Rental Income Tax in Ethiopia

Rental Income Tax is one of the taxes being recently enforced in Ethiopia. Even though it has been a long time since it was included in the income tax proclamation, it was started to be strictly enforced especially on individual home owners who rent out their property not more than 2 years ago. Here one can find rates, applicable deductions and related topics on rental income tax in Ethiopia.

Rental of buildings

Income tax is imposed on the income from rental of buildings and collected at the following rates:

  1.  On income of bodies (share companies, plc's for example) thirty percent (30%) of taxable income,
  2. On income of persons according to Schedule B (shown below) of the Income Tax Proclamation No. 286/2002  and its amendment in July 2016.

No

Taxable Income from Rental
 (per year)

Tax Rate (%)

Deduction in Birr

From Birr

to Birr

01

0

7200

Exempted (Non-taxable)

None

02

7,201

19,800

10

720

03

19,801

38,400

15

1,710

04

38,401

63,000

20

3,630

05

63,001

93,600

25

6,780

06

93,601

130800

30

11,460

07

Over 130,800

 

35

18,000

 Income from rental of building is calculated as follows:

  • If the tax payer leased furnished quarters, the amounts received attributable to the lease of furniture and equipment is included in the income.
  • Sub-lessors pay the tax on the difference between income from sub-leasing and the rent paid to the lessor, provided that the amount received from the sub-lessor is greater than the amount payable to the lessor.

Deductions

Deductions apply in computing taxable income:

  • For taxpayers not maintaining books of account; taxes paid (except income taxes) with respect to the land and buildings being leased, and one fifth (1/5) of the gross income received as rent for buildings, furniture and equipment as an allowance for repairs, maintenance and depreciation of such buildings, furniture and equipment.
  • For taxpayers maintaining books of account, the expenses incurred in earning, securing, and maintaining rental income. Deductible expenses include (but are not limited to) the cost of lease (rent) of land, repairs, maintenance, and depreciation of buildings, furniture and equipment as well as interest on bank loans and insurance premiums.

 

Exchange Rates

Selling
Buying
USD 28.1053  27.5542 
GBP 35.2900  34.5980 
EUR 32.8916  32.2467 
CHF 27.9182  27.3708 
CAD 19.5265  19.1436 
AED 6.9240  6.7882