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One of the steps taken by the government to enhance Investment in Ethiopia is the provision of Investment Incentives. This page contains details on the incentives as laid out by the Minister of Councils.

These Incentives have been taken out of

However, it’s advisable that a reader gets these documents for a comprehensive understanding of the existing proclamations and regulations.

The Ethiopian Government provides these investment incentives:

• Exemption from Income Tax
• Exemption from The payment of customs duty

 Under Exemption from income tax there are

• Investment activities eligible for Income Tax Exemption
• Income Tax Exemption for expansion or upgrading of an existing enterprise
• commencement of period of expansion from income tax
• Carry forward of losses

   

And under the Exemption from the payment of customs duty there are

• Conditions for importing vehicles duty free
• Areas of investment not eligible for Customs Duty Exemption 
• Transfer of capital goods imported free of customs duty

Exemption from Income Tax

 Investment Activities Eligible for Income Tax Exemption

1.  Where an investor engaged in manufacturing or agro-industrial activities, or investment areas of information and communication technology development or the production of agricultural products to be determined by directives to be issued by the Investment Board;
   • Exports 50% /(fifty percent) of his products or services; or
   • Supplies 75% (seventy five percent) of his product to an exporter as a production or service input;he shall be eligible for income tax exemption for 5 years.
2. Notwithstanding the provisions of list 1 above the Board may, under special circumstances, grant income tax exemption for a period not longer than 7 years. However, the granting of income tax exemption for a period longer than 7 years requires the decision of the Council of Ministers.
3. An investor engaged in activities mentioned in list 1 above who exports less than 50% (fifty percent) of his products or services, supplies his products or services only to the domestic market shall be eligible for income tax exemption for 2 years.
4. Notwithstanding the provision of list 1 above, the Board may, under special circumstances, grant income tax exemption for a period not longer than 5 years.
5. Notwithstanding the provision of list 3 above, directives issued by the Board may prohibit exemption from income tax with respect to an investor who supplies his products or services only to the domestic market.
6. Notwithstanding the provisions of lists 1 and 3 above, an investor who exports hides and skins after processing up to crust level may not be entitled to incentives provided therewith.
7. Notwithstanding the provisions of the above lists, where the investment is in relatively under-developed regions such as Gambella, Benishangul and Gumz, South Omo, in Afar Zones to be determined by the Board, Somali and other regions to be determined by the Board, the investor shall be eligible for income tax exemption for an additional 1 year period.
8. The income tax exemption under the provisions of the above lists shall be effective when the investor provides the information for the relevant revenue collecting institution and its validity is ascertained for each income tax period.

 Income Tax Exemption for Expansion or Upgrading of an Existing Enterprise:

 An investor engaged in activities mentioned under the provisions of list 1 above who exports at least 50% (fifty percent) of his products and services and increases, in value, his products or services by 25% shall be eligible for income tax exemption for 2 years.

Commencement of Period of Exemption from Income Tax

The period of exemption from income tax shall begin from the date of commencement of production or the date of provision of services, as the case may be.

 Carry Forward of Losses

 An investor who has incurred loss within the period of income tax exemption shall be allowed to carry forward his loss for half of the income tax exemption period, after the expiry of such period.

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 Exemption from the Payment of Customs Duty

1. An investor shall be allowed to import duty free capital goods and construction materials necessary for the establishment of a new enterprise or for the expansion or upgrading of an existing enterprise.
2. In addition, an investor granted with a customs duty exemption privilege shall be allowed to import duty free capital goods necessary for his enterprise
3. Notwithstanding the provisions of lists 1 and 2 above the Board may, by its directives, bar the duty-free importation of capital goods and construction materials where it finds that they are locally produced with competitive price, quality and quantity.
4. An investor eligible for duty-free importation of capital goods pursuant to these Regulations shall be given the same privilege for spare parts whose value is not greater than 15% (fifteen percent) of the total value of the capital goods to be imported.

Conditions for Importing Vehicles Duty Free:

1. Any investor may import duty free:
   • Ambulances used for emergency case of employees
   • Buses used for tour operation services.
2. Without prejudice to list 1 above, the board may issue directives on conditions of importing duty free:
   • up to three 4-wheel drive vehicles for tour operation services
   • vehicles for any other investments depending on the type and nature of the project.

 Areas of Investment Not Eligible for Customs duty exemption:

• Notwithstanding the provisions of the Exemption from the Payment of Customs Duty, the following areas of investment are not eligible for exemption from the payment of customs duty.

•  hotels (excluding star-designated hotels), motels, tea rooms, 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;
• lottery and games of a similar nature;

• Notwithstanding the provision list 1 above, the Board may, where it finds appropriate, issue directives providing for additional areas of investment which may not be eligible for exemption from the payment of customs duty.

Transfer of Capital Goods Imported Free of Customs Duty

•  Capital goods imported free of customs duty shall not be transferred to third parties not entitled to similar duty free privileges, unless prior payment of the customs duty is effected thereon.
• Any regulations or directives inconsistent with these Regulations shall not have effect with respect to matters provided for in these Regulations.

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