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  Introduction   Investment Objectives
  The Country's General Feature   Guarantees to Investors
  Major Investment Opportunities   Investment Incentives
  Related Information: Learn More about the export products of Ethiopia
 
     
 
Investment Incentives
  
 


To facilitate the promotion of private investment, to enhance the inflow of foreign capital and technology in to the country, the Ethiopian Investment Commission grants the following incentives to both domestic and foreign investors engaged in areas eligible for investment incentives.

 
Customs Import Duty


100% 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 as well as spare parts with up to 15% of the value of the imported investment capital goods.
Investment capital goods imported with out the payment of import customs duties and other taxes levied on imports may be transferred to another investor enjoying similar privileges
Exemption from customs duties or other taxes levied o imports are granted for raw materials necessary for the production of export goods.

 
Exemption from Payment of Export Customs Duties


Ethiopia’s products and services destined for export are exempted form the payment of any export tax and other taxes levied on exports.
 
Income tax Holiday

Income derived from an approved new manufacturing and agro industrial investment or investment invested on agriculture shall be exempted from the payment of income tax for periods ranging form 2 to 8 years, depending on the area of investment the volume of export and the location in which the investment is taking place
 
Loss Carried Forward

Business enterprises that have suffered 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.


 
 

 

 

 
  Taxation  
 

The Federal Government of Ethiopia, with a view to encourage investment and foreign trade, has recently introduced successive measures to reform its tax system the reform was basically required to reduce the rates as to broaden the base of the investment sector.

 
Corporate Income tax

In Ethiopia, the corporate income tax (tax on profit) is 30 percent
 
Turn Over Tax (TOT)

A two per cent tax is payable from the supply of goods to the local market and from rendering of construction, grain mill, tractor and combine harvesting services under way in the country. A 10% tax is also payable on other sectors.
 
Excise Tax

Excise tax is levied on selected local or imported products. The tax rate ranges from 10 to 100 percent
 
 

 

  
Customs Duties

Customs duties are payable on imports and entities that have no duty free privileges. According to the harmonized system of classification of goods, the rate of customs duty ranges from 0 to 35 per cent.
 
Employment Income tax

Personal income tax is payable as per proclamation No 286/2002 Accordingly, the first Birr 150 of monthly personal income is exempted from payment of income tax. From monthly income of Birr 151 and above, the marginal tax rates range from 10 to 35 peer cent.
 
Export Taxes

There are no taxes levied on export products and services
 
Withholding Tax

With holding tax is payable on import of goods and is set at 3% of the same cost, insurance and freight. In the case of organizations, (NGOS) the amount with held is 2 % of the gross amount of payment.
 

 

Value Added Tax (VAT)

Value Added tax is levied on businesses whose turnover is over and above Birr 500.00 per year. They are required to pay 15% VAT but export goods and basic services, are all exempted from VAT.
 
Tax Treaties

Ethiopia, with purpose to avoid double taxation, has signed tax treaties with several countries and is also ready to conclude similar treaties with other countries for the purpose of avoiding double taxation.
 
Investment policy

The country’s market oriented economic development strategy embraces wide reforms with inducements to both domestic and foreign private investments. The private sector is encouraged to invest in almost all areas of the economy A foreign investor can invest jn his/her own or jointly with domestic investor(s)
 
Wholly Foreign Owned Investments

A foreign investor intending to invest on his/her own. Except in consultancy services and publishing is required to invest not less than USD 100,000 in cash and /or in kind as an initial investment capital per project to start business.
 
Joint Venture Investment

A foreign investor may team up with a domestic investor or company for a joint venture investment, usually in the form of a partnership of private limited company or share company.

Under the Investment proclamation No 280/2002, a minimum capital of USD 600.000 except in consultancy services and publishing is required from a foreign investor who intends to enter in to a joint venture partnership with a domestic investor.

A foreign investor wishing to invest in partnership with domestic investor/s in areas of engineering, architecture, accounting and auditing services, and publishing is required from a foreign investor who intends to enter into a joint venture partnership with a domestic investor.

A foreign investor wishing to invest n partner ship with domestic investor/s in areas of engineering, architecture, accounting and auditing services, project studies or business and management consultancy services or publishing is required to invest only USD 25,000 per project the foreign partner can satisfy this minimum equity capital either in cash and /or in kind. There is no restriction at all in share ownership in a joint venture.