Major Investment Incentives
To encourage private investment and promote the inflow of foreign capital and technology into Ethiopia, the following incentives are provided to investors both domestic and foreign engaged in new enterprises and expansion projects in areas qualified for investment incentives.
1. Customs Import Duty
– One hundred percent exemption from the payment of import customs duties and other taxes levied on imports is granted to all investment capital goods, such as plant and machinery, equipment etc. Spare parts worth up to 15% of the value of the imported investment capital goods, provided that the goods are not produced and not available locally in comparable quantity, quality and price are also treated in the same manner.
– Investment capital goods imported without the payment of import customs duties and other taxes levied on import may be transferred to another investor enjoying similar privileges.
– Exemptions from customs duties or other taxes levied on imports are granted for raw materials necessary for the production of export goods.
2. Exemptions 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.
3. 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 on depicted in the following table depending upon the area of investment selected, the volume of export to be made, and the location in which the investment is undertaken.
Profit tax holiday is granted subject to council of Ministers Regulation on the basis of the investment proclamation No.280/2002 as follows:
|Sr.No.||Areas of investment eligible for profit tax||Conditions for profit tax eligibility||Profit tax exemption years||Profit tax exemption years if the investment is made in relatively under-developed regions|
|1.||An investor engaged in a new manufacturing or agro-industry activity||a) if at least 50% of its production is to be exported or
b) if at least 75% of its production will be an input for the production of export items;
c) if the project is evaluated under a special circumstance by the BOI
d) if less than 50% of the production is to be exported
e) if the production is for the local market
f) if the production mentioned above on (d) is considered by the BOI to be a special one
not longer than 7
not longer than 8
|2||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||3|
Moreover, the council of ministers may also award profit tax holiday for more than seven years.
4. Exemption From Payment of Taxes On Remittance of Capital
Any remittance made by a foreign investor from the proceeds of the sale or transfer of shares of assets upon liquidation or winding up of an enterprise is exempted from the payment of any tax.
5. Loss Carry Forward
Business enterprises that suffer losses during the tax holiday period can carry forward such losses following the expiry of the exemption period for half of the income tax exemption period.