Under the current legal system of Ethiopia, customs duty, tariff and taxes are regulated by a number of laws which include domestic laws and international bilateral treaties to which Ethiopia is a party. Some include;
|Customs Proclamation No. 859/2014
|Customs Proclamation Amendment No. 1160/2019
|Social Welfare Levy on Imported Goods Regulation No. 519/2022
|Excise Tax Proclamation No. 1186/2020
|Export Trade Duty Incentive Schemes Proclamation No. 768/2012
|Federal Tax Administration Proclamation No. /983/2016, and Council of Ministers of Regulation No. 407/2017 on Federal Tax Administration
|The various tax proclamations (Income, VAT, Sur tax, and Excise tax)
|Customs Tariffs Regulation No. 122/1993
|Customs Tariffs Amendment Regulation No. 80/2003
|Customs Tariffs Amendment Regulation No. 89/2003
|Customs Tariffs Amendment Regulation No. 153/2008
|Compiled directives on customs
|Tariff Book (The Customs Commission, August 2019)
To this end, the Customs Proclamation No. 859/2014 and its amendment Proclamation No. 1160/2019 (herein after, "the proclamation") sets the base for the regulation of customs duty, tariff and tax in Ethiopia. Hence, some of the major issues relating to customs duties and taxes are dealt with below in accordance with the proclamation. (Other relevant laws will also be dealt with, though briefly.)
Under the current Ethiopian Legal Regime, duties and taxes are payable for any imported or exported goods unless otherwise provided by law or decided by the Ministry of Revenue. Article 110 of the Proclamation states that a declarant is liable for payment of the duties and taxes imposed on the goods, as well as penalties and interests incurred due to default thereof. In fact, where a customs clearing agent commits an error resulting in the non- payment of duties and taxes, he/she is jointly and severally liable with the declarant for the payment of the unpaid duties and taxes, as well as penalties and interests incurred due to default thereof.
Here are some issues relating to customs duties and taxes.
1. Applicable Dates for Assessment and Payment of Customs Duties and Taxes(Article 111 of the Proclamation)
Unless otherwise provided by law, the duties and taxes on import or export goods are assessed on the basis of the law in force on the date of acceptance of the goods declaration or the date of correction under Article 93 of the Proclamation (deductive value method). Where it is not possible to determine the date of lodging or acceptance of the goods declaration, the duties and taxes are assessed on the basis of the law in force on the date determined by the Authority.
Note, however, that under current practice duty and tax payments have to be made before the submission of a declaration with the Customs Regulation (ERCA, Ethiopian Customs Guide, March 2017, retrieved from www.mor.gov.et ).
2. Customs Duty and Tariff Rates
Duty on goods imported into the customs territory is paid at the rates specified by the Customs Tariff Regulation. Accordingly, there are six duty tax rates (0%, 5%, 10%, 20%, 30%, and 35%) that are applicable based on the type of the good imported. The reason behind the variation of duty tax rates is the need for encouraging the importation of some goods by imposing a 0% tax rate and at the same time to discourage importation of selected goods by imposing a higher tax rate.
There are two schedules for the purpose of determining the applicable tax rates. The first schedule encompasses raw materials, semi-finished goods and import items for public use. Note that the tax rate for this category is lesser, keeping in mind that the imported goods enhance domestic production or used for public use such as ambulances. Hence, raw materials and producer goods are largely zero rated although it may increase to 10% and the tax rate for semi-finished goods is 10% and 20%. On the contrary, the second schedule contains consumer or finished goods that are imported for personal use or a non-productive purpose. The higher duty tax rates are usually applied for consumer goods such as automobiles for personal use.
This being said, the Customs duty and tax rate, for exported goods ar at 0% except for selected products of hides and skins of animals.
You can find the Customs duty and tariff rates which was revised in HERE.
Total Cost of the goods = FOB Cost + Insurance + Freight + Galafi Cost (fixed at USD 18/mt, and for customs calculation purpose only) + Inland Transport Charge
Total Cost of the goods x Import Customs Duty = A
(Total Cost of the goods + A) x Excise Tax Rate (If applicable) = B
(Total Cost of the goods + A + B) x VAT = C
(Total Cost of the goods + A + B + C) x Surtax = D
D x Withholding Tax = E
Scanning Charge (0.07%* (FOB Cost + Insurance + Freight + Galafi Cost (fixed at USD 18/mt, and for customs calculation purpose only))) = F
TOTAL PAYABLE at THE TIME OF IMPORT = A+B+C+D+E+F
*Note - Manufacturers who are exempted from surtax and withholding tax are required to pay a social welfare levy of 3%
3. Determination of Dutiable Value
Article 89 of the Proclamation, asserts that:
- The dutiable value for imported goods is the actual total cost of the goods up to the first entry point to the customs territory of Ethiopia; and
- The dutiable value for export goods is the actual total costs of the goods up to the final exit point from the customs territory of Ethiopia.
In both circumstances, the total cost means the cost of the good, insurance, freight and other charges. Therefore, the Customs Commission (formerly ERCA) normally charges customs duty and tax as a percentage of the duty paying value of goods, which is the sum of the amounts paid for the imported or exported good up to the point of entry into or exit from the customs territory, i.e. the cost of the good, insurance, freight and other charges.
Customs valuation is an important proceeding to determine the value of the imported goods for the purpose of ascertaining the correct import duty. Hence, there are five major methods to calculate the value of the imported goods which are applicable in the order below:
Method 1: Transaction value method(Article 90, 96 and 97 of the Proclamation)
The transaction value of imported goods is the transaction value that is actually paid or payable for the goods when sold for export to Ethiopia; provided, however, that:
- there are no restrictions as to the disposal or use of the goods by the buyer, other than restrictions imposed by law or by particular decisions issued based on such law, a limit in the geographical area in which the goods may be resold or limits that may not substantially affect the value of the goods;
- the sale or price of the goods is not subject to some conditions or restrictions for which a value cannot be determined;
- no part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer may accrue directly or indirectly to the seller,
- where the buyer and seller are related (for e.g. legally recognized partners, are related by affinity or consanguinity), the transaction value is the basis for valuation of duty if it is accepted by the Authority.
Method 2: Valuation of identical goods(Article 91 of the Proclamation)
Where the transaction value of the imported goods cannot be determined by Method 1, it is determined by taking the transaction value of identical goods sold for export to Ethiopia at the same commercial level and in substantially the same quantity at or about the same time as the goods being valued.
If this cannot be applicable then the value of the goods is determined based on the transaction value of identical goods sold at a different commercial level or in different quantities by making adjustments to take account of differences attributable to the commercial level or the quantity.
Method 3: Valuation of similar goods(Article 92 of the Proclamation)
Where the transaction value of imported goods cannot be determined by Method 2, then the determination is on the basis of the transaction value of similar goods sold for export to Ethiopia at the same commercial level and in substantially the same quantity at or about the same time as the goods being valued.
Method 4: Deductive value method(Article 93 of the Proclamation)
Where the transaction value of imported goods cannot be determined as set forth in Method 3, the deductive value method is applicable. The deductive value method uses the unit price of the imported goods, identical or similar goods imported at or about the same time as the goods being valued and which are sold in Ethiopia in their original state in the greatest aggregate quantity to persons who are not related to the seller; provided, however, that the price shall be reduced by:
- the amount of commission usually payable or the profit and general expense equal to that usually reflected in sales within Ethiopia of such goods;
- the usual charges for the transport, insurance and other related costs to be incurred within Ethiopia for the goods; and
- import duties, taxes and other shares payable with respect to the goods.
Method 5: Computed value method(Article 94 of the Proclamation)
Where the transaction value of imported goods cannot be determined based on the above Methods, the value should be calculated based on a computed value, consisting of the sum of:
- the cost of manufacturing or processing of the goods;
- an amount representing the general expenses and profit equal to that usually reflected in the sale of goods of the same class or kind by producers in the country of export; and
- the transport, loading, unloading, handling and insurance costs associated with the transport of the goods to the port of entry into the customs territory of Ethiopia.
(See Article 97 on charges not to be included in Transaction Value, and Article 98 on deduction from Transaction Value).
Please note that the above Valuation Methods are also applicable to:
- goods that have been released from customs control without paying duties and taxes undergo another customs procedure to pay duties and taxes;
- goods which may undergo post customs clearance audit;
- the valuation of non-commercial imported goods and temporarily imported goods.
4. Mode of Payment(Article 114 of the Proclamation)
Payment of duties and taxes may be in cash or any other legal means of Payment
5. Refund of Duties and Taxes(Article 123-128 of the Proclamation)
A refund of duties and taxes may be claimed for the following reasons:
- Overcharged duties and taxes;
- Invalidated goods declaration;
- Deteriorated, spoiled, damaged, destroyed goods; or
- Short-landed goods.
For overcharged duties and taxes a refund will be granted if the overcharge is a result of incorrect commodity classification, tariff setting, valuation, or other calculation mistakes. A claim for refund of duties and taxes will be considered only if it is submitted within one year from the day of registration of the declarations after customs formalities are accomplished. For an invalidated goods declaration, duties and taxes will be refunded where a goods declaration is canceled after duties and taxes have been paid and an application is submitted by the person concerned within the prescribed period.
6. Duty and Tax Exemptions(Article 129-130 of the Proclamation)
Duty and Tax exemptions with respect to import and export goods may be granted the Ministry of Finance. Also, duty-free privileges provided under international treaties and agreements signed and approved by Ethiopia in connection with diplomatic relations are to be implemented under the recognition of the Ministry of Foreign Affairs.
The following are the major rules under the proclamation relating to duty and tax exemptions;
- It is prohibited to transfer duty and tax exempted imported goods to a person who does not enjoy a similar privilege or use them for a purpose other than which the duty free privilege is granted or place them under the possession and service of others, before payment of the duties and taxes applicable to them.
- Any duty and tax exempted imported goods may be re-exported or transferred to a person who enjoys similar privilege without payment of duties and taxes or transferred to any person upon payment of the duties and taxes. The duties and taxes shall be calculated at the value of the goods and tariff rates prevailing during the time of disposal.
- Where duty and tax exempted imported goods are lost or damaged the importer shall forthwith report to the Authority.
- Any person who enjoys duty and tax exemptions privilege for investment purposes is required to produce a clearance document from the Authority prior to the transfer of duty and tax exempted imported goods to other persons or the return of his investment permit.
7. Service Charges(Article 115 of the Proclamation)
The service charges to be collected by the Authority for - services it renders in connection with customs formalities is determined by regulation to be issued by the Council of Ministers.
Service charge fees include;
- Warehouse licensing and renewal fee: According to the Customs Warehouse License Issuance Council of Ministers Regulations No. 24/1997, license and renewal fees for customs warehouses is Birr 1,250 (renewal Birr 500) licensing fee for General Customs Warehouse and for private Customs.
- Scanning fee: All goods subject to examination with a scanning machine are charged 0.07% of duty paying value for scanning.