Free invoice generator and tax tools for Ethiopia

A small business in Ethiopia deals with the Ministry of Revenues on several fronts. Business income tax is levied under the Federal Income Tax Proclamation as amended by Proclamation No. 1395/2025, VAT under Proclamation No. 1341/2024, and the Tax Administration Proclamation governs how you register, file, keep records and are penalised. If you employ people you also withhold employment income tax every month, and since the 2025 amendment the monthly rates are set in a single table in article 11.

Pension is a separate payroll cost that the Ministry of Revenues also collects. Under article 11 of the Private Organization Employees' Pension Proclamation No. 1268/2022, contributions for private-sector employees are collected by the Federal Ministry of Revenue or the regional revenue authorities and paid into the pension fund run by POESSA, the Private Organizations Employees Social Security Administration. Stamp duty on contracts and agreements is a further, smaller charge, under the Stamp Duty Proclamation.

Two recent reforms matter. Proclamation No. 1395/2025 (Federal Negarit Gazette No. 64, 1 September 2025) applies to income derived from 8 July 2025, and it added a new article 53 making income from digital services provided in Ethiopia taxable whether the provider is resident or not, at a rate the Council of Ministers sets. Tax Administration (Amendment) Proclamation No. 1434/2026 (Federal Negarit Gazette No. 48, 30 July 2026) took effect on publication and renumbered most of the administration law, so older article citations no longer match.

Ethiopia no longer has a turnover tax. Item 39 of Income Tax (Amendment) Proclamation No. 1395/2025 added the Turnover Tax Proclamation No. 308/2002 and its amendments to the list of repealed laws, and the amendment applies to income derived from 8 July 2025. The transitory provision keeps the old rules only for the tax year before the one in which the amendment came into force. The Ministry of Revenues website still lists the turnover tax proclamations as in force, but the Negarit Gazette text is the law. The route for small taxpayers now runs through article 50 of the income tax law: a Category B taxpayer pays tax on annual gross sales, in the manner a Council of Ministers regulation sets, unless it is VAT-registered, supplies professional services or elects to be taxed on its income under Schedule C.