What tax system is applicable in Ethiopia?

Ethiopia has a federal tax system, with tax powers and revenues divided between the federal government and the regional states.

What type of tax system that Ethiopia follows?

The major types of direct taxes in Ethiopia are personal income tax, rental tax, business profit tax, withholding tax and such other taxes like taxes from 11 Ibid Page 12 Page | 8 loyalties, from games of chance, dividends or property taxes.

How many types of taxes are there in Ethiopia?

In Ethiopia there are two types of tax. These are direct and indirect tax.

What is the difference between TOT and VAT?

A turnover tax is similar to VAT, with the difference that it taxes intermediate and possibly capital goods. It is an indirect tax, typically on an ad valorem basis, applicable to a production process or stage. For example, when manufacturing activity is completed, a tax may be charged on some companies.

Is there income tax in Ethiopia?

The Personal Income Tax Rate in Ethiopia stands at 35 percent.

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What is the tax rate in Ethiopia?

A deduction between ETB 60 and 1,500 of the taxable amount is applied, according to the total income of the taxpayer.

Tax Rate.

Income tax from employment Progressive rates from 0 to 35%
ETB 3,201 – 5,250 20%
ETB 5,251 – 7,800 25%
ETB 7,801 – 10,900 30%
Above ETB 10,900 35%

What is the purpose of taxation in Ethiopia?

Taxation is the main source of development finance in most countries. In Ethiopia domestic revenues were more than three times as large as total budget aid in 2010, making it the only real candidate for sustainable development financing in a long-term exit strategy from aid dependency.

What are the three major types of taxes?

Tax systems in the U.S. fall into three main categories: Regressive, proportional, and progressive.

What are 5 types of taxes?

Here are five types of taxes you may be subject to at some point, along with tips on how to minimize their impact.

  • Income Taxes. Most Americans who receive income in a given year must file a tax return. …
  • Excise Taxes. …
  • Sales Tax. …
  • Property Taxes. …
  • Estate Taxes.


What are the 4 types of tax?

Learn about 12 specific taxes, four within each main category—earn: individual income taxes, corporate income taxes, payroll taxes, and capital gains taxes; buy: sales taxes, gross receipts taxes, value-added taxes, and excise taxes; and own: property taxes, tangible personal property taxes, estate and inheritance …

Who pays VAT seller or buyer?

The seller charges VAT to the buyer, and the seller pays this VAT to the government. If, however, the purchasers are not the end users, but the goods or services purchased are costs to their business, the tax they have paid for such purchases can be deducted from the tax they charge to their customers.

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What percentage is VAT?

The standard rate of VAT increased to 20% on 4 January 2011 (from 17.5%). Some things are exempt from VAT , such as postage stamps, financial and property transactions. The VAT rate businesses charge depends on their goods and services.

Which type of tax is VAT?

Value-added tax (VAT) is a type of indirect tax levied on goods and services for value added at every point of production or distribution cycle, starting from raw materials and going all the way to the final retail purchase.

How is income tax calculated in Ethiopia?

Salary Income Tax Calculation in Ethiopia, Pension, Gross Salary and Net Salary Calculator with Examples

  1. Salary Income Tax = (Gross Salary * Tax Rate) – Deduction.
  2. Employee Pension – Gross Salary x 7%
  3. Net Income = Gross Salary – Salary Income Tax – Employee Pension – Other Taxes (If applicable)
  4. Employee Pension – 7%


How is turnover tax calculated in Ethiopia?

The Turnover Tax shall be: 1) 2% (two percent) on Goods sold locally 2) for Services rendered locally; (a) 2% (two percent) on Contractors, grain mills, tractors and combine-harvesters; (b) 10% (ten percent) on others. 5. … Hence, the seller is principally accountable for the payment of the tax.

What is Ethiopia royalty tax?

Tax on royalties is a flat rate of five percent (5%) – both for a resident of Ethiopia and a non-resident who derives an Ethiopian source royalty. The person who effects payment is required to withhold the foregoing tax and account to the Tax Authority within thirty (30) days of the end of each calendar month.

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Across the Sahara