Title: Ethiopia Value Added Tax Proclamation No. 285/2002

Overview: Value added tax (VAT) was introduced in the year 2003 as a replacement to sales tax. It was adopted as part of a comprehensive tax reform initiative in 2002, with VAT replacing sales tax. As per the document, it was believed that the tax reform will tackle problems and bring the following benefits:

1). The Sales tax does not allow collection of the tax on the added value created wherever a sales transaction is conducted;

2). The value added tax minimizes the damage that may be caused by attempts to avoid and evade the tax and helps to ascertain the profit obtained by the taxpayers;

3).  The tax enhances saving and investment as it is a consumption tax and does not tax capital

4) The value added tax enhances economic growth and improves the ratio relationship between Gross Domestic Product and Government Revenue;

Scope of Application:  Value added taxes (VAT) shall be charged at a rate of 15% or 0% of the value of goods or services depending on the type of transaction.

A). 15% VAT shall be levied on:

1). Every taxable transaction by a registered person;

2). Every import of goods, other than an exempt import;

3). An import of services

B). The Following taxable transactions shall be charged with tax at a rate of zero percent:

1). The export of goods or services to the extent provided in regulations;

2). The rendering of transportation or other services directly connected with international transport of goods or passengers, as well as the supply of lubricants and other consumable technical supplies taken on board for consumption during international flights;

3). The supply of gold to the National Bank of Ethiopia;

4). Supply by a registered person to another registered person in a single transaction of substantially all of the assets of a taxable activity or an independent functioning part of a taxable activity as a going concern, provided a notice in writing signed by the transferor and transferee is furnished to the Authority within 21 days after the supply takes place and such notice includes the details of the supply

C). Exempted Transactions:

1). Commercial rental establishments (such as Hotel, Motel, inn, Boarding house, etc.);

2). Accommodations in the house (Temporary accommodation, Conditions apply);

The following types of supplies of goods (other than by way of export) or rendering of services, as well as the following types of imports of goods, are exempt from payment of VAT to the extent provided by regulation:

3). (a) the sale or transfer of a used dwelling, or the lease of a dwelling; (b) the rendering of financial services; (c) the supply or import of national or foreign currency (except for that used for numismatic purposes), and of securities; (d) the import of gold to be transferred to the National Bank of Ethiopia; (e) the rendering by religious organizations of religious or church related services; (f) the import or supply of prescription drugs specified in directives issued by the Minister of Health, and the rendering of medical services; (g) the rendering of educational services provided by educational institutions, as well as child care

services for children at pre-school institutions; (h) the supply of goods and rendering of services in the form of humanitarian aid, as well as import of goods transferred to state agencies of

Ethiopia and public organizations for the purpose of rehabilitation after natural disasters, industrial accidents, and catastrophes; (i) the supply of electricity, kerosene, and water; (j) goods imported by the government, organizations, institutions or projects exempted from duties and other import taxes to the extent provided bylaw or by agreement’. (k) supplies by the post office authorized under the Ethiopian Postal Services Proclamation, other than services rendered for a fee or commission; (1) the provision of transport; (m) permits and license fees; regulation: o), the supply of goods or services by a workshop employing disabled individuals if more than 60 percent of the employees are disabled; and (p) the import or supply of books and other printed materials to the extent provided in regulations

Type of law: Proclamation

Key words:  Value; Value added Tax; Taxable Transaction; Supply of goods; Tax rates; Exempt transactions; Place of supply; Time of Supply; Value of Supply; Registration; Tax credit; Reverse Taxation; Filling of Tax Return; Payment of VAT; Collection Enforcement; Seizure of property to collect Tax; Record keeping; Appeal procedures; Administrative Penalties; Criminal Offenses;

Entry into Force: January 1, 2003

Repeals:

1). Ethiopia Sales and Excise Tax Proclamation No. 68/1993;

2). Ethiopia Sales and Excise Tax (Amendment) Proclamation No. 77/1997;

3). Ethiopia Sales and Excise Tax (Amendment) Proclamation No. 149/1999;

4). Ethiopia Sales and Excise Tax (Amendment) Proclamation No. 228/2001; and

5). Ethiopia Sales and Excise Tax (Amendment) Proclamation No. 237/2001

Amended by:

1). Ethiopia Value Added Tax (Amendment) Proclamation No. 609/2008

2). Ethiopia Value Added Tax (Amendment) Proclamation No. 1157/2019

Implemented by: —

Repealed? Yes: By VAT proclamation NO. 1341/2024

Language: Amharic and English

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