The rate
The standard rate in Ethiopia is 15%. Some goods and services carry reduced or zero rates and others are exempt. The difference matters: zero-rated sales still let you reclaim the tax on your purchases, exempt sales do not.
Who must register
ETB 2,000,000 of taxable supplies. You are liable to register at the start of any twelve calendar months if there are reasonable grounds to believe you will exceed it in that period, or at the end of any twelve months or less if you actually did. The Authority can count in the taxable supplies of anyone related to you. Sales of capital goods used in the business, and supplies made only because you are selling or closing the business, are left out of the count. Once liable, you have seven days to apply, on the approved form or electronically, and the Authority answers within 21 days. Voluntary registration is limited: you may apply only if your annual taxable supplies exceed ETB 1,000,000, so below a million you cannot opt in. A non-resident with no fixed place of business in Ethiopia is liable on the same threshold; the Authority can make it lodge security and, if it does not comply, appoint an Ethiopian VAT representative who is personally liable for the tax. Registered businesses must display the original VAT registration certificate at the main place of business and an official copy at every other one.
Filing and paying
Registered and filed with Ministry of Revenues.
The accounting period is the calendar month, with one Ethiopian quirk: Nehase and Pagume are added together and treated as a single month. File the VAT return and pay the net VAT on or before the last day of the following calendar month, through eTax. You file for every period whether or not you owe anything. Unregistered large taxpayers and unregistered government entities that received a reverse-charged supply file their own monthly declaration on the same date. Where a due date falls on a Saturday, Sunday or an Ethiopian public holiday it moves to the next business day.
Penalties for getting it wrong
Late filing: 5% of the unpaid tax for each tax period or part of one, capped at 25%. For a first period the penalty cannot exceed ETB 50,000, and it can never be less than the lower of ETB 10,000 or 100% of the tax that should have been declared. File late with nothing to pay and it is a flat ETB 10,000 for each period missed. Late payment: 5% of the tax still unpaid one month after the due date, then a further 2% for each month or part-month it stays unpaid, capped in total at the tax itself. Late payment interest runs on top and separately, at the highest commercial lending rate in Ethiopia in the previous quarter plus 15%, calculated as simple interest day by day.