Sunday, 06 July 2014 18:02

Indirect Taxes

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The value added tax (VAT) system, which came into effect on July 4th 2002, largely replaced the old business tax system of commodity and service taxes including the sales tax and the withholding tax. The VAT rate is 15% of the value of every taxable transaction by a registered person and all imports of goods and services other than those exempted. Taxable transactions which shall be charged with zero percent are: export of goods or services to the extent provided in the regulations. The rendering of transportation or other services directly connected with international transport of goods and other consumable technical supplies taken on board for consumption during international flights.

Excise tax is payable on a range consumer goods, whether locally produced or imported, e.g., alcohol, tobacco, salt, fuel, television sets, cars, carpets, and toys. Its rates vary from 10% on receivers, garments and textiles of any type and fabric to 100% on perfumes. vehicles above 1800 cc and alcoholic drinks. It is payable in addition to VAT.
Turn over tax, under the total value of 500,000 Birr is applicable to pay 2 or 10 percent from annual taxable transactions on goods sold or services rendered locally.
All income from domestic of foreign sources is taxable whether it is obtained as remuneration, profit, or gain, from employment, business activities or any activity which brings income to the beneficiary.

For depreciation allowance, assets are categorized into different classes. The categories and rates of depreciation are:
1. Building and structure 5%
2. Intangible assets 10%
3. Computers, information systems, soft ware products and data storage equipment 25%
4. All other business assets including automobiles, buses, and minibuses 20%
Every investor has a tax obligation and is required to obtain a tax payer identification number (‘TIN”). An investor that will involve in taxable activity has also an obligation to register for VAT.

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More in this category: « Custom Duty Taxation »

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