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The following areas of investment are exclusively reserved for Ethiopian nationals.

  1. Manufacturing of cement, cement & clay products.
  2. Banking, Insurance and micro – credit & saving services.
  3. Packaging, Forwarding and Shipping agency services.
  4. Broadcasting service.
  5. Mass media service.
  6. Attorney and legal consultancy services.
  7. Preparation of indigenous traditional medicines.
  8. Advertisement, promotion and translation works.
  9. Air transport service using aircraft with a seating capacity up to 50 passengers.
  10. Flour production
  11. Manufacturing of ice crème and cakes
  12. Finishing of fabrics ,yarn warp and weft, apparel and other textile products by bleaching, dyeing and other textile products by bleaching dyeing ,shrinking, sanforizing ,mercerizing or dressing
  13. Tanning of hides and skins below finished level.
  14. Printing industry
  15. Plastic shopping bag
  16. Quarry
  17. Provision of kindergarten, elementary junior secondary education.
  18. Tour operation below grade 1
  19. Provision of diagnostic center service by constructing own building
  20. Provision of clinical  center service by constructing own building
  21. Capital goods leasing, excluding leasing of motor vehicle.

A business organization may have Ethiopian nationality, provided that its capital is owned by Ethiopian Nationals. 

No Activity Fee in Birr
1 Issuance of  new investment permit 600
2 Expansion 300
3 Renewal of investment permit 200
4 Chang of investment permit 100
5 Substitution of lost or damage investment permit 100
6 Issuance of principal registration 100
7 change of principal registration 80
8 Renewal  of principal registration 100
9 Substitution of principal registration 50
10 Issuance of work permit 1,700
11 Renewal of work permit 1,300
12 Substitute  of work permit 1,000
13 Notarization of memorandum  652
14 Notarization of minute of meeting 160
15 Competency certificate  for contractor (G-1) 5,000
15 Technology of transfer 200
16 Issuance business license 100
17 Name registration 25
  1. For Sole Proprietorship (Individual Investor)
    • An application form duly filled and signed by the investor / agent. Where the application is made by an agent, a photocopy of his/her power of attorney.
    • Photocopies of the relevant pages of a valid passport including the pages that shows recent entry visa;
    • Collect from EIA letters for the bank to deposit the minimum requirement.
    • To get an investment permit, come with bank recommendation letter about the deposited minimum required capital.
  2. Business organization (Wholly foreign owned and Joint investment )
    • Prepare Draft Memorandum and Articles of Association according to Ethiopian Investment Law.
    • Get a clearance letter from the Agency (EIA) for the name of the company.
    • Attach copy of valid passport and visa / or ID of the General Manager and shareholders.
    • Edit and authenticate the Memorandum and Article of Association at EIA.
    • Collect Letter for the bank to deposit the minimum requirement or the paid-up capital of the company.
    • To get the commercial registration and investment permit, come with bank recommendation letter about the deposited capital, TIN and authenticated office rental agreement.
    • Fill an application form and attach the above mentioned documents with it.
  3. Branch of a business organization
    • An application form duly filled and signed by the agent of the business organization.
    • Copy of memorandum and article of association or equivalent document of the parent company.
    • Photocopy of documents ascertaining the legal personality of the business organization (registration certificate).
    • Minutes of the parent company passed by an authorized body for the establishment of a branch company in Ethiopia, authenticated by the public notary, or a letter written by the owner in case of a one – Man Company.
    • Authenticated photocopy of the power of attorney of the representative of the company, and photocopies of the relevant pages of the representative’s valid passport or ID, in case the representative is and Ethiopian national.
    • Collect from EIA letters for the bank to deposit the minimum requirement.
    • To get an investment permit, come with bank recommendation letter about the deposited minimum required capital.
  4. Expansion or upgrading of existing Enterprises
    • An application form duly filled and signed by the investor / agent. Where the application is made by an agent, a photocopy of his/her power of attorney.
    • Where the investment is made by a business organization, photocopies of its memorandum and article of association (with amendments if any).
    • Photocopy of a valid business license, principal registration certificate and audit report of the existing enterprise.
    • Three passport size recent photographs of the investor or the general manager (if company).
Sunday, 06 July 2014 18:46

Forms of Investment

Investment may be carried out in one of the following forms
1. Sole Proprietorship (Individual Investor)
2. Business organization
• Wholly foreign owned
• Joint investment between domestic and foreign
• Branch of a business organization

Minimum Capital Requirement

Under the Investment Proclamation No. 769/2012 (as amended),

  1.  Any foreign investor, to be allowed to invest pursuant to the proclamation, shall be required to allocate a minimum capital of USD 200,000 for a single investment project.
  2. The minimum capital required of a foreign investor investing jointly with a domestic investor shall be USD 150,000.
  3. The minimum capital required of a foreign investor investing in Architectural or Engineering works or related technical consultancy services, technical testing and analysis or in publishing work shall be
    a) USD 100,000 if the investment is made wholly on his own;
    b) USD 50,000 if investment is made jointly with a domestic investor.
  4. A foreign investor re-investing his profits or dividends generated from his existing enterprise may not be required to allocate a minimum capital.
Sunday, 06 July 2014 17:13

Market Size and Access

Ethiopia has enjoys potential market opportunities and preferential market access: 

  • Ethiopia has a large population and thus potentially one of the largest domestic markets in Africa;
  • Ethiopia’s proximity to the Middle East also offers potential market opportunities;
  • The Common Market for Eastern and Southern Africa (COMESA) embracing 19 countries with a population of 400 million;
  • preferential access to European Union market under the EU’s Everything-But-Arms (EBA) initiative ;
  • USA markets under the African Growth and Opportunities Act (AGOA); and 
  • The Generalized System of Preference (GSP). 

Thus, most Ethiopian products can enter into these markets quota and duty free.

Sunday, 06 July 2014 18:06

Custom Duty

The following customs duty exemptions are provided for investors (both domestic and foreign) engaged in eligible new enterprises or expansion projects such as manufacturing, agriculture, agro-industries, generation, transmission and supply of electrical energy, Information and Communication Technology Development , hotel and tourism, construction contracting, education and training, hotel services, architectural and engineering works, technical testing and analysis, capital goods leasing and importation of LPG and bitumen.

  • 100% exemption from the payment of customs duties and other taxes levied on imports is granted to all capital goods, such as plant, machinery and equipment and construction materials;
  • Spare parts worth up to 15% of the total value of the imported investment capital goods, provided that the goods are also exempt from the payment of customs duties;
  • An investor granted with a customs duty exemption will be allowed to import capital goods duty free within five years from the date of commissioning of a project; 
  • An investor entitled to a duty-free privilege buys capital goods or construction materials from local manufacturing industries shall be refunded customs duty paid for raw materials or components used as in puts for the production of goods; and
  • Investment capital goods imported without the payment of custom duties and other taxes levied on imports may be transferred to another investor enjoying similar privileges.

 

Sunday, 06 July 2014 18:02

Indirect Taxes

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.

Sunday, 06 July 2014 18:00

Taxation

Direct Taxes

Income taxable under Income Tax Proclamation No. 286/2002 Article 6) include incomes from employment, business activities, personal activities, entrepreneurial activities by non-residents, movable property, immovable property, alienation property, dividend distributed by resident company, profit shares paid by registered partnerships, interest paid by the national, regional of local governments, and license fees. Personal income tax rates applicable at present are given below:

  No. Employment Income per month   Tax Rate
Over Birr To Birr  
1 0 150 Exempt threshold
2 151 650 10%
3 651 1400 15%
4 1401 2350 20%
5 2351 3550 25%
6 3551 5000 30%
7 Over 5000   35%

Source: Income Tax Proclamation No. 286/2002

Taxable business income of companies is taxed at the rate of 30%. Other business taxpayers with business income ranging from ETB 1.801 to ETB 60.000 pay between 10 and 30%. Business income beyond ETB 60.000 is charged 35%.

Taxable Business Income Tax Rates 

No. Taxable Business Income Tax Rates Tax Rate
Over Birr To Birr
1 0 1800 Exempt threshold
2 1,801 7,800 10
3 7,801 16,800 15
4 16,801 28,200 20
5 28,801 42,600 25
6 42,601 60,000 30
7 Over 60,000   35

Source: Income Tax Proclamation No. 286/2002

Capital gain tax under Income Tax Proclamation No.286/2002 (Article 37) is payable on gains obtained from the transfer of buildings used for business, factory, or office purposes at 15% and shares of companies at 30%.
An individual foreigner, who lives in Ethiopia for more than 183 days in a period of twelve calendar months, whether continuously or intermittently, is regarded as being resident of entire tax period and is taxed in accordance with the provisions on Income Tax Proclamation No. 286/2002 (Article 5.2)
However, the following are excluded from the computation of taxable income in accordance with Article 13 of the Income Tax Proclamation No. 286/2002 and article 13 of the Regulations No. 78/2002:

  • Medical treatment
  • Transportation allowance
  • Hardship allowance
  • Reimbursement of travelling expenses incurred on duty
  • Per diem and travelling expenses on joining and completion of employment, provided that such payments are made pursuant to specific provisions of contract
  • Board members’ and board secretaries’ allowance; the income of persons employed for domestic duties;
  • The contribution of the employer and the employee to the retirement or provident fund and all forms of benefits contributed by employers that do not exceed 15% of monthly salary
  • Payments made to a person as compensation in relation to injuries suffered by that person or death of another person.
    Other direct taxes applicable are royalties (5%), income paid for services rendered outside of Ethiopia (10%), income from games of chance (15%), dividends (10%), income from rental of property (15%), and interest income (5%) and are payable at flat rates in accordance with Article 31-36 of the Income Tax Proclamation

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Sunday, 06 July 2014 17:30

Registration

Foreign investors wishing to invest in Ethiopia are required to apply to the Ethiopian Investment Agency (EIA) on a prescribed form.

Together with the application for an investment permit, the following documents need to be submitted to the Licensing and Registration Directorate of the EIA:

Sunday, 06 July 2014 17:25

Legal and Juridical System

The current Constitution of the Federal Democratic Republic of Ethiopia (FDRE) (proclaimed in 1995) has introduced many changes in the judicial system of Ethiopia. Among the major changes are: the establishment of an independent judiciary; provision for a three-layered federal and regional court system; provision for the extraordinary jurisdiction of the Federal Supreme Court to “review and correct any final decision of a basic error of law”, including a decision of the Federal Supreme Court; and the establishment of Federal and Regional Judicial Administration Councils for the appointment and dismissal of judges with a view to avoiding government interference.

Ethiopian law is essentially based on civil law, even though vestiges of the common law system are in evidence in some laws, notably the civil procedure code and the maritime code. Significantly, commercial and industrial laws are mainly influenced by the civil law.

Sunday, 06 July 2014 18:16

Non-Fiscal Incentives

The non- fiscal incentives given to all exporters are the following:

  • Investors who invest to produce export products will be allowed to import machinery and equipment necessary for their investment projects through suppliers credit;
  • Investors who invest in areas of agriculture, manufacturing and agro-industry will be eligible to obtain loan up to 70 percent of their investment capital from the Development Bank of Ethiopia (DBE) if their investment is sound to be feasible; and
  • The Government of Ethiopia will cover up to 30 percent of the cost of infrastructure (access road, water supply, electric and telephone lines) for investors investing in industrial zone development.
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