Ethiopia is the ninth largest country in Africa and is located in the northeastern region, popularly referred to as the Horn of Africa. As a landlocked country, Ethiopia is bound to the east by Djibouti and Somalia, to the north and northeast by Eritrea, to the south by Kenya and to the west by the Sudan. The total land area is 440,284 miles (1.1 million square kilometers). There are ten major rivers (7000 km long) and lakes (7400 sq. km. in area). Ethiopia is a country of great geographical diversity. Located within the tropics, its physical conditions and variations in altitude have resulted in great range of terrain, climate, soil, flora and fauna. Ethiopia has high and rugged mountains, flat-topped plateau called “Ambas,” deep gorges, incised river valleys and vast rolling plains. Its altitude ranges from the highest peak at Ras Dashen (4620 meters above sea level) down to the Dalol (also known as the Danakil) depression, approximately 148 meters below sea level.Ethiopian climate varies according to the different topographical regions. The central plateau has a moderate climate with minimal seasonal temperature variation. The mean minimum during the coldest season is 6°C (43°F), while the mean maximum rarely exceeds 26°C (79°F). Temperature variations in the lowlands are much greater, and the heat in the desert and Red Sea coastal areas is extreme, with occasional highs of 60°C (140°F).
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To encourage private investment and promote the inflow of foreign capital and technology into Ethiopia, the following incentives are granted to both domestic and foreign investors engaged in areas eligible for investment incentives:
Customs Import Duty
One hundred per cent exemption from the payment of import customs duties and other taxes levied on imports is granted to an investor to import all investment capital goods, such as plant machinery and equipment, construction materials., as well as spare parts worth up to 15% of the value of the imported investment capital goods, provided that the goods are not produced locally in comparable quantity, quality and price.
Investment capital goods imported without the payment of import customs duties and other taxes levied on imports may be transferred to another investor enjoying similar privileges.
Some investment areas such as hotels (other than star designated), whole sale, retail and import trade, maintenance service, etc. are not eligible for exemption from customs duty. (Please see schedule two)
Exemptions from customs duties or other taxes levied on imports are granted for raw materials necessary for the production of export goods. In accordance with the Proclamation No. 249/2001, three duty incentive schemes are available for exporters.
They are Duty Draw-Back Scheme, Voucher Scheme and Bonded Manufacturing Warehouse Scheme. Taxes and duties paid on raw materials are drawn back at the time of export of finished products. The duty draw back scheme applies to all taxes at the time of importation, and those paid on local purchases.
Exemption from Payment of Export Customs Duties
Ethiopian products and services destined for export are exempted from the payment of any export tax and other taxes levied on exports.
Income Tax Holiday
Any income derived from an approved new manufacturing and agro-industry investment or investment made in agriculture shall be exempted from the payment of income tax for the periods depicted in the following table, depending upon the area of investment, the volume of export, and the location in which the investment is undertaken.
Profit tax holiday is granted subject to Council of Ministers Regulation No.84/2003 issued on the basis of the Investment Proclamation No. 280/2002 as follows:
Areas and Periods of Tax Exemption
Conditions for Profit Tax Eligibility Profit Tax exemption for investments
Profit tax exemption made in underdeveloped regions
An investor engaged in a new manufacturing or agro-industry activity:
If he exports at least 50% of its products 5 years 6 years Tax Exemption
If he supplies at least 75% of its products, to an investor, as an input for the production of export items 5 years 6 years Tax Exemption
If it exports less than 50% of its products 2 years 3 years Tax Exemption
If the project is evaluated under a special circumstance by the BOI up to 7 years up to 8 years Tax Exemption
If the production is for the local market 2 years 3 years Tax Exemption
If the production mentioned above in (c) is considered by the BOI to be a special one 5 years 6 years Tax Exemption
Expansion or upgrading of the above projects:
If the expansion or upgrading increases the existing production by 25% ,
in value and 50% of the production is to be exported 2 years 3 years Tax Exemption
Board of Investment
Moreover, the Council of Ministers may also award profit tax holiday for greater than seven years. However, the Board may issue a directive to deny income tax exemption right granted to investors producing only for local market, as may be necessary. The period of exemption from profit tax begins from the date of the commencement of production or provision of services, as the case may be.
Loss Carried Forward
Business enterprises that suffer losses during the tax holiday period can carry forward such losses for half of the income tax exemption period following the expiry of the exemption period.
key sectors for worldwide investors : energy (solar, hydro, biomass, renewable ..), infrastructure, roads, natural resources, mining, agriculture, forestry, telecommunications, tourism and ecotourism, responsible tourism, education, research, health, fisheries, transport, manutactring.
The Ethiopian Government launched a programme for the privatisation of state owned enterprises. Detailed information on the process of privatisation can be obtained from the Ethiopian Privatization Agency.
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