. 4 per cent of total exports in 2001/2002. Furthermore, agriculture plays a crucial role in providing raw material inputs for the local industry. Endowed with wide ranging agro-ecological zones and diversified resources, Ethiopia grows all types of cereals, fiber crops, oil seeds, coffee, tea, flowers, fruits and vegetables. The potentially irrigable land is estimated at 10 million hectares. Ethiopia has the largest livestock population in Africa. Fishery and forestry resources are also significant. Considerable opportunities exist for new private investment in the production and processing of the above agricultural crops and resources. The following areas in particular, have been identified to offer plenty of opportunities to private investors.
The food crops grown include teff, wheat, maize, beans, peas, lentils, soyabeans, chickpeas etc. In 1992/2000, Ethiopia produced 11.4 million tons of these food crops on about 8.9 million hectares of land. This is far short of the country's demand for these crops. Great opportunities, therefore, exist for commercial production and processing of these food crops. Some pulses can also be produced or processed for the export market. Oil crops such as rapeseed, linseed, groundnuts, sunflower, ginger seed and cottonseed serve as raw material inputs for the edible oil industry. Some oilseeds, including sesame, are important export crops. Favorable agro- climatic conditions also exist in the south-western parts of the country for introducing coconut for the production and processing of palm oil and ghee. Besides, Ethiopia has a huge potential for producing and processing of maize. It is widely grown in various agro-ecological zones. The total annual average production is 250 thousand metric tones in an area of about 1.4 million hectares. As part of the government's initiative to efficiently tap the available potential, detailed project profiles have already been prepared for the processing of coffee and corn.
Coffee is Ethiopia's gift to the world. The country is Africa's leading producer of Coffee Arabica. Coffee remains the single most important cash crop. The volume of coffee export was just over 110 thousand tons in 2001/2002. The potential for private production and processing of coffee is significant. Tea is also another potential for production, processing and export. Ethiopia's tea is of an excellent quality. The total tea export for the year 2001/02 was 153 tons. The favourable agro-climatic conditions in the country offer excellent opportunities for production and processing of tea for both export and domestic consumption.
Cotton provides significant opportunities for export. A portion of existing textile industry demand of lint cotton is met from domestic production, the remaining being met through imports. In addition, there are good prospects for exporting lint. Opportunities for production and processing of cotton in Ethiopia are significant.
Ethiopia's diversified agro-climatic conditions makes it suitable for the production of a broad range of fruits, vegetables and flowers, including citrus, banana, mango, papaya, avocado, guava, grapes, pineapple, passion fruit, apples, potatoes, cabbages cauliflower, okra, egg plant, tomato, celery, cucumber, pepper, onion, asparagus, water melon, sweet melon, carrots, green beans and cut flowers. Ethiopia is believed to be center of diversity and center of origin for various flowering plants. Cut flower and vegetable production are fast growing export businesses; in 2001/02-production year over 29,000 tons of fruits and vegetables and 10 tons of flowers were exported. The agro-processing of fruits and vegetables can be vertically integrated with production. There are already some integrated agro-industrial processing plants run by a state enterprise. The horticulture sub-sector in general holds great potential for private investment.
Ethiopia is one of the top ranking countries in Africa and among the first ten in the world in terms of livestock resource. The livestock resources of the country include 35 million cattle, 11.4 million sheep and 9.6 million goats. Traditional methods of animal husbandry render current output per unit of domestic breed of livestock too low. Therefore, investment opportunities are potentially attractive for modern commercial livestock breeding, production and processing of meat, milk and eggs. Investment opportunities of significance potential are also available in ostrich, civet cat and crocodile farming.
Opportunities exist for fresh water fish production and processing using artificial ponds. In addition, the country's fresh water bodies have an estimated annual fish production capacity of 30,000-40,000 tons, of which less than ten per cent is presently being exploited.
Forestry and Apiculture
An estimated 2.5 million hectares of natural forest presently remains in 58 designated National Forest Priority Areas (NFPA). Of these, 13 are managed under integrated forest management systems, with about 80,000 hectares of industrial forest having been established for limited sustainable exploitation. Investors are welcome to invest in integrated commercial production of structural timber, pulp-wood, match wood or even fuel wood. Production of rubber and natural gum also offers exciting opportunities for private investment. With some 3.3 million beehives, Ethiopia is the leading honey and bees wax producing and exporting nation in Africa. This offers excellent prospects for private investment in apiculture.
Investment in the provision of agricultural support services such as pest and disease control, technical consultancy, agricultural machinery, cold storage, transport and marketing services offer considerable scope.
Manufacturing is now at an early stage of development, and currently accounts for about 7 per cent of GDP and 5.3% of employment. It covers about 145 state owned and 643 private manufacturing industries of all sizes. These industries are mainly engaged in the production of food products and beverages, tobacco products, textiles, wearing apparel, tanning and dressing of leather, footwear, luggage and handbags, manufacturing of wood and its products, manufacturing of rubber and plastic products, manufacturing of chemicals and chemical products, manufacturing of other non-metallic mineral products, manufacturing of basic iron and steel, manufacturing of fabricated metal products, assembling of motor vehicles, trailers and semi trailers . As part of the government effort to re invigorates and revitalize the manufacturing sector, a new Industrialization Development Strategy has recently been adopted. The Strategy clearly identifies the priority areas of the manufacturing sub-sectors and put in place strategies that insure the development of vibrant industries in the country. Major manufacturing opportunities offering attractive potential benefits to prospective investors exist in the textile and garment, food and beverage, leather and electronic, building materials and non-metallic mineral and metallic industrial sub-sectors. These investment opportunities include:
Food and Beverages: processing and preserving of meat products; integrated production, processing and preserving of fish and fish products; processing and preserving of fruits and vegetables; integrated production and processing of dairy products; manufacture of sugar; brewery, winery, soft drinks, processing and bottling of mineral water, etc.
Tannery, Leather Goods and Articles: tanning up to finishing; manufacture of luggage items, handbags, saddlery and harness items, foot-wear, garment and integrated tanning and leather goods.
Textile: spinning, weaving and finishing of textile fabrics and production of garments.
Glass and Ceramics: tableware and sanitary ware, sheet glass and manufacturing of containers.
Chemicals and Chemical Products: manufacture of basic chemicals based on local raw materials, including PVC granules from ethyl alcohol, formal-dehyde from methanol, manufacture of caustic soda and chlorine-based chemicals, carbon black; activated carbon; precipitated calcium carbonate and ball-point ink.
Drugs and Pharmaceuticals: manufacturing of pharmaceutical, medicinal, chemical and botanical products in the form of tablets, capsules, syrups and injectables.
Paper and Paper Products: pulp from indigenous raw materials, paper and paper products.
Building Materials: manufacture of cement, lime, gypsum, marble, granite, limestone, ceramics, roofing tiles, corrugated sheets, tubes, pipes and fittings.
Electrical and Electronic products: manufacture of office, accounting and computing machinery; manufacture of electric motors, generators, transformers, capacitors, resistors, switch gears , electrical fittings and integrated circuit boards; manufacture of radio, television, VCRs, printers, floppy disc drives, communication and other equipment and apparatus for the domestic and export market.
Metallurgy: manufacture of basic iron and steel, operation of blast furnaces, steel converters, rolling and finishing mills. Recycling of metal waste and scrap. Manufacture of basic precious and non-ferrous metal; mechanical working, heat treatment, pleating of ferrous and non-ferrous metals.
Structural Products: manufacture of structural metal products, reservoirs and steam generators.
Machinery and Equipment: assembly and manufacture of agricultural machinery and equipment, industrial, transport and mining machinery and parts,
construction machinery, machine tools and accessories, miscellaneous light engineering products, components and parts.
Ethiopia offers excellent opportunities for mineral prospecting and development. According to the Ministry of Mines and Energy, "Ethiopia's green stone belts offer one of the finest areas for gold mineralization any where in the world," and already more than 500 metric tons of gold deposits have been identified by Government exploration efforts. Additional gold reserves are expected to be identified in at least seven regions of the country.
In addition to gold, Ethiopia is blessed with good deposits of tantalum, platinum, nickel, potash and soda ash. Included in the construction and industrial minerals are marble, granite, limestone, clay, gypsum, gemstone, iron ore, coal, copper, silica, diatomite, bentonite, etc. With regard to fossil energy resources, there are significant opportunities for oil and natural gas in the four major sedimentary basins, namely the Ogaden, the Gambella, the Blue Nile and the Southern Rift Valley. Details of the mineral resources have been published by the Ministry of Mines in two volume prospectus.
Tourists and writers who have been to Ethiopia wonder why Ethiopia's tourism potential is still so little known. According to December 12,2002 edition of Our World, "Those who have discovered Ethiopia would probably like to keep the secret to themselves." In any case, the message is starting to filter through. Tourism in Ethiopia is growing slowly but surely.
The country has a lot to offer to tourists. Visitors will find landscapes comparable to its neighbouring countries, Kenya or Tanzania, and awe-inspiring historical sites and monuments similar to its other neighbour, Egypt.
The highlands of Ethiopia have an attractive landscape, scenery and wildlife. In the African Rift Valley system, a wide variety of wildlife and numerous bird species, both endemic and common, are found and a substantial volume of traffic is directed to this area. The magnificent Tis Issat Falls on the Blue Nile (Abay) river the endemic wildlife in Semien Mountains, the Sof Omar Cave in the south east are some of the interesting sites. The rock-hewn churches at Lalibela, the ancient buildings of Yeha and the obelisks at Axum, the medieval palaces at Gondar and the monasteries of Lake Tana, Debre Damo aand Debre Libanos are the main tourist attractions.
Given its unique cultural heritage, magnificent scenery, pleasant climate, rich flora and fauna, important archaeological sites, friendly and hospitable people and the recent growth in the inflow of tourists, Ethiopia's potential puts it among the leading tourist destinations in Africa. Tourism infrastructure, which is still inadequate, should be developed in order to cope with the growing traffic. There are, therefore, great opportunities for private investment in hotels, lodges and international restaurants.
The Ethiopian Government recognizes that the delivery of infrastructural services, such as transport (road, rail and air), telecommunications and postal services, energy and water have a long way to go before they meet the demand of investors. It is, therefore, making heavy investment in infrastructure development through on-going power, telecommunications and road sector development programs to relieve supply constraints and improve quality of services. Besides, it is widening the opportunities for private sector participation in the development of infrastructural facilities.
The Government is planning to assign 40 per cent of road maintenance works to the private sector contractors in the short term and increase the level to 100 per cent in 10 years. The power sector program has a plan to increase power generation capacity from 327MW to 663MW by 2004/05. The private sector has a role to play by involving in generation and off-grid transmission and distribution of electrical energy as well as generation of electricity to supply the national grid based on power purchase agreement with government.
In recognition of the huge investment capital required to develop infrastructural facilities that are crucial for economic development, the Government is considering viable options in the short-to medium-term. The short-and medium-term alternatives include finding a strategic partner in the operation and development of telecommunication infrastructure.
Opportunities exist for private investment in the following services:
exporting the country's various products except traditional export products like raw coffee, oil seeds, pulses, etc. by way of undertaking market promotion, quality improvement or packaging;
construction ,comprising first grade contracting and rental of construction machinery as well as real estate development;
social services, such as health, education and sports facilities;
Other projects in these sectors are to be identified by potential investors.
The principal taxes currently in place are profit tax, turn over tax (TOT), value-added tax (VAT), excise tax, customs duty and income tax from employment. VAT has replaced sales tax. TOT and withholding taxes have been introduced recently. Other taxes include corporate tax, dividend income tax, royalties and stamp duties.
The Government has recently been introducing a series of measures to reform the tax system with a view to encouraging investment and foreign trade. On the whole, the reform process is to reduce the rates but broaden the base.
Corporate Income Tax
The corporate income tax (tax on profit) in Ethiopia is 30 per cent.
Turn Over Tax (TOT)
A 2 per cent tax is payable from supplying of goods to the local market and rendering of construction, grain mill, tractor, combine harvesting services undertaken in the country. A 10 per cent tax is payable on other sectors excluding the above mentioned services.
Excise tax is levied on selected items when produced locally or imported from abroad. The tax rate ranges from ten per cent to hundred per cent.
Customs duties are payable on imports by all persons and entities which have no duty-free privileges. The main regulation on customs duty has introduced a harmonized system of classification of goods and the rate of customs duty ranges from 0 to 35 per cent.
Income Tax from Employment
Personal income tax is payable as per Proclamation No.286/2002. According to this law, the first Birr 150 of monthly personal income is exempted from payment of income tax. For monthly income of Birr 151 and above the marginal tax rates range from 10 per cent to 35 per cent with 7 income brackets as shown below.
Income tax from employment
Monthly income (Birr)
Up to 150
There are no taxes on export products and services from Ethiopia.
Withholding tax is payable on import of goods and is set at 3 per cent of the same cost, insurance and freight. In case of organizations, having legal personality, government agencies, private non-profit institutions, and non-governmental organizations (NGOs), the amount withheld is 2 per cent of the gross amount of payment.
Value Added Tax
Value added tax is levied on those businesses whose turnover is over and above Birr 500,000 per year. They are expected to pay 15 per cent VAT. All export goods and basic services, however, are exempted from VAT
Corporate Income Tax
Turn Over Tax (TOT)
2% and 10%
10% up to 100%
0% up to 35%
Income Tax from Employment
0% up to 35%
With holding Taxes
Value Added Tax
Ethiopia has concluded tax treaties with a number of countries and is also ready to conclude similar treaties with other countries for the purpose of avoidance of double taxation.
Visas are required for all foreign visitors to Ethiopia, with the exception of nationals of Kenya and the Sudan. Visa applications may be obtained at Ethiopia's diplomatic missions overseas. However, nationals of 33 countries are now allowed to receive their tourist visas on arrival in Ethiopia at the regular charge. The list includes Argentina, Australia, Austria, Belgium, Brazil, Canada, China, Denmark, Finland, France, Germany, Greece, Ireland, Israel, Italy, Japan, Republic of Korea, Kuwait, Luxembourg, Mexico, The Netherlands, New Zealand, Norway, Poland, Portugal, Russian Federation, South Africa, Spain, Sweden, Switzerland, Taiwan, United Kingdom and United States. However visas are readily available at Ethiopian's diplomatic missions abroad.
The Main Department for Immigration and Nationality Affairs issues a residence permit to a foreign investor, upon submission of an Investment Permit issued in his/her name. A foreign investor, who is a share holder of a company or branch company and an expatriate staff who has a work permit, is also entitled to a residence permit.
The currency of Ethiopia is based on the decimal system. The units of currency are the Birr and cents. The Birr is divided into 100 cents. The average exchange rate at the time of publication is: $1= 13.47 Birr
It follows the Julian calendar, which consists of twelve months of 30 days each, and a thirteenth month of five or six days (on a leap year).
Ethiopia is in the GMT +3 time zone.
The government offices have 39 working hours a week. The office hours are 8:30 a.m. to 12:30 p.m. and 1:30 p.m.to 5:30pm. from Monday through Thursday. Working hours on Friday are 8:30 a.m. to 11:30 a.m. and 1:30p.m. to 5:30 p.m. Private and public businesses are often open on Saturdays, too.
Personal effects, unexposed film, cameras and accessories may be imported free of duty. Duty free items include 250 grams of tobacco or 200 cigarettes or 50 cigars, two litters of alcohol and half a litter of perfume. Visitors may export souvenirs with a value not exceeding Birr 500.
Airport Service Charge
An embarkation fee of US$20 per person is payable when leaving Ethiopia. The embarkation fee can be paid either at the Exit Airport or any Airline Ticket Office