4. Consider a company that is registered for Value Added Tax (VAT) with the authority.

You are
to report the forms of input VAT and output VAT reported for the tax year. You should provide
special VAT issues you have considered important to discuss! Also report how they declare and
pay the VAT.
VAT in Ethiopia the following sections present how the tax authorities perform their
responsibilities with respect to the major VAT administration tasks, including taxpayer
identification and registration, VAT filing and payment, control of VAT filing and payment,
VAT invoicing, VAT auditing, penalties and VAT refunds.
According to tax law VAT is levied on consumption of taxable goods and services supplied or
imported into Ethiopia. It is collected by registered persons at designated points who then remit
it to the tax authority. Since, it is important to note that all VAT refunds are paid out of VAT
revenue collected in ERCA.
In administering VAT in Ethiopia tax authorities use computer programs, namely: Standard
Integrated Government Tax Administration System (SIGTAS) and Automated System for
Customs Data Management (ASYCUDA). The computer programs are used to maintain taxpayer
register and process VAT returns. Detection of non-filers seems to be carried out mainly
manually. As the outcomes of the in-depth interviews with tax officials showed, the tax authority
tries to identify non-filers in collaboration with the Ministry of Trade and Industry. In Ethiopia
every trader is required to renew business license annually with the pertinent offices under the
Ministry of Trade and Industry or regional governments.
Value-added tax (VAT) is a type of indirect tax levied on goods and services for value added at
every point of production or distribution cycle, starting from raw materials and going all the way
to the final retail purchase. The amount of value addition is first identified at each stage, and then
tax is levied on the same. Ultimately, the end consumer has to pay the complete VAT while
buying goods; buyers at earlier stages of production receive reimbursements of tax they have
paid. Because the consumer bears the entire tax, VAT is also a consumption tax. Output VAT is
VAT which you must calculate and collect when you sell goods and services, provided that you
are registered in the VAT Register and Input VAT is VAT which is included in the price when
you purchase vat able goods or services for your business.
To calculate payable VAT : Payable VAT amount = Output VAT amount – Input VAT
amount deductible . Output VAT amount = total VAT amount of sold goods or services stated
 on the added value invoice. VAT on invoices = assessable price of goods or services “multiply
by” VAT rate of goods and services
Ethiopia has recently implemented the Value added tax system to its tax regime. Standard VAT
is currently fixed at the rate of 15%. VAT is imposed for every imported goods and services
other than an exempt imports and an import of services. VAT will be charged at a rate of zero
percent for supply of gold to the National Bank of Ethiopia, direct international transport of
goods or passengers, export of goods or services to the extent under provided regulation
Add Tax Tax Amount = (Original Cost * VAT% ) / 100 Net Price = Original Cost + Tax
Amount
Remove Tax Tax Amount = Original Cost - ( Original Cost * ( 100 / ( 100 + VAT% ) ) ) Net
Price = Original Cost - Tax Amount
The tax year for an individual is, the one-year period from 1st Hamle to 30th Sene, unless the
Authority has granted permission, by notice in writing and subject to such conditions as may be
specified by the Authority in the notice, for the individual to use its accounting year as the
individual's tax year; for a body
Discuss the nature and application proclamation and regulations of turnover tax; excise
tax, as well as stamp duty applied in Ethiopia.
Turnover Tax in Ethiopia has replaced Sales Tax. This page contains Turnover Tax Rate in
Ethiopia, Base of computation obligation, and exemption from TOT in Ethiopia.
1. Income Tax Proclamation No. 286/2002 or 286/1994 (according to the Ethiopian
calendar - EC) and its amendment Proclamation No. 608/2008

Highlights of the Turnover Tax Proclamation, Regulation

The Rate of Turnover Tax and Exemption
Note: If VAT is charged over goods or services, then TOT will not be charged. Filing of Tax
Return and Payment of TOT can be done either at the end of each Ethiopian calendar month or
once in at the end of every quarterly year of the tax year (that is every three months starting from
8th of July (Hamle 1).
Rate of Turnover Tax
The Turnover Tax shall be:
 (two percent) on Goods sold locally
 For services rendered locally:
 2% (two percent) on contractor, grain mills, tractors and combine-harvesters;
 10% (ten percent) on others.
Base of Computation of the Turnover Tax
Base of computation of the Turnover tax shall be the gross receipt in respect of goods supplied or
Services rendered
Obligation to Collect and Transfer the Turnover Tax
A person who sells goods and services has the obligation to collect the Turnover Tax from the
buyer and transfer it to the Tax Authority. Hence, the seller is principally accountable for the
payment of the tax.
Exemption
1. The following shall be exempted from Turnover Tax:The Minister of Finance and
Economic Development may, by directive, exempt other goods and services.
 the sale or transfer of a dwelling use for a minimum of two years, or the lease of a
dwelling:
 the rendering of financial services;
 the supply of national or foreign currency (except for that used for numismatic
purposes)
 and of securities;
 the rendering by religious organizations of religious or other related services:
 the supply of prescription drugs specified in directives issued by the relevant
government
 agency, and the rendering of medical services;
 the rendering of educational services provided by educational institutions, as well
as child
 care services for children at pre-school institutions:
 the supply of goods and rendering of services in the form of humanitarian aid:
 the supply of electricity, kerosene, and water;
 the provision of transport;
 permits and license fees;
 the supply of goods or services by a workshop employing disabled individuals if
more than
 60%of the employees are disabled; and
 the supply of books.
2. The Minister of Revenue may, by directive, determine the scope and manner of
exemptions provided for in this Article.

Rate of Turn over Tax

The Turn over Tax shall be:1) 2%(two percent) on Goods sold locally2) for Services rendered
locally;
(a) 2% (two percent) on Contractors, grain mills, tractors and combine-harvesters;
(b) 10%(ten percent) on others.
5. Base of Computation of the Turn over Tax Base of computation of the Turn over Tax shall be
the gross receipts in respect of goods supplied or services rendered.
6. Obligation to Collect and Transfer the Turnover Tax
A person who sells goods' imd services has the obligation to collect the Turn over Tax from the
buyer arid transfer same to the Tax Authority. Hence, the seller is principally accountable for the
payment of the tax.
7. Exemption1)
The following shall be exempted from Turn over Tax:
(a) The sale or transfer of a dwelling used for a minimum of two years, or the lease of a dwelling;
(b) The rendering of financial services;
(c) The supply of national or foreign currency (except for that used for numismatic purposes) and of
securities;
(d) The rendering by religious organizations of religious or other related services;
(e) The supply of prescription drugs specified in directives issued by the relevant government
agency, and the rendering of medical services;
(f) The rendering of educational services provided by educational institutions, as well as child care
services for children at pre school institutions;
(g) The supply of goods and rendering of services in the form of human it a rained;
(h) The supply of electricity, kerosene, and water;
(i) The provision of transport;
(j) Permits and license fees;
(k) The supply of goods or services by a work shop employing disabled individuals if more than
60% of the employees are disabled; and
(l) The supply of books.
2) The Minister of Finance and Economic Develop-mend may by directive, exempt other goods
and services.
Discuss the nature and application proclamation and regulations of stamp duty
The legal instrument which regulates stamp duty in Ethiopia is Stamp Duty Proclamation
proclamation no. 110/1998 and its amendment proclamation no. 612/2008.
Article 3 of the stump duty proclamation exhaustively lists instruments chargeable with stamp
duty:
1. Memorandum and articles of association of any business organization cooperative or any
other form of association.
2. award
3. bonds
4. warehouse bond
5. contractor agreements and memoranda thereof
6. security deeds
7. collective agreement
8. contract of employment
9. Lease, including sub-lease and transfer of similar rights.
10. natural acts
11. power of attorney
12. documents
Rates and Mode of Valuation of stamp Duty
As per Art 4 (1) (2) of Proclamation Number 110/1998: The rates might be flat or they may
depend on the value of the property.
Liability, Time and Manner of Payment
Article 6 & 7 of Proclamation Number 110/1998.
 Exemptions from Stamp Duty
Article 11-the following are exempt from the liability of payment of same:
 Public bodies on which the federal government of Ethiopia Financial Administration
Proclamation No. 57/1996 applies.
 Goods imported for sale by traders having import license, when first registered in the
name of the trader.
 Documents that are exempted in accordance with international agreements and
conventional approved by Ethiopian government.
 Subject to reciprocity embassies, consulates and missions of foreign states may be
exempted.
 Share certificates are exempt from stamp duty payable on the register of title of property.
Penalties
Article 12 provides:
Any person:
a) Executing or signing, otherwise than as a witness, a document chargeable with stamp duty
without the same being stamped.
b) Who, with intent to defraud the appropriate payment of duty, conceals facts bearing on the
true nature of any instrument.
Shall be liable on conviction to a five not less then birr 25,000 and not exceeding Birr 35,000 and
to rigorous imprisonment for a term not less than 10 yrs and not more than 15 yrs.
Any person who is:
a) appointed to sell stamps or stamp papers, disobeys regulations issued under this proclamation;
or
b) not so appointed, sells or offers for sale stamps or stamped papers.
Shall be liable on conviction to a fine not less than 5,ooo and not exceeding and to rigorous
imprisonment for a term not less than 5 years and not more than 10 yrs.
Excise taxes are taxes paid when purchases are made on a specific good, such as gasoline.
Excise taxes are often included in the price of the product. There are also excise taxes on
activities, such as on wagering or on highway usage by trucks. One of the major components of
the excise program is motor fuel
Purpose of excise tax
 Excise duties usually have one or two purposes: to raise revenue and to discourage particular
behavior or purchase of particular items. Taxes such as those on sales of fuel, alcohol and
tobacco are often "justified" on both grounds. In general, an excise tax is a tax is imposed on the
sale of specific goods or services, or on certain uses. Federal excise tax is usually imposed on the
sale of things like fuel, airline tickets, heavy trucks and highway tractors, indoor tanning, tires,
tobacco and other goods and services
What's the Difference between Excise Duty and Sales Tax? ... Excise duty applies to specific
goods and services while sales tax is charged for a much broader range of things. Sales tax is
typically charged as a percentage of the cost, while excise duty can be charged as a percentage of
the cost or on a per-unit basis.

Import and Export Procedures in Ethiopia

Published on 20 August 2013
Category: Import and Export
This page presents information about Ethiopian import and export procedures in Ethiopia.
1. Import Procedures in Ethiopia 
2. Export Procedures in Ethiopia 
1. Import Procedures in Ethiopia 
An importer with an import license/investment permit has to follow certain procedures for
importing goods. (See the article Import and Export Regulations in Ethiopia to learn about the
procedures for obtaining import and export licenses)
Pre-Shipment Inspection
Goods imported are not required to be inspected prior to shipment EXCEPT when:
 they are imported from China (but goods that will be used as inputs for manufacturing
will be exempt from this requirement). The certificate obtained for pre shipment inspections of
goods from China is called CIQ certificate.
 the goods imported have compulsory Ethiopian standard. In this case, the goods have to
be inspected by an internationally recognised inpsection company prior to shipment and
certficate issued.
 the importer and the supplier have an agreement for pre-shipment inspections.
 Arrangement and Mode of Payment
An importer has to fulfill two major requirements to settle payment. The first is that the importer
must apply for an approval of foreign currency to a commercial bank which is authorized by the
National Bank of Ethiopia. As part of the request, the importer must present his/her valid
business and import license or investment permit, and a pro-forma invoice from the supplier. The
pro-forma invoice should describe the imported goods, state the unit price, quantity and total
price, as well as list additional charges that may be applied on the transaction.
(See the article Foreign Exchange Regulation and Directives in Ethiopia for further information)
After an approval of foreign currency, the importer must obtain a bank permit in order to arrange
the mode of payment. The bank permit is obtained from the NBE. However, an importation of
exceptional goods is allowed on a franco-vaulta basis. Importation of goods on the basis of
franco-valuta means the importer is allowed to use his/her own hard currency for the payment of
the goods instead of applying for it and getting it from the government. The goods which may be
imported on a franco-vaulta basis include:
 imported good by diplomatic personnel for diplomatic purposes; 
 specific personal goods;
 goods imported for investment activities including capital goods and raw materials
adequate to commissioning stage and for their personal use by investors having license from the
appropriate government office.
(See article 2(9) of the Revised Regulations on the Importation of Goods on Franco-Valuta Basis
Regulation No. 88/2003)
Revised Regulations on the Importation of Goods on Franco-Valuta Basis
DOWNLOAD
Regulation No. 88/2003
As such, in most circumstances importers should arrange the payment of the imported goods
through banks. After the bank permit has been issued by the NBE, the importer then chooses the
mode of payment in accordance with his/her agreement with the seller. There are three methods
of payment for imports (and also exports) in Ethiopia;
 Letter of Credit, in which the bank undertakes to pay the supplier a stated sum of money
within a prescribed time limit and against the hand-over of the documents needed for the release
of goods from customs. A letter of credit normally includes, a commercial invoice,
manufacturer’s invoice, packing list, country of the goods origin, original sets of bill of lading,
 airway bill, truck way bill, railway Manifest (depending on the mode of transportation), and a
certificate of quality. 
 Cash against Document, where the importer’s bank hands over to the importer the
documents needed for the release of goods from customs against full payment.
 Advance Payment, i.e. the importer orders the bank to pay the seller via SWIFT transfer
prior to shipping or rendering the service.
An application for the above mode of payments is usually accompanied with the following
documents;
 Import license/investment permit
 Tax Identification Number (TIN)
 Other documents required for the foreign currency approval;
 The foreign currency approval;
 Insurance certificate,
 Regulatory permit (for products requiring pre-import permit), and ownership certificate
from country of purchase (for used vehicles),
 An original price confirmation (for used commodities),
 A written waiver (in case of shipment by a foreign vessel),
 An undertaking letter for the entry of goods (in case of advance payment).
(An application form, used by the Ethiopian Commercial Bank, for a letter of credit is available
HERE)
For all methods of payment, the importer is required to have an account with the bank, a TIN and
he/she must not be listed on the National Bank of Ethiopia delinquent list which is a register that
includes account holders whose cheques have been dishonored repeatedly; and whose accounts
are closed by banks.
Once payment has been effected, the importer should be sure to collect his documents from the
bank in case of letter of credit or cash against person and from the supplier in case of advance
payment.
Customs Proceedings for Imported Goods
(See the article Customs Procedures in Ethiopia for more information)
i. Customs Declaration
An importer should first prepare a customs declaration (goods declaration) and submit such
declaration to the Customs Commission (the former ERCA). The custom declaration must
include the contract of sale; goods description; tariff classification, valuation and payment of
duties and taxes, and other supporting data (such as the name and address of the trade operator
and, the mode of transportation to be used).
After the submission, the Customs Commission will examine the declaration by verifying the
correctness of data information, tariff classification, valuation and payment of duties and taxes
registered and supporting documents attached to declaration. The verification process may also
include the fulfillment of legislative requirements administered by other regulatory agencies,
such as veterinary, health and/or phytosanitary issues.
ii. Payment of Customs Duty and Taxes
The importer is required to pay duties and taxes on the imported goods which include customs
duty at 0-35% based on the type of good imported, VAT at 15%, withholding tax at 3% on the
CIF (Cost+Insurance+Freight), Surtax at 10% and excise tax for few selected goods at 10%-
100%.
iii. Inspection
There is also a physical examination that will be conducted on the goods in order to ensure that
the imported goods are not harmful to the public. Further, the imported goods will be examined
so that their origin, country of export, nature, condition, quality, quantity, tariff classification and
value of the goods are in accordance with the information furnished in the goods declaration.
iv. Clearance and Goods Release
In addition to the Customs Commission’s (ERCA’s) clearance activities (based on the physical
examination conducted above), other regulatory bodies will also be involved in the clearance of
certain imported goods. This applies to all goods for which pre-import permits are issued, as well
as the ones for which an import permit is issued only at the time of clearance. The importer or
his/her agent is responsible for obtaining the necessary permits from the regulatory agencies at
the time of clearance. For instance, a person importing medicine is required to obtain a pre-
license, before the starting of the import procedure and an import permit at the time of entry in
order to obtain clearance.
After the physical examination and obtaining the necessary license, the importer will obtain a
goods release charges upon the payment of services charges. The goods will then be released and
the importer takes possession of them. In addition, the Customs Commission (ERCA) will issue
a final declaration for the importer as a certificate of completing the import procedures and
importation of goods.
Any importer who obtained a foreign currency permit should present the final import customs
declaration to the NBE. This is a requirement for importing (or exporting) goods in the future.
Note that an importer should keep all records and documents related to the import for five years
from the date of Customs Commission (ERCA’s) acceptance of the goods declaration. During
this period, Customs Commission (ERCA) may perform a post clearance audit of the import. The
purpose of such audits, which may cover traders’ commercial data, business systems, records and
books, is to verify the accuracy and authenticity of declarations and information provided by the
importer.
TOP 
2. Export Procedures in Ethiopia
Application to the NBE/Authorized Commercial Bank
An application must be submitted to the NBE that is accompanied with the export contract,
seller’s invoice, export license of seller, TIN, export permit application, letter of seller stating
that consignment will be settled within 90 days maximum and any other relevant document.
Note that the exporter must notify the Ministry of Trade that a contract deal has been made with
a buyer within 15 days of the conclusion of the contract for export. 
Further, the buyer must, first, open an irrevocable L/C/documentary credit in favour of the seller.
The exporter should go through the text of the L/C opened in their favour and make sure that
compliance can be met without doubt.
Customs Proceedings 
(Also see the article Customs Procedures in Ethiopia)
i. Customs Declaration 
The Custom declaration should include the type of export regime, detailed information about the
exported goods, and also tariff classification and customs valuation, which is relevant to
determine the correct export duties and taxes. The exporter, then, submits the customs
declaration to the Customs Commission which may accept or reject the declaration.
 Upon acceptance of the customs declaration, the exporter pays the due export duties and taxes
which is almost at 0%. The customs duty on exported goods is 0% except for selected hides,
skins and leathers. VAT is also calculated at 0% for exported goods. But there is an excise tax
imposed on the exportation of selected goods.
ii. Obtain Certificates
After the customs declaration the exporter then must obtain the necessary certificates. When
export product is ready, the exporter must obtain certification from the Inspection Centre that the
commodity is prepared in accordance with the characteristics of the agro-ecology of its
production area and meets the required grade.
The exporter also must obtain a certificate of origin from Chambers of Commerce and special
movement forms or certificates issued by the Customs Authority.
iii. Obtain export customs clearance and ship goods
The customs commission (ERCA) should physically examine the export goods in particular
whether they confirm to the customs declaration and depending on the risk assessment. Further
exported goods are subjected to pre-shipment mandatory inspections. For instance coffee, must
be examined by the Ethiopian Coffee and Tea Development (which is under the Ministry of
Agriculture, and Natural Resources), while live animals and meat products, oilseeds and pulses
are inspected by the Ministry of Livestock and Fisheries.
The exporter may also inspect and insures the export cargo.
After the examination, the exporter is granted a release note upon the payment of warehouse fees
and any other service charge.
iv. Arrange Payment Issue
An arrangement for payment may be through the franco-valuta basis or bank permit. A bank
permit allows for three types of payment modalities; letters of credit, cash against payment, and
advance payment. To obtain a permit for any of these, the exporter is required to present a
completed bank permit form, which is available from the banks, along with the following
documents to his/ her bank.
 An original sales contract agreement;
 The exporter’s business license;
 The exporter’s TIN certificate;
 For L/C: Advice and shipping documents (commercial invoice, packing list, bill of lading
or air way bill, certificate of origin and regulatory permit, if required);
 For advance payments: original credit advice, and advance payment receipt advice
(incoming telegraphic transfer) or customs declaration along with a bank advice for the sale of
the cash notes to the bank.
 Commercial invoice including one copy duly certified by the Customs;
 Packing List;
 Foreign exchange declaration forms;
 Customs Declaration Annex form (CDAF) in duplicate;
 Certificate of Origin; and
 Insurance Policy in duplicate.
For all methods of payment, the exporter needs to have an account with the bank and must not be
listed on the NBE delinquent list. Additionally, the exporter should collect his documents from
the bank or the buyer when payment has been effected.
In case of a documentary credit, the commercial bank negotiates these documents to the
importer’s bank in the manner as specified in the letter of credit. Before negotiating documents,
the exporter’s bank scrutinizes them in order to ensure that all formalities have been complied
with and all documents are in order. The bank then sends the bank certificate and attested copies
commercial invoice of the exporter.
Next, the exporter can get immediate payment from his/her respective bank on the submission of
documents by signing a Letter of Indemnity. By signing the Letter of Indemnity the exporter
undertakes to indemnity the bank in the event of non receipt of payment from the importer along
with accrued interests.
Further, where payment should be effected via a documentary credit (L/C) banks have the
obligation to verify documents in a way that the documents strictly conform to the instruction
contained in the credit (Article 965 of the commercial code). The bank is, however, not liable
where the documents are on their face value in conformity with the instructions received (Article
966 of the commercial code). When the bank refuses the documents, it will notify the presenter
with the error’s found for rectification (Article 965 of the Commercial Code).
(See also the article Foreign Exchange Regulation and Directives in Ethiopia on retention and
utilization of foreign exchange by exporters)
v. Pay service charges and receive final export customs declaration
This is the last stage of the export procedure. After fulfilling all obligations for customs
clearance and the release of goods, ERCA will issue the final declaration to the exporter as a
certificate that all customs procedures related to the export of the goods have been accomplished.
Any exporter who obtained an export bank permit is expected to present the final export customs
declaration to the NBE. This is a requirement for importing or exporting goods in the future. As
in the case of imports, an exporter must keep all records and documents related to the export for
five years from the date of ERCA’s acceptance of the goods declaration. During this period, the
Customs Commission (ERCA) may perform a post clearance audit of the export.