Information for Investors

Investment Regulations

1. Legal and Juridical System


The constitution is the supreme law, overriding all other legislation in the country. The legal system depends on codified laws, including civil, penal, civil procedure, and penal procedure, commercial and maritime codes.
All proclaimed laws are published in official gazettes (Negarit Gazeta). In administering justice, courts are directed by internationally accepted principles of justice as well as by the laws of the FDRE. The practice of law is reserved for Ethiopians. However, foreign nationals have the right to appear in courts as witnesses. In such cases, the foreigner is allowed to communicate through a court-appointed translator.
The Commercial Code of 1960 provides the legal framework for undertaking business activities in Ethiopia. The constitution, in accordance with Article 40, ensures the right of every citizen to the ownership of private property, including the right to acquire, use and dispose of such property. The Investment Proclamation (769/2012) gives also a foreign investor the right to own a dwelling house and other immovable property necessary for his investment.
The Investment Proclamation (769/2012) guarantees investors against measures of expropriation or nationalization, and specifies advance payment of compensation “corresponding to the prevailing market value” of a private property earmarked for expropriation or nationalization for public interest.
Ethiopia is a member of the World Intellectual Property Organization (WIPO) and the Multilateral Investment Guarantee Agency (MIGA). Furthermore, Ethiopia has concluded bilateral investment treaties (BITs) and double taxation treaties (DTTs) with a number of countries.


2. Institutional Framework


The Investment Proclamation of 2012 and the Regulations on Investment Incentives and Investment Areas Reserved for Domestic Investors of 2012 are the main legal framework for both foreign and domestic investment in Ethiopia.
The Ethiopian Investment Commission (EIC) is an autonomous government institution accountable to the Investment Board. The Prime Minister chairs the Board. A Commissioner who is also member of the Board heads the EIC.
The EIC has restructured itself recently with a view to promoting more FDI and improving the services it renders to investors.
The major activities of the EIC and the one-stop shop services it renders to foreign investors are the following:
• Promoting the country’s investment opportunities and conditions to foreign and domestic investors;
• Issuing investment permits, business licenses and construction permits;
• Notarizing memorandum and articles of association and amendment;
• Issuing commercial registration certificates and effecting renewal, amendment, replacement or cancellation;
• Effecting registration of trade or firm name and amendment, replacement, suspension or cancellation;
• Grading first grade construction contractors;
• Registering technology transfer agreements and export-oriented non-equity-based foreign enterprise collaborations with domestic investors;
• Negotiating and, upon government approval, signing bilateral investment promotion and protection treaties with other countries; and
• Advising the Government on policy measures needed to create an attractive investment climate for investors.
The EIC also provides additional services on behalf of investors’ request to facilitate the acquisition of land and utilities (water, electrical power and telecom services), to process loan and residence permit applications, to get approval of environmental impact assessment (EIA) studies for their investment projects as well as for the issuance of tax identification number (TIN).


2.1 Registration Requirements


The minimum capital require of a foreign investor is USD200,000 per project.
If a foreign investor invests in partnership with domestic investor(s), the minimum capital required of him is USD150,000 per project.
 The minimum entry capital required of a foreign investor investing in areas of architectural, engineering works or related technical consultancy services, technical testing and analysis and publishing work is USD100,000 where the ownership is fully foreign owned. Where the investment is to be made jointly with domestic partner(s) the minimum capital required for the foreign investor is USD50,000.
 A foreign investor reinvesting his profits or dividends generated from existing enterprise is not required to allocate a minimum capital.
An individual investor may also invest as a sole proprietor, with full equity ownership. Areas open for joint-venture investment with the Government are the manufacture of weapons and ammunition and telecommunication services. Otherwise, the law encourages joint ventures with Ethiopian individuals and companies. Investment can also be effected through business organization incorporated in Ethiopia or abroad (locally registered branch companies).
As a requirement, a foreign investor should obtain investment permit first by submitting a properly filled application form with the required documents.


Commercial Registration of Company


Where the application is to establish as a new local viable venture in Ethiopia, the foreign investor applicant is required to submit the following documents.
 An application form signed by an agent of the company;
 Name clearance from the EIC in the case of creating a new company;
 A photocopy of agent’s power of attorney;
 A copy memorandum and articles of associations;
 Copy of each shareholders valid passport or identity card or photocopy of a certificate evidencing a domestic investor status;
 Tax identification number (TIN);
 An authenticated office lease agreement or title deed;
 In case of non share company, a bank statement showing that the company’s capital to be contributed in cash is deposited in a bank account and proper documents related to contribution in kind; and
 In case of share Company, a bank statement showing that at least one fourth of per value of the subscribed shares of the company is deposited in a bank account.


Commercial Registration of a Branch Company
Where the application is to establish as a branch company in Ethiopia, the applicant is required to submit the following documents:
 Legal certificate of incorporation in the country of origin;
 Notarized document of the memorandum and article of association;
 A decision stating the organizations’ intent to invest in Ethiopia, together with the amount of capital allocated for the purpose; and
 A power of attorney to the appointed agent in Ethiopia and his two passport size photographs;
 Tax identification number (TIN); and
 An authenticated office lease agreement or title deed.
Upon receiving in full the authenticated documents listed above together with property filled investment application form, the investment permit and company registration certificate will be issued within 3 hours.
Investment to be made by business organization incorporated in Ethiopia
Where the application is to be made by a business organization incorporated in Ethiopia, the foreign investor applicant is required to submit the following documents.
 An application form signed by an agent of the company;
 A photocopy of agent’s power of attorney;
 Name clearance from EIC in the case of establishing new company;
 A photocopy of its memorandum and articles associations;
 Copy of each shareholders valid passport or identity card or a photocopy of the certificate evidencing a domestic investor status;
 In case there is a business organization in the company, a photocopy of its memo random and articles of associations or similar documents of the parent company, legal certificate of incorporation in the country and an authenticated minute stating the organization’s intent to invest in Ethiopia.
Application for expansion or upgrading of an existing enterprise
Where an applicant to expand or upgrade an existing enterprise, a foreign investor is required to submit the following documents:
 An application form signed by an agent;
 Photocopy the agent’s power of attorney;
 Where the applicant is sole proprietor, a photocopy of his valid passport or identity card or a certificate evidencing a domestic investor status and his two recent passport size photographs;
 Where the applicant is a business company, a photocopy of its memorandum and articles of associations and his two recent passport size photographs of the general manager;
 A photocopy of each shareholders valid passport or identify card or a photocopy of the certificate evidencing a domestic investor status;
 In case there is a business organization in the company, a photocopy of its memorandum and articles of associations or similar documents of the parent company, a legal certificate of incorporation in the country and an authenticated minute stating the organization’s intent to invest in Ethiopia;
 A photocopy of a valid business license of the existing enterprise; and
 A photocopy of project feasibility study.
The Main Department for Immigration and Nationality Affairs issues a residence permit to a foreign investor, upon the submission of his/her investment permit. A foreign investor, who is a shareholder of a company or a branch company and an expatriate staff who has a work permit, are also entitled to have a residence permit.
NOTE:
All documents whose sources are outside of Ethiopia should be authenticated by foreign public notary, the Ethiopian Embassy, the Ministry of Foreign Affairs of Ethiopia and domestic public notary. 


2.2. Land Allocation


In Ethiopia, land is public property. Individuals, companies and other organizations have only the right to use land. There are two broad classifications of land for rent or lease purposes: rural land and urban land.
Rural land is rented mainly for agriculture. Currently, there are nearly 11.55 million ha of potential land for farming. The rental price of rural land is generally low. There is strong commitment from the government to avail the country’s fertile land for investment. The Ministry of Agriculture has been given the responsibility of providing technical support for private investors investing in agriculture. The support ranges from providing land above 5000 ha, provision of information, technical support, and facilitation for other public services.
Urban land is divided into two categories. These are land for industrial use and land for other activities. Industrial land is given much attention by the government and a number of industrial zones with the necessary infrastructural facilities (roads, electricity, water, telephone) are established in the major cities and towns in order to support the county’s drive for rapid industrialization. Industrial land in industrial zones is allocated to investors at fixed prices. Land for export-oriented industries is generally available at concessionary rate.
The Ethiopian Investment Commission (EIC) has the mandate to facilitate the allocation of land for FDI projects throughout the country. Urban land for other activities is available on a auction basis. The auction prices vary, depending on demand.
The lease and rental prices of urban and rural land vary according to location, type of investment and class of land. The land cannot be mortgaged or sold, but the lease or rental value of land and the fixed assets thereon may be mortgaged or transferred to a third party.
The Ministry of Industry is there to avail sheds or plots of land for manufacturing investment in public industrial zones on rental basis. Private industry zones are also present.

 DATA SOURCE: ETHIOPIAN INVESTMENT GUIDE 2014