Ethiopian Revenues and Customs Authority (ERCA) decided to increase the amount of non taxable transportation allowance and per diem. The Authority backed its decision claiming the cost of living has risen than it used to be.

According to Addis Fortune, a letter signed by ERCA’s Director General, Beker Shale, amended two of the seven articles stipulated on the previous directive that regulated the matter.

The letter raised the threshold to 2,200 Birr for transportation allowance and 225 Birr for Per Diem. This is an increase of 50 percent and 120 percent respectively.

Commenting on the development Beker said, “The main reason to amend the allowance range for tax exemption is the increase in the cost of living in the country’.

The previous directive that came into effect back in 2008 limited the non taxable amount of per diem to 150 Birr. It also limited the exempted amount of transportation allowance to 1,000 Birr and noted the allowance cannot exceed 25 percent of the employee’s salary. On the other hand Per Diem is limited to those that travel above 25 Kilometers from their work place yet it cannot exceed quarter of the employee’s salary.

The amendment only changed the amount that is exempted from tax without tampering with the rate.

In addition to the two article amendments, the directive also states Per Diems paid to government officials and civil servants are exempted from being subject to income tax

“The highest rate of Per Diem for government officials and civil servants is 225 Br, that is why the directive will not be applicable for government officials,’’ said Tesfaye Mergiya, tax advisor to the director general.

Source: Fortune