Major Investment Incentives
To encourage private investment and promote the inflow of foreign capital and technology into Ethiopia, the following incentives are granted to both domestic and foreign investors engaged in areas eligible for investment incentives:
Exemption from import customs duty
One hundred per cent 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, such as plant, machinery and equipment, construction materials, as well as spare parts worth up to 15% of the value of the imported investment capital goods. However, the following investment areas are not eligible for exemption from import customs duty:
- Hotels (excluding star-designated hotels), motels, tearooms, coffee shops, bars, night clubs and restaurants, which do not have international standards;
- Wholesale, retail and import trade;
- Maintenance services;
- Commercial road transport and car-hire services;
- Postal and courier services;
- Real estate development;
- Business and management consultancy services;
- Advertisement services;
- Cinematography and similar activities;
- Radio and television broadcasting services;
- Theatre and cinema hall operations;
- Customs clearance services;
- Laundry services;
- Travel agency, trade auxiliary and ticket selling services; and
- Lottery and games of similar nature.
Investment capital goods imported without the payment of import customs duties and other taxes levied on imports may be transferred to another investor enjoying similar privileges.
In accordance with the Revised Export Trade Duty Incentive Scheme Establishing Proclamation No. 543/2007, three export incentive schemes are also available for exporters. They are Duty Draw-Back Scheme, Voucher Scheme and Bonded Manufacturing Warehouse Scheme.
In addition, all Ethiopian products, with the exception of few products (e.g. semi-processed hides and skins), destined for export are exempted from the payment of any export tax and other taxes levied on exports.
Exemption from the payment of income tax
Any income derived from an approved investment in new manufacturing, Aggro-Industry and information and communication technology (ICT) development or agriculture is exempted from the payment of income tax for the periods as shown in the following table, depending upon the volume of export and the location in which the investment is made.
Profit tax holiday is granted subject to Council of Ministers Regulation No.84/2003 (as amended) issued pursuant to the Investment Proclamation No. 280/2002 (as amended).
|Conditions for Eligibility||Income tax exemption||Income tax exemption for investments made in relatively underdeveloped regions|
|An investor engaged in a new manufacturing, agro-industry, ICT or agriculture :|
|exports at least 50% of his products or services||5 years||6 years|
|> supplies at least 75% of his products or services, to an exporter, as a production or service input> under special circumstance the Board may grant||5up to 7||6up to 8|
|> exports less than 50% of his products or services, or supplies his products or services only to the domestic market> under special circumstance the Board may grant||2up to 5||3up to 6|
|exports at least 50% of his products or services and increases, in value his production or services by over 25% through the expansion or upgrading of an existing enterprise|
Carry forward of losses
Business enterprises that suffer 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.