Income Tax Proclamation No. 286

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Iuni 8th
Year No. 34
ADDIS ABABA-41hJuly. 2002
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Proclamation’ No. 286/2002 Income Tax Proclamation page 1867
WHEREAS, the Declaration on Economic Policy of the
Government of the Federal Democratic Republic of Ethiopia inaugurates a new era in social ari’d economic relations and
institutions in this country;
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O~’ 10f WHEREAS, in consequence of these developments, the
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market economy;
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WHEREAS, it is believed thatmodernizing the tax system

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and broadening the tax base promotes economic growth by
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~’i(Ili) ODU’I.-r fOlf.h.,.flD. NOW, THEREFORE, in accordance with Article 55(1)
;t-tD-~Ad and (11) of the Constitution, it is hereby proclaimed as
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Unit Price CHAPTER I
Substantive Provisions
1. Short Title
This Proclamation may be cited as the “Income Tax
Proclamation NO.286/2002″
2. Definitions
In this Proclamation, the meanings of terms defined in
other laws of Ethiopia apply unless a different meaning is expressly provided herein. For the purposes of this
Proclamation the following terms shall have the
meanings given to them hereunder:
Negarit G.P.O.Box 80,001

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-0(1+’ . F!IdnI Neaari! Gueta No. 34 4- July, 2002 Page 1868
l)”Person” shall mean any individual, body, or as- sociation of persons (including a business represen-
tative residing and doing business in Ethiopia on behalf
of the principal).
2) “Body” shall mean any company, registered part-
nership, entity formed under foreign law resembling
a company or registered partnership, or any public
enterprise or public financial agency that cmies out
, business activities including body of persons cor-
porate or pnincorporated whetOeu’ recog-
nizedunder.,a 1~~,Jlf!?r~~~n Etbio~ja ~e1sewhere
and any foreIgn b6dy~s” business agent doing
. business in Ethiopia C:)O~~alfof th,~rinqipal.
.3}. ‘ ‘Association of persons’ ‘Shall mean~ as5ociation
of individuals or,an 8S$.qciationthat includes one or
more members who are not individuals, but not
including any association falling within the de-
finition of “body”. .”
4) ..”Related person” means:
(i) a natural person and;
(a) any relative of that nafurafperson’;-‘o’f
(b) a trust in respect of which such relative is
or may be a benefj9iary; or
(ii) a trust and a person who is or may 1?e a
beneficiary,in respect of that trust;~r ‘
(iii) a partnership,joint venture, or unincorporated
association,or body or private company; and(a) any”memberthereof; or
(b) aoy other person where that person and a . memberof such partnership,’j61l1tveit-
ture, or unincorporated association ~r
body, or private company as the case
may he, are related persons in tenn~of
(iv) an incorporated com’pany, other than a closed ‘
(a)’& person;otherthan an incOrporated Corn- pany, where that person or that person ~nd
a. pe~on a person related to thefust
mentionedperson in tenns of this de~
finition controls 10 percent ormo~ of; .
(i) the right to vote in the first mentioned
company; or, .,
(ii) the rights to distributions capital or proflts
of the first-mcQtioned company. either
directly or through ooe or more interposed
companies, partnerships, or trusts; or
(b) any other incorporated company in which
the first mentioned person refelTed to in
(a) or that person and a person related to
that fU’Stmentioned person in tefms of this
defmition controls 10 percent or more of:
(i) the right to vote in the first .mentioned
oompany, or f.’ ,~.


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Federal Negarit Gaz.eta -No. 34 4111
July. 2002-Page 1869
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lI{to.1-o;r flf., “,,}”If.,1 (ii) the rights to distributions of capital or profits of the
fIrst-mentioned company, either directly orthrough one or more interposed companies, part-
nerships, or trusts; or
(c) any person where that person and the person referred to in (a) or the other incorporated company referred to
in (b) are related persons in terms of this definition; or
(d) any person related to the person referred to in (c) in terms of this definition; or
“Relative” in relation to a natural person; means: (i) the spouse of the rpeson; or(ii) an ancestor, lineal descendant, brother, sister, uncle, aunt, nephew, niece, stepfather, step-mother, stepchild, or adopted child of that person
or of the spouse, and in the case of an adoptedchild the adoptive parent; or
(iii) the spouse of any person referred to in paragraph (ii) and for the purposes of this defInition, any
adopted child is treated as related to her adoptive
parent within the first degree of consanguinity.
6) “Business” or “Trade” shall mean any industrial, com-
mercial, professionl or vocational activity or any otheractivity recognized as trade by the Commercial Code of
Ethiopia and carried on by any person for profIt.
7) “Taxpayer” shall mean any person subject to tax under this Proclamation.
8) “Withholding Agent” shall mean any person with a tax collection obligation under this proclamation.
9) “Permanent Establishment” shall mean a fIxed place of business through which the business of a person is
wholly or partly carried on. The following shall, in
particular, be considered to be a permanent establish-
(a) an administrative, branch, factory, workshop, mine,
quarry or any other place for the exploitation of
natural resources, and a building site or place where
construction and/or assembly works are carried out.
(b) A person shall be considered not to have a per- manent establishment if that person:
(i) uses facilities solely for the purpose of storage or
display of goods or merchandise belonging to that
(ii) maintains a stock of goods or merchandise belon-
ging to that person solely for the purpose of
storage or display;
(iii) maintains stock of goods or merchandise belon-
ging to that person solely for the purpose of
processing by another person;
(iv) maintains a fIxed place of business solelly for the
purpose of purchasing goods or merchandise or a
collecting information for that penon’s busiDesa;

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09:”‘l.”:” f”‘l.lPlr1:C~~ ~ ‘}~~m- y..f>mlrA.:: tracts in the name of that person, that person shall be
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respect of any activities which the agent undertakes
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:fID-SI . 11) “Taxable Income” shall mean the amount of income
12) subject to tax after deduction of all expenses and other deductible items allowed under this Proclamation and
Regulations issued there under;
“Employee” shaH mean any individual, other than a
contractor, engaged (whether on a penn anent or tem- porary basis) to perfonn services under the direction and
control of the employer;
(a) “Unskilled Employee” shall mena an employee
who has not received vocational training, does not
use machinery or equipment requiring special skill,
and who is engaged by an employer for a period
aggregating not more than 30 days during a
calendar year;
(b) “Contractor” shall mean an individual who is
engaged to perfonn services under an agreement bywhich the individual retains substantial authority to
direct and control the manner in which the services
are to be perfonned.
13) “Tax Authority” shall mean the Federal Inland Revenue Head Office or any of its branch offices estblished in any
part of Ethiopia and the tax authorities of the Regional

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B!’ Federal Negarit Gazeta-Mo. 34 4. May, 2002.-Page 1871
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fa) OkY.A (IP) fTODlh-t:’-“”) “)11l..y..’fOOD7i’1’f”t’l~
~. 14) “Minister” shall mean the Minister of Finance and
Economic Development and “Ministry” shall
mean the Ministry of Finance and Economic
15) “Fiscal Year” shall mean the budgetary year of the
Ethiopian Government.
16) “Category A taxpayer”, “Category B taxpayer”,
and “Category C taxpayer” shall have the respec-
tive meanings given to them in a regulation to be
issued hereunder.
,3. Scope of Application . 1) This Proclamation shall apply to residents of
Ethiopia with respect to their worldwide income.
2) The Proclamation shall apply to non-residents of
Ethiopia with respect to their Ethiopian sourceIncome.
4. Obligation to pay Income Tax Every person having income as defmed herein shall pay
income tax in accordance with this Proclamation
5. Residence 1) An individual shall beresident in Ethiopia, if he:
(a) has a domicile within Ethiopia;
(b) has an habitual abode in Ethiopia; and/or
(c) is a citizen ‘of Ethiopia and a consular,
diplomatic or similar official of Ethiopia posted
2) An individual, who stays in Ethiopia for more than 183 days in a period of twelve (12) calendar months,
either continuously or intermittently, shall be
resident for the entire tax period.
3) A body shall be resident in Ethiopia, if it:
(a) has its principal office in Ethiopia;
(b) has its place of effective mangement in Ethiopia;
(c) is registered in the trade register of the Ministry of
Trade and Industry or Trade bureaux of the
Regional Governments as appropriate.
4) “Resident person” includes a permanent establish- ment of a non-resident person in Ethiopia.
6. Source of Income
Income taxable under this proclamation ahall include, but
not limited to: (a) income from employment;
(b) income from business activities;
(c) income derived by an entertainer, musician, or
sports person from his personal activities;
(d) income from enterpreneurial activities carried on
by a non-resident through a permanent establish-
ment in Ethiopia;
(e) income from movable property attributable to a
permanent establishment in Ethiopia;
(t) income from immovable property and appur-
tenances thereto, income from livestock and
inventory in agriculture and forestrj, and income
from usufruct and other rights deriving from
immovable property is uch property is’ situated in
(g) mcome from the alienation of property referred to
in (e);

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i’ .
Federal Negarit Gazeta
-July, 2002-Page 1872
(h) dividends distributed by a resident company;
(i) profit shares paid by a resident registered partner-
(j) interest paid by the national, a regional or local
Government or a resident of Ethiopia, or paid by a
non-resident through a permanent establishment
that he maintains in Ethiopia;
(k) license fees (including lease payments, and
royalties paid by a resident or paid by a non-
resident through a permanent establishment that
he maintains in Ethiopia.
7. Foreign Tax Credit 1) If during the tax period a resident derives foreign source income, the Income Tax payable by that
resident in respect of that income shall be reduced by
the amount of foreign tax payable on such income.
The amount of foreign tax payable shall be substan-
tiated by appropriate evidence such as a tax assess-
ment, a withholding certificate or any other similar
document accepted by the Tax Authority.
2) However, the reduction of the Income Tax provided
by Sub-Article (1) shall not ex ceed the tax payable
in Ethiopia that would otherwise be payable on the
foreign source income.
3) In the case of a taxpayer subject to Income Tax on
Schedule C income, any reduction of tax prescribed
by Sub-Article (1) shall be limited to the tax that
would otherwise be payable in Ethiopia computed as
if Article 28 (loss carry forward) of this Proclamation
applied separately to each foreign country in respect
of profit and losses derived from sources therein.
4) The reduction of tax prescribed by this Article shall
be calculated separately in respect of each foreign
country from which income or profit is derived.
8. Schedules ofIncome This Proclamation provides for the taxation of income in
accordance with four schedules, as follows:
1) Schedule ‘A,’income from employment;
2) Schedule ‘B,’ income from rental of buildings;
3) Schedule ‘C,’ income from business as defined in
Article 2(6), but not including activities covered by
the Rural Land Use Fee and Agricultural Activities
Income Tax Proclamations issued by regional states;
4) Schedule ‘D’, other income including income from:
(a) royalties;
(b) income paid for services rendered outside
of Ethiopia;
(c) income from games of chance;
(d) dividends;
(e) income from casual rental of property;
(f) interest income;
(g) specified non-business capital gains.
9. Foreign Exchange Transactions All net gains and losses arising from any transactions in
foreign exchanges shall be brought to account for tax
purposes as additions to taxable income or deductible
losses in the year in which they are realized.

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hl1C ~l1hl1C
0 150 h..,l1C
151 650 10
651. 1400 15
1401 2350 20
2351 3550 25
3551 5000 30
h5000 O,,~
35Employment income
Income Tax
(per month) payable
Over Birr to Birr
0 150 exempt threshold
151 650 10
651 1400 15
1401 2350 20
2351 3550 25
3551 5000 30
Over 5000 35
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th) +oPitit,e. o-~;J- lh. Tf-k far f’} .,..til.,., l1.1~’Federal Negarit Gazeta- No. 344111July, 2002-Page 1873
Schedule’ A’ Income /Employment Income
10. Taxable Income 1) Every person deriving income from employment is.
liable to pay tax on that income at the rate specified
in Schedule A, set out in Article 11. The first Birr
150 (one hundred fifty Birr) of employment
income is excluded from taxable income.
2) Employers have an obligation to withold the tax
from each payment to an employee, and to pay to the
Tax Authority the amount withheld during each
calendar month. In applying the preceding, income
attributable to the months ofNehassie and Pagumen
shall be aggregated and treated as the income of one
11. Tax Rate
Schedule A
12. Determination of Employment Income 1) Employment income shall include any payments or
gains in cash or in kind received from employment
by an individual, including income from former
employment or otherwise or from prospective
2) The type of taxable fringe benefits and the manner
of their assessment shall be determined by
Regulations to be issued by the Council of Minis-
3) Income received in the form of wages does not
include representation and other similar expen-
ditures (on social functions, guest accommodations,
13. Exemptions The following categories of income shall be exempt
from payment of income tax hereunder:
(a) income from employment received by casual
employees who are not regularly employed
provided that they do not work for more than one(1) month for the same employer in any twelve
(12) months period;
(b) pension contribution, provident fund and all forms
of retirement benefits contributed by employers inan amount that does not exceed 15% (fifteen
percent) of the monthly salary of the employee;
(c) subject to reciprocity, income from employment,
received for services rendered in the exercise of
their duties by:

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fh.~f.10. f10. ‘?i1C
h1lC ‘hllh 1IC
‘0 1,800
h’?1IC a
1,801 7,800
7,801 16,800
16,801 28,200
28,201 42,600
42,601 60,000
h60,000 Olf.
35Taxable Income from Rental
Income Tax
(per year) payable
Over Birr to Birr
0 1800
exempt threshold
1,801 7,801
7,801 16,800
16,801 28,200
28,201 42,600
42,601 60,000
Over 60,000 35
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10. ,;JCf.1.OD~AI Federal Negarit Gazeta-No. 344111July, 2oo2-Page 1874
(i) diplomatic and consular representatives, and
(ii) other persons employed in any Embassy,
Legation, Consulate or Mission of a foreign
state performing state affairs, who are national
of that state and bearers of diplomatic pass-
ports or who are in accordance with inter-
national usage or custom normally and
usually exempted from the payment of in-
come tax.
(d) income specifically exempted from income tax by:
(i) any law in Ethiopia, unless specifically amen-
ded or deleted by this Proclamation;
(ii) international treaty; or
(iii) an agreement made or approved by the
(e) the Council of Ministers may by regulations exempt
any income recognized as such by this Proclamation
for economic, administrative or social reasons.
(f) payments made to a person as compensation or a
gratitude in relation to:(i) personal injuries suffered by that person;
(ii) the death of another person.
Section III
Schedule ‘B’ IncomelIncome From Rental of Buildings
14. Taxable Income IncoI]le tax shall be imposed on the income from rental
of buildings.
15. Tax l<.ite The tax payable on rented houses shall be charged, levied and collected at the following rates: (a) on income of bodies thirty percent (30%) of taxable income, (b) on income of persons according to the Schedule B (hereunder) Schedule 'B' 16. Detennination of Income 1) Income from rental of building shall be computed as follows:(a) if the tax payer leased furnished quarters the amounts received attributable to the lease of furniture and equipment shall be included in income. 005A005A005A001100440045005C00560056004C0051004C0044004F0044005A0011004600520050 ":"-~,~!L);1,~t?,(~1Ir_C,j}8_~.k.~~~IR{n'.?::,c, -Federa1~eg~t~2azeia:~No. 3141b jul~~2002-Pag~)875 .,.' .,,; A) ,~b~U O~b6-rT fOt11(1)o 10. fo.1: .111."" A."cD- hb~,l', bOtbLAen- f~J. ";1' f( b"~"'b~,l',"'en- fOt,h~~ "H1C h~T ..,-n~ 1 - --fD}.b~it-:,.O~,.~-r f10. A~~:-r ",l', ~en-~- . th) ...,-flC OOtIP"O""1.tJ. fOth.,.ft-"" bm""" 10. ",l', "'+'i1i ,l',"I.;Jft-; {if " h1n. ..,-nc Oh.,.+C b.,.h&.fen- 0."'" ;JC 0""'" ,.,.bLA fOD~"" ;C'J'OC-h'i ft1t1' :1'hlu - (iif 00111-0 It':''t,l',rF..,-nC h~f"T Ao."'~1 "o.-r bJtC; "ODUftl oy,,7)f OIfm1'1'i lf~c~C; liD.,.1.1 (.IlTtf'Lf1i1) fOtt1'1 bo.-r' ho.-r bJt'i hODUttlhOt 1"fen- m""" fh.~,l', 10. h11;h9"il.,.'1en-1 (iii) ~1I1-n AOt,l',tt- 1-nC h~f"T' ..,-oc h~~ 1D1J.1.~:r:1 'ODJlll.~ "71.;J1'1'~llh~I 1:l.ll Ou.tJ hCP~ f.J.OD'hi:-r 1"PT ~,}1."'mO-k t1'~1D-fh.~~'} 10. A"7"'1""1 Ah.~~ ,..,1;' F~ CPll-r'i fdDhm"'" ~1:t>llJtc’Len-1 “”7ll+m!:’ f””’I..1-
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..,-fle “h~”ft-.. (b) sub-lessors shall pay the tax on the difference
between income from sub-leasing and.the rent paidto the lessor, provided that the amoimt’ received
from the sub-lessor is greater than the an10untpayable to the lessor. ..
– (c) the following amounts shall be deducted from
income in computing taxable income:(i) taxes p~d with respect !o the land and buil-
dings being leased; except income taxes; and
(ii) for taxpayers not maintaining books of ac-
count, one fifth (1/5) of “the gross incomereceived as rent for buildings furniture andequipment as an allowance for repairs, main-
tenance and depreciation of such buildings,
furniture and equipment;
(iii) for taxpayers maintaining books of account,
the expenses incurred in earning, securing,and maintaining rental income, to the extent
that the expenses can be proven by the
taxpayer and subject to the limitations
specified by this Proclamation; deductible
expenses include (but are not limited to) the cost of lease (rent) of land, repairs, main-tenance, and depreciation of buildings, fur-
niture and equipment in accordance withArticle 23 of this Proclamation as well as
interest on bank loans, insurance premiums.
2) The owner of a building who allows a lessee to sub-lease
is liable for the payment of the tax for which the sub-
lessor is liable, in the event the sub-lessor fails to pay.
3) At the earlier of the time construction of a rental building
is completed or when the building is rented, the owner
and the builder are required to notify the administrationof the kebele in which the building is situated about such
completion and the name, address, and tax identification
number of the person (or persons) subject to tax onincome from rental of the building. The kebele adminis-
tration has the obligation to communicate this infor- mation or information obtained by the administrations
own initiative to the appropriate tax authority. Section IV
Schedule ‘c’ IncomelBusiness Income Tax
17. Scope ofSchedule ‘C’Income
Income Tax shall be imposed on the taxable business income realized from entrepreneurial activity.
18. TaxableBusiness Income
Taxable business income shall be determined per tax
period on the basis of the profit and loss account or income statement, which shall be drawn lD com-
pliance with the Generally Accepted Accounting
Standards, subject to the provisions of this
Proclamation and the directives issued by the Tax
Authority .
Tax Rate
1) Taxable buisness income of bodies is taxable at the rate of 30%.
2) Taxable business income of other taxpayers shall
be taxed in accordance with the following Schedulec.

1of1C”f”th,IC.AO+ f4f0D+
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. <16,800 28,200 42,600 60,000 " 20. Ded~ctibJeExpcnses In the determination, of business incQme ,subject to tax in Ethiopia, deductions shall be allowed for ,expenses incurred for the purpose of earning, securing, and maintaining that business income to the exteI1t that the expenses can be, proven by the taxpayer and subjeCt to the limitations specified by .. . ~) .-;. this Proclamation. 21. Non-Deductible Expenses 1) The follow1n{ expenses shall not be deductible: (a)1he cost of the acquisition, improvement,,renewal, 'JIld. reconstructipn of business assets that are depreciated pursuant to . ArticJe 23. of this Prqclamation; (b) an increase of the, share of capital of a company or the basic capital of a registered partnership; , (c) voluntary pension or providenJ.,Jund cqn. Ui,butiOnsover and above 1~% of the monthly salary of the employee. " (d) declared dividends and paid-out profit 'shares; (e) interest in excess of the rate used between the National Bank of Ethiopia and the cOmmerciAlbanks increased by two (2) percentage points. ' (f) damages covered by insurance policy; (g) punitive damages and penalties; (h) the creation or increase of reserves. provisions and other special.purpose fundsunless otherwise allowed by this Proclamation; (i) Income Tax paid on Schedule C income and recoverable V a1ue~Added Tax; (j) representation expenses over and above 10% of the salary of the employee; (k) personal consumption expenses; (I) expenditures exceeding the limitS set forth by this Proclamation pr Rejulations issued hereunder. (m) entertainment expenses; (n) donation or gift. 2) Notwithstanding the provisions of Sub-Article (1) (n) of this Artiete, the Council of Ministers may by Regulations allow donations or gifts Pl'Ovic1ed for public use to be deducted. 3) Interest paid to shareholders on loaDS and advances shall not be deductible to the" extent that the loan or advances in respect of which the interest paid exceeds on average dUrin. 'the tax periOd four times the IIDOIIDt orthe sb8N c:apital. 1bis sub-Article does not apply 10 batab and insurance companies. 005A005A005A001100440045005C00560056004C0051004C0044004F0044005A0011004600520050 ,~ ii1£.~f~ U-&-IA~:J&."f-:JfLIfJ.1'C @! "~?)1+' Bifji ~'9'"Federal Negarit Gazeta - No. 344'" July, 2002-Page 1877 1)1' §. hh-1)1f eD-~ fft-ibit-"f ~C~"'"f1 O"7..ool I."f- hflU Oltf,fhtlltf"1 il1::h~ f"7..llD- tltt..., 00 IPt.:J'ce 111::J'.: 0 "7..A f.,..,. il 0 "7..11'10 -r 1. tL f1lHt h1~f (r)~1_"J'l- .,.L'''7.. f,l1'c;A:: 000 .:>“‘ f”7.. 1~ f1″‘~
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4) In the case of bodies other than companies, Sub-
Article (3) above shall apply as if for the referenceto share capital there were substituted a reference to
basic capital.
22. Trading Stock
1) For the purposes of ascertaining the income of a person for a tax period from a business, there shall
be deducted the cost of trading stock of the businessdisposed of by that person during that period.
2) The cost of trading stcok disposed of during a tax
period is determined on the basis of the average-
cost method, i.e. the generally accepted accountingprinciple under which trading stock valuation is
based on an average cost of units on hand.
3) The term “trading stock’ means any business asset
that is either used in the production process and
becomes part of the product, or that is hold for sale.
23. Depreciation
1) In the determination of taxable business income, the owner of the business assets may deduct
depreciation for business assets.
2) Fine art, antiques, jewelry, trading stock and other
business assets not subject to wear and tear and
obsolescence shall not be depreciated.
3) The acquistion or construction cost, and the cost of
improvement, renewal and reconstruction, of buil-
dings and constructions shall be depreciated in-
dividually on a straight-line basis at five per cent(5%).
4) The acquisition or construction cost, and the cost of
improvement, renewal and reconstruction, of intan-
gible assets shall be depreciated individually on a
straight-line basis at ten percent (10%).
5) The following two categories of business assets
shall be depreciated according to a pooling systemat the following rates:
(a) Computers, information systems, software
products and data storage equipment: twenty-
five (25%).
(b) All other business assets: twenty percent
(20% ).
6) In each category as referred to in Sub-Article (5),
the rate of depreciation specified in that Sub-Articleshall be applied to the depreciation base of the
category .
7) The depreciation base shall be the book value ofthe
category as recorded in the opening balance sheet
of the tax period:
(a) increased by the cost of assets acquired or
created and_the cost of improvement, renewaland reconstruction of assets in the category
during the -tax period.
(b) decreased by the sales price of assets disposed
of and the compensation received for the loss
of assets due to natural calamities or otherinvoluntary conversion during the tax period.
8) If the depreciation base is a negative amount, that
amount shall be added to taxable profit and the
depreciation base shall become zero.
9) Ifthe depreciation base does not exceed Birr 1,000
the entire depreciation base shall be a deductible
business expense.
10) If a revaluation of business assets takes place, no
depreciation shall be allowed for the amount of the
11) In determination of taxable business income a
deduction is permitted in respect of each category
of business assets for the maintenance and im-
provement expenses of business assets belonging
to that category for the acutal amount of the
expenses, but not in excess of twenty percent(20%) of the deprciation base of the category at the
end of the year. Any actual expenses exceeding this
twenty percent (20%) shall increase the de-
preciation base of that category.

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f”‘OOH’IO f7ichCf’ “‘i'”lOC .f’11′(I)<') -rCt;: ft.lt1 boll')f my,9" f7ichCf' "'i'"lOC tt-c:rA t"'i~'" f1'tOJo hlf~ tflUqlttry fCPtOJo +C~ ..,-oc h"7.h~IAO-r f,)"'.(' P'~ 10. Itf. .,..,.c;7i Y,1.~lAd Federal Negarit Gazeta-No. 34 4th July, 2002-Page 1878 . 24. 1 'ransfers of Business Assets I) When assets used in a business are sold, exchanged, or otherwise transferred, gain or loss is recognized on the transfer. 2) Transfers of business assets among companies which are parties to a reorganization are not treated as a disposal of the property. 3) The value of business assets held by a company or companies which are parties to a reorganization is the same as the value of such assets immediately before the reorganization. Similarly, the balance value of any depreciation categories shall be carried nvp.r. 4) "reorganization" means: (a) a merger of two or more resident companies; (b) the acquisition or takeover of fifty percent (50%) or more of the voting shares and fifty percent (50%) or more of all other shares by value of a resident company solely in ex- change for shares of a party to the reor- ganization; (c) the acquisition of fifty percent (50%) or more of the assets of a resident company by another resident company solely in exchange for voting participations with no preferential rights as to dividends of a party to the reorganization; (d) a division of a resident company into or more resident companies; or (e) a spin-off The Tax Authority shall ensure that the mer- ger, acquisition, takeover, division, or spin-off is not having tax avoidance as a principal objective. 5) The rules of Sub-Article (1) - (4)shall not apply to the transfer of assets described under Article 23(5). 6) Loss shall not be recognized on the transfer of a business asset to related person within the meaning of Article 2(4). 25. Bad Debts In the determination of taxable business income, a deduction shall be allowed for a bad debt if the following conditions are met: (a) an amount cOITesponding to this debt was previously included in the income; (b) the debt is written off in the books of the taxpayer; and (c) any legal action to collect the debt has been taken but the debt is not recoverable. 26. Special Reserves for Finance Institutions In the determination of taxable business income of finance institutions a deduction shall be allowed for special (technical) reserves in accordance with the directives issued by the National Bank of Ethiopia; the business income, however, shall be increased by amounts drawn from such reserves. 27. Participation Deduction 1) If a resident company or partnership reinvests the profit it earned to raise the capital of another company or partnership subject to the conditions in Sub-Article (2) and (3); such amount shall be deductible from its taxable income. 005A005A005A001100440045005C00560056004C0051004C0044004F0044005A0011004600520050 .1ta iii'(,~fi:'it ~Yo~A ~;J~"";JtLllJ ()~ ?;?;.,., Iuf1§ q.9". Federal Negarit Gazeta-No. 344111July, 2002-Page 1879 g. htttJ W,,e 010-'" h1"'ta(6)(u) f.,.ooth.,.a>–
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01P1ml.V ~’dtn OOIPI..’t h”7.hLA ..,-fiC ~,
f.U’fiA” 2) The deduction mentioned in letter (a) of Sub-
Article (1) shall apply to shares of resident com-
panies that are subject to taxation under Scdedule C and in which the investing body has a shareholding
of at least twenty-five percent (25%), by value or by
number, in the share capital or the voting rights.
3) The deduction mentioned in letter (b) of Sub-
Article (1) shall apply to basic capital of resident
registered partnerships that are subject to taxation
under Schedule C and in which the investing body
holds at least twenty-five percent (25%) by value of
basic capital.
4) The Council of Ministers shall by reg;ulations
determine the manner in which the; incentive
granted in this Article shall be applied.
28. Loss Carry forward
1) If the determination of taxable business income results in a loss in a tax period, that loss may be set
off against taxable income in the next five (5) tax
periods, earlier losses being set off before later
2) If during a tax period the direct or indirect
ownership of the share capital or the voting rights
of a body changes more than twenty-five percent
(25%), by value or by number, Sub-Article (1) shall
cease to apply to losses incurred by that body in that
tax period and previous tax periods.
3) A net operating loss may be carried forward and
deducted only for two periods of three years.
Transfer Pricing
1) Where conditions are made or imposed between persons carrying on business in their commercial or
financial relations which differ from those which would be made between independent persons, the
Tax Authority may direct that the income of one or
more of those related persons is to include profits
which he or they would have made but for those
conditions. The Tax Authority shall do so in
accordance with the directives to be issued by the
2) In order to ensure the just and efficient application
of this Article the Tax Authority may make
agreements in advance with persons carrying on
entrepreneurial activities, subject to conditions if
necessary, that specified conditions between
related persons do not differ from those which would be made between independent persons.
30. Exemptions
1) The following categories of income shall be exempt from payment of business income tax
hereunder:(a) awards for adopted or suggested innovations
and cost saving measures, and
(b) public awards for outstanding performance tax
any field.
(c) income specifically exempted from income tax
by the law in force in Ethiopia, by internationaltreaty or by an agreement made or approved by
the Minister.
The revenue obtained by:

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Federal Negarit Gazeta-No. 34 4th
July, 2002-Page 1880
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-HlC fDDaI.~2f “l1’lJ/.- (a) the Federal, Regional and Local Governments of
(b) the National Bank of Ethiopia
from activities that are incidental to their
operations shall be exempt from tax on Schedule
C income.
Scheduled Income/Other Income
31. Royalties
1) Royalties shall be liable to tax at a flat rate of five percent (5%).
2) The withholding Agent who effects payntnt shall
withhold the foregoing tax and account to the Tax
Authority within the time limit set out in this
3) Where the payer resides abroad and the recipient is a
resident, the recipient shall pay tax on the royalty
income within the time limit set out in this
4) This tax is a final tax in lieu of a net income tax.
5) The term “roayalty” means a payment of any kind
receivedas a consideration for the use of, or the
right to use, any copyright of literary, artistic or
scientific work, including cinematography films,
and films or tapes for radio or television broadcas-
ting, any patent, tradework, design or model, plan,
secret formula or process, or for the use or for the
right to use of any industrial, commercial or
scientific equipment, or for information concerning
industrial, commerciaLar..scientific experience.
32. Income from Rendering of
Technical Services
1) All payments made in consideration of any kind of
technical services rendered outside Ethiopia to
resident persons in any form shall be liable to tax at
a flat rate of ten percent (10%) which shall be
withheld and paid to the Tax Authority by the payer.
2) The term “technical service” means any kind of
expert advise or technological service rendered.
33. Income from Games ofChance
1) Every person derving income from winning at games of chance (for example, lotteries, tombolas,
and other similar activities) shall be subject to tax at
the rate of fifteen percent (15%), except for win-
nings of less than 100 Birr.
2) The payer shall withhold or collect the tax and
account to the Tax Authority in the manner
provided in Article 67.
3) This tax is a final tax in lieu of income tax.
34. Dividends
1) Every person deriving income from dividends from a share company or withdrawals of profits from a
private limited company shall be subject to tax at the
rate of ten percent (10%).
2) The withholding Agent shall withhold or collect the
tax and account to the Tax Authority.
3) This tax is a final tax in lieu of income tax.
35. Income From Rental of Property
Every person derving income from the casual rental of
property (including any land, building, or moveable
asset) not related to a business activity taxable under
Article 17 shall pay tax on the annual gross income at
the rate offifteen percent (15%). This tax is a final tax in
lieu of a net income tax.

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hce; 10cooC f 36.
Interest Income on Deposits
1) Every person deriving income from interest on deposits shall pay tax at the rate of five percent(5%).
2) The payer shall withhold the tax and account to the
Tax Authority in the manner provided in Article 67.
3) This tax is a final tax in lieu of income tax.
37. Gain on Transfer of Certain Investment Property
1) .
Income Tax shall be payable on gains obtained
from the transfer (sale or gift) of property described
in this Article at the following rates:
(a) building held for business, factory, office 15%
(fifteen percent)
(b) shares of companies 30% (thirty percent)
2) Gains obtained from the transfer of building held
for residence shall be exempt.
3) The basis for computation of gains obtained from
the transfer of properties described in this Articleshall be determined by Regulations to be issued by
the Council of Ministers.
4) Any exchange of shares in a resident company
which is a party to a reorganization – as defined in
Article 24(4) -in exchange for share in another
resident company which is also a party is not a disposal of the shares.
5) The value of the shares given in exchange under
Sub-Article (4) shall be equal to the value of the
original shares.
6) Loss on the transfer of such property shall be
recognized and be available to offset gain subject tothe following limitations:
(a) Loss on transfers under this Article may be used
to offset gain on transfers under this Article, but
may not be used to offset any other income orgain. Unused losses may be carried forward
(b) No loss shall be recognized on transfer to
associates within the meaning of Article 2(4).
7) Any person authorized by law to accept, register or in any way approve the transfer of capital assetsshall not accept, register or approve the transfer
before ascertainig that the payment of the tax has b~en duly effected in accordance with this Article.
Procedural Provisions Section 1
General Provisions
38. Powers And Duties ofTax Authority
1) The implementation and enforcement of this Proclamation and of Regulations issued hereundershall be the duty of the Tax Authority.
2) Notwithstanding anything to the contrary in any
other law, the Tax Authority shall be empowered toinvestigate any statements, records and books of
account submitted by any taxpayer at any time by:
(a) sendmg duly accredited inspectors to the place
of business or practice of the tax payer to check
same or any vouchers, stocks of other materialitems of the taxpayer;

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Ii!f12 q.9′”Federal Negarit Gazeta-No. 34 4th July, 2002-Page 1882
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llC’:f’)f t0J.:J.IJO 1 (b) requiring the taxpayer or any employee thereof who
has access to or custody of any information, records
or books of account to produce the same and to attend during normal office hours at any reasonably
convenient tax office and answer any questions
relating thereof;
(c) requiring any person including municipality, Body,
Financial Institution Department or Agency of
Federal or Regional Government to disclose par-
ticulars of any information or transactions, in-
cluding any lending or borrowing which it may
have relating to the taxpayer.
39. Confidentiality ofTax Information
I) The Tax Authority and all persons who are or have
been its agents or employees shall maintain thesecrecy of all information except such information
as are required by the Commercial Code of
Ethiopia to be published by trade gazette, on
particular taxpayers received by them in an official
capacity, and may disclose such information only
to the following persons:
(a) employees of the Tax Authority, for the purpose
of carrying out their official duties;
(b) law enforcement agencies, for the purpose of
the prosecution of a person for tax violations;
(c) courts, in proceedings to establish a person’s
liability for tax, penalties, or interest, or in any
criminal case;
(d) tax authorities of a foreign country, in accor-
dance with an international treaty to which
Ethiopia is a party.
2) Persons who receive informaion under Sub-Article
(1) must maintain the secrecy of that informaion,
except to the minimum extent necessary to achieve
the object for which disclosure is permitted. Other
persons who receive information the disclosure of
which is regulated by this section may not further
disclose the informaion and must return documents
reflecting the informaion to the Tax Authqril’.
3) Information concerning a taxpayermay be disclosed
to another person with the taxpayer’s written con-
40. Code of Conduct for Tax Authority Employees
I) Each employee of the Tax Authority shall:
(a) be honest and fair, treating each taxpayer with
courtesy and respect;
(b) apply the law, regulations and rulings to each
case on the basis the objective facts in that case,
showing no partiality to members of his family
or to friends;
(c) refrain from participating in any determination
that will affect his or his spouse’s tax liability;
(d) where either a known family relationship or a
business interest might influence any deter-
mination he must, as an employee, make public(in the manner provided by regulations) such
relationship or interest;
(e) Subject to Article 39 protect the confidentiality
of any tax or duty information, and
(f) not solicit or accept any bribe or perfonn any
other improper act relating to the duty to
determine or collect any tax.

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July, 2002-Page 1884
45. Business Licenses
1) A person obtaining a license to carry an a business
accupation is required to. supply the TIN to.the
licensing autharity. All public badies and ins-
titutians issuing a business araccupatianallicense
shall nat issue or renew such license unless the
taxpayer has supplied the TIN.
2) Natwithstanding Sub-Article (1) the licensing
autharity may nat require the taxpayer to. supply a
TIN if accarding to. the registratian schedule
distributed as per Article 43 shaws that the date far
his registratian is nat yet due.
46. Directives
The Minister af Revenue is hereby empawered to. issue
directives to.provide procedures far TIN registratian af
taxpayers. In accardance with thase directives, the Tax
Autharity shall prepare a schedule af registratian far a
TIN, which shall inter alia cantain specific dates far
registratian af a given class af taxpayers, and shall
distribute capies af the timetable to. all licensing
autharities. Change of Address and Cessation of Business
1) Any taxpayer who. makes a change af address shall
natify the Tax Autharity af the change within thirty
(30) days.
2) Any taxpayer who. ceases a trade ar business
activity shall natify the Tax Autharity within thirty
(30) days that the activity has ceased. In the case af
a cessatian af activity, any declaratian af incame
required by this Proclamaatian filed at the end
af a tax year, shall be filed no. later than sixty (60)
days after the activity haS ceased. Any tax due far
the periad in which the cessatian accuITed shall be
paid on ar befare the declaratian due date deter-
mined under this provisian.
3) Where:
(a) any incame is derived by a persan in a tax year
from any business, activity, investment ar ather
saurce that has ceased either befare the cam-
mencement afthe year or during the year, and
(b) if the incame had been derived before the
business, activity, investment ar ather saurce
ceased it wauld have been chargeable to. tax
under this Proclamatian,
this Praclamatian shall apply to. the incame an
the basis that the business, activity, investment
ar ather saurce had nat ceased at the time the
incame was derived.
48. Record Keeping Requirement
1) All persans who. are engaged in a business or trade
as defined in Article 2(5), ar wtlO awn buildings
held all ar in part far rental, except far Categary C
taxpayers shall keep boaks and recards.
2) A persan required to.keep baaks and recards
in accardance with Sub-Article (1) shall keep the
fallawing infarmatian:
(a) a recard of the business assets and liabilities,
including a register af fixed assets shawing the
date af acquisitian the cast af acquisitian, and
the CUITentboak value af each asset;
(b) a recardaf all daily incame and expenses
related to. the business activity and the matter to.
which they relate;
(c) a recard af all purchases and sales af goods and
services related to. the business activitiy

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July, 2002-Page 1887
5) If a withholding agent fails to withhold or under withholds he shall be made to pay the full amount of
the tax to the Tax Authority.
54. Withholding of Schedule’ ‘D” Income Tax on Payments
1) The payer of any payment subject to tax under
Schedule “D” shall withhold from the payment
the amount of tax required by Schedule’ ‘D” .
2) The obligation of the payer to withhold tax has priority over all other obligations to withholdamounts from payments to a payee (the taxpayer).
3) A payer shall pay the witheld tax to the Tax
Authority within fifteen (15)days of the end of
each calendar month, and each payment shall be accompanied by a statement with respect to each
taxpayer who received payments during the month.
4) The statement referred to in Sub-Article (3) shall be
in the form and furnished in the manner prscribed
by the Tax Authority, and shall contain the
following information: (a) the name, address, and TIN of each taxpayer;
(b) the amount of payments subject to tax under
Schedule D;
(c) the amount of the tax withheld from the
5) At the time of making a payment to a taxpayer, the
payer shall furnish each taxpayer a tax withholding
certificate (in the form prescribed by the Tax
Authority) showing the date of the payment and
stating the information listed in Sub-Article (4); the
taxpayer’s right to contest the amount of tax withheld; and the manner of doing so.
6) The tax-witholding certificiate is proof of the
amount of tax withheld on payments subject to tax
under Schedule D.
55. Issuance of Identification Card
The Tax Authority shall issue identification cards to
Withholding Agents.
56. Record of Payments and Tax Withheld
1) A withholding agent shall maintain, and make
available for inspection by the Tax Authority,
records showing, in relation to each fiscal year:
(a) payments made to a payee, and
(b) tax withheld from those payments.
2) The withholding agent shall keep the records
referred to in Sub-Article (1) for five (5) fiscal yearsafter the end of the fiscal year to which the records
3) The Tax Authority may require a withholding agent
to furnish a copy of the records to be maintainedunder Sub-Article (1) in the manner, form’ and at
the intrvals prescibed by the Tax Authority.
57. Adjustment To Tax Due For Year
And Withholding Agent’s Indemnity1) Except for tax withheld with respect to final taxes,
withheld tax (or tax paid currently under Artide 53
or Article 54 or collected on import under Article
52 is included in ascertaining a taxpayer’s tax due
for the tax year.

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f1.C;JfAlJ (a) with respect to the acquisition of services or
property, at the time the services or properties
are provided;
(b) witn respect to the use of property, at the time
the property is used; or
(c) in any other case, arthe time that person makes
payment in full satisfaction of the liability.
61. Prepayments .
Without prejudice to Article 21 of this Proclamat1?n, a deduction for an outooing or expense incurred on a serVIce or
other benefit which :xtends beyond twelve months includingcost of lease of land, shall be allowed proportionately over the tax periods to which the service or other benefit relates.
62. Claim of Right
1) A taxpayer who is accounting for tax purposes on a
cash basis shall treat an amount as received and anoutgoing or expense as paid, even though that person
is not legally entitled to receive the amount or liable
to make the payment, if that’ person claims to belegally entitled to receive, or legally obliged to pay
the amount.
2) Where Sub-Article (1) applies and that person later
refunds the amount received or recovers the out-going or expense paid, an appropriate adjustment
shall be made to that person’s income c+the tax
period during which the refund or recovery occurs.
3) A person who is accounting for tax purposes on an
accrual basis shall treat an amount as receivable andan outgoing or expense as payable even though that
person is not legally entitled to receive the amount orliable to make the payment, if that person claims to
be legally entitled to receive, or to be legally obliged to pay the amount. ‘
4) Where Sub-Article (3) applies and that person later
ceaSeS to claim the right to receive the amount or toclaim an obligation to pay the outgoing or expense,
an appropriateadjustrnent shall be made to that
person’s income of the tax period during which that person ceases to make the claim.
Long Term Contracts
1) 1n the case of a person accounting for tax purposes
on an accrual basis, the timing of inclusions in anddeductions from income relating to a long-termcontract of a business of that person shall be
accounted for on the basis of the percentage of thecontract completed during any tax period.
2) The percentage of completion is determined by comparing the total costs allocated to the contract
and incurred before the end of the tax period with
the estimated total contract costs including anyvariations or fluctuation.
3) Whereduring the tax period m which a long-
t~rm contract of a business is comp1eted theperson carrying on the business:
(a) .
incurs a loss; or
(b) has an unrelieved loss available for carrying
forward under Article 28(1);
. which is attributable to the long-term contract,
the Tax Authority may allowthe loss to be:
(c) carried back to preceding tax periods, and
(d) applied against an amount of income of a tax
period not exceeding the amount, by whichinclusions in the income of the business relating
to the long-:term contract forthat period exceed
deductions therefrom.

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Federal Negarit Gazeta-No.34 4111
July, 2002-Page 1890
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I.”‘CofI”-r 1ftm-, hlfJrC’ “‘ofI~’ ~tIJ(afilArJ 4) A loss .incurred by a person in carrying on a business
during a tax period is attributable to a long-term
contract of the business to the extent that deductionsallowed in ascertaining the income from the business
relating to the long-term contract for that period
exceed inclusions in ascertaining that income.
5) In this Article, “long-term contract” of a business of
a person means a contract for manufacture, ins-
tallation, or construction, or, in relation to each, the
performance of related services, which is not com-
pleted within the tax period in which work under the
contract commenced, other than a contract estimated
to be completed within twelve (12) months of the
date on which the work under the contract commen-
Declaration and Assessment
64. Tax Year
1) Unless otherwise provided, the period for tax assess-
ment (“tax year”) shall be the fiscal year, that is, the
one-year period from 151
RamIe to 30th Sene.
2) The tax year of a person is:
(a) in the case of an individual or an association of
individuals, the fiscal year;
(b) .in the case of a body, the accounting year of the
bodv. .
3) A body shall not change its accountmg year un ess 1
obtains prior approval, inwriting, from the Tax
Authority and complies with any condition that may
be attached to the approval.
4) The Tax Authority may, by notice in writing, revoke
an approval granted to a company under Sub-Article
(3) if the body fails to comply with any of the
conditions attached to the approval.
5) Where the tax year of a person changes as a result of
Sub-Article (3) or (4), the period between the last full
tax year prior to the change and the date on which the
new tax year commences shall be treated as a separate tax year, to be known as the “transitional
year. ”
65. Certificate and Assessment ofSchedule A Income
1) The tax-withholding certificate issued by an em-
ployer to an employee shall be proof that tax in the
amount stated was withheld on the employee’sSchedule “A” income of the amount stated.
2) The amount of tax withheld on an employee’s
Schedule A income, paid to the Tax Authority and
accompanied by the employer’s statement (as
required by Article 51) shall be the amount assessed
by the Tax Authority effective on the date the tax is
paid, and subject to later amendment if the Tax
Authority determines that an error or omission has
been made.
3) In the case of an employee whose taxable income for
a tax year consists exclusively of Schedule “A”
income, no declaration of income is required.
4) Notwithstanding the preceding, an employee
working for more than one employer or an employee
of international organization having diplomatic im- munity or working in embassies, missions ana otfier
consular establishments of a foreign government
shall himself declare and pay taxes on his schedule “A” income with the time prescribed under Article
5) If’an employer finds out that his employee has more
than one employment income and if he ascertains
that the other employer(s) have not aggregated said
income, he shall aggregate and withhold the tax

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“/”” :: 66. Declaration and Assessment of Schedule Band C
1) Every taxpayer who has Schedule B or Schedule C income shall prepare a declaration of his income in a
form prescribed by the Tax Authority. Taxpayers
shall submit the tax declaration to the, Tax Authorityat the time of submitting the balance sheet, and the
profit and loss account for that tax year within the
time prescribed below: (a) Category A taxpayers within 4 months from
the end of the taxpayers tax year.
(b) Category B taxpayers within 2 months from
the taxpayers tax year.
2) The type of records to be submitted to the Tax
Authority in accordance with Sub-Article (1) aboveshall be determined by Regulatons to be issued by
the Council of Ministers.
3) The tax calculated
accordancewith the tax declaration.
reduced by the tax with heldin accordance with
Articles 52 and 53 of this Proclamation and the
amounts provided by Article 7 (foreign tax credit) of
this Proclamation during the tax year, shall be trans-ferred by the taxpayer to the Tax Authority simul-
taneously with the tax declaration.
4) Any excess payments over the tax calculated accor-
ding to Sub-Article (3) of this Article shall be
refunded by the Tax Authority to the taxpayer withinninety (90) days of becoming satisfied on the tax
5) The amount of tax due for the year, as stated in the
declaration, shall be the amount assessed by the TaxAuthority although the Tax Authority may deter-
mine that an error or omission has been made and
therefore may issue an amended assessment.
67. Declaration and Assessment of Schedule D Income
1) Every taxpayer who has Schedule D income, not subject to withholding at source constituting a final
tax, shall prepare a declaration of that income in a
form prescribed by the Tax Authority. Taxpayersshall submit this declaration to the Tax Authority
within two (2) months from the end of the Ethiopian
Fiscal Year.
2) The tax calculated in accordance with the de-
claration, after the amounts provided by Article 7(foreign tax credit) paid during the year with respect
to the Schedule D income subject to declaration
having been reduced, shall be transferred by the
taxpayer to the Tax Authority simultaneously with
the declaration.
3) The amount of tax due for the year, as stated in the
declaration, shall be the amount assessed by the taxAuthority unless the Tax Authority determines that
an error or omission has been made.
68. ~)’tandardAssessment for Category CTaxpayers
1) A standard assessment method shall be used to
determine the income tax liability of Category Ctaxpayers.
2) The standard assessment shall be a fixed amount of
tax determined in accordance with a Council of
Ministers Regulations establishing a schedule 9fstandard assessment amounts that reflect variationsin the type of business, business size, and business
location. The taxpayer shall pay the tax determined
in accordance with standard assessment on the 7th
day of July to the 6thday of August every year, unless,
the taxpayer requested and is allowed to make installment payments in accordance with Council of
Ministers Regulations.

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~’9′”‘Federal Negarit Gazeta – No.34
41hJuly, 2002-Page 1892
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Q’ 3) The period during which the standard assessment
amount will be used and the basis for the revised
amount shall be determined by a directive to be
issued by the Minister. The Minister shall distribute the
revised standard assessment to the tax Authorities.
69. Assessment by Estimation
1) If no records and books of accounti are maintained
by the taxpayer, or if, for any reason, the records and
books of accounts are unacceptable to the TaxAuthority, or if the taxpayer fails to declare his or its
income within the time prescribed by this
Proclamation, the Tax Authority may assess the tax by estimation.
2) The manner of assessing tax by estimation shall be
determined by directives to be issued by the Minister
of Revenue.
70 Aggregation
A taxpayer who derives income from different sources
subject to the same schedule shall be assessed on the
aggregate of such income.
71. Limitations
1) If a taxpayer has submitted a declaration of income
within the time limit and manner as prescribed in this
Proclamation, the Tax Authority has five (5) years to
amend. the assessment. The five-year assessment
period runs from the due date of the declaration.
2) If a taxpayer has submitted a declaration in the
manner required by this Proclamation, but after the
due date for making a declaration, the Tax Authority has five (5) years to amend the assessment. The five
years assessment period runs from the date the
declaration was received by the Tax Authority.
3) In case where the taxpayer has not declared his income or has submitted a fraudulent declaration, not
time limit provided in any other law shall bar theassessment of the tax by the Tax Authority.
Assessment Notification
72. Contents of Assessment Notification
Every assessment notification shall contain the
following elements: 1) gross income and deductions applicable under
this Proclamation;
2) taxable income;
3) rates applicable or percentage;
4) taxes paid and due;
5) any penalty or interest;6) the taxpayer’s name, address, and TIN; and
7) a brief explanation of the assessment and a
statement of the taxpayer’s rights.
73. Service ofTax Notices
1) Income tax assessment notices or other notices
issued by the Tax Authority to any taxpayer shall be
communicated in writing as follows:
(a) In the case of a resident individual, by registered
letter or by delivery to the taxpayer in person, or
if he is absent, to any adult member ofhis family
or any person employed by him at his residence,
or place of business or, professional practice,
provided that, if, no person can be found toaccept such service, then, the same may be
effected by affixing the notice to the door or
other available part of the said residence or
place of business.
(b) in the case of a resident body, by registered letter to the registered address of the body or by
deli very to any director or employee of the body
at any of its places of business.

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000″‘) ;rnftoO”” (DII.~1-ht.II«rA II Federal Negarit Gazeta – No. 34
4thJuly, 2002-Page 1893
(c) in the case of non-resident persons, to their agent or agents in Ethiopia, or by affixing to the door or
other available part of the residence or place of
business of such agent if he could not be served in
Provided that, if in any case none of these
measures are effective, service may be discharged
by the publication in any newspaper in which
Court notice may be advertised. The cost of such
publication shall be charged to the taxpayer.
2) Any assessment of income tax duly served on the
taxpayer shall become final when:
(a) the taxpayer tails to pay the tax due or to lodge
his or its appeal with the Tax Appeal Commission
within thirty (30) days from the date of receipt of
an assessment notice orfrom)the date of decision
of the review committee,
(b) the time for appealing the decision of the Tax Appeal Commission has expired; or
(c) the Court of Appeal renders its final decision.
3) A taxpayer who does not pay the final assessment as
provided under Sub-Article (2) of this Article is in
Tax Payable when Due
Any tax (including whithheld or collected tax) that is to
be paid to the Tax Authority by a stated date shall be
payable on that dat~. Failure to make a timely payment shall result in the imposition of interest and the late
payment penalty.
75. Interest
1) If any amount of tax is not paid by the due date, the
taxpayer is obliged to pay interest on such amount
for the period from the date the tax is due to the date it is paid.
2) The interest rate under Sub-article (1) of this
Article is set at 25% (twenty five percent) over and
above the highest commerciallending interest rate
that prevailed during the preceding quarter.
3) Interest shall be collected in the same manner as the
tax to which it relates.
76. Credit and Refund
1) Where the Tax Authority is satisfied that tax has
been paid by a person, whether by withholding,
installments, or otherwise, in excess of the person’s tax. libality to which the payment or payments relate,
the Tax Authority shall:
(a) credit the overpaid tax. against any liability of
that person in respect of:(i) other taxes under this Proclamation;
(ii) withholding of tax under this
(iii) any other amount due to the Tax
Authority under this Proclamation; or
any other tax law; and
(b) refund the remainder to that person within 90
days of becoming satisfied.
2) The Tax payer shall be entitled to an interest set at
the highest commercial lending interest rate in-
creased by 25% (twenty five percent) that prevailed during the precedjng quarter if befIt has
not received the refund within the time prescribed
under Sub-Article (1) (b) of this Article.

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h4.~ l.!.C(llD- .e1L}Arl Federal Negarit Gazeta
– No. 34 4tbJuly,2002-Page 1894
3) Without limiting the general~ty of Sub-Article(l) of this Article, a person may apply for a refundunder this Article. A refund application shall be
made to the Tax Authority in writing within e
three (3) years of the later of: (a) the date on which the Tax Authority has served the notice of assessment to which the
refund application relates, or
(b) the date on which the tax or interest was paid.-
4) The Tax Authority shall, within forty-five (45)
days of making a decision on a refund application
under Sub-Article 2, serve on the person applying for
the refund a notice in writing of the decision.
5) A person dissatisfied with a decision referred to in Sub-Article 4 may challenge the decision only
through. the appeal procedure as though the de-
cision were that of an assessment. L
Collection Enforcement
77. Seizure of Property to Collect Tax 1) Subject to Sub-Article (4) of this Article;-if anyperson liable to pay any tax imposed by this
Proclamation is in default under Article 73(3), it shall be lawful for the Tax Authority to collect such
tax ‘and such further amount as shall be sufficient
to cover the expenses of the seizure Jby seizing any
property belonging to such person. Seizure may be
made on the accrued salary or wages of any
employee, including a government employee, by
serving a notice of seizure on the officer who has
the duty of paying the salary or wages.
2) For purposes of this Section; the team “Sezure”
inCludes seizure by any means, as well as, collec-
tion from a person who owes money or property to
the taxpayer, Except as provided in Sub-Articles
(3) and (6), a seizure shall extend only to property
possessed and obligations existing at the time the
seizure is made. The Tax Authority may request a
police officer to be present during seizure. Where
the Authority seizes any property as provided
hereinabove, it shall have the right to sell the seized
goods at public auction or in any other manner
approved by the Authority within not less than 10
days after the seizure, except that when the goods
seized are perishable the Authority can sell the
goods after any reasonable period having regard to
the nature of the goods.
3) Whenever any property on which seizure had been
made is not sufficient to satisfy the claim for which
seizure is made, the Tax Authority may, thereafter
and as may be necessary, Qroceed to seize oth~r property, liable to seizure, of the person agamst
whom the claim exists until the amount due, together
with all expenses, is fully paid.
4) Seizure may be made under Sub-Article (1) ofthis
Article on employee’s remuneration or other
property of any person with respect or any unpaid
tax only after the Tax Authority has notified such
person in writing of its intention to make such
seizure. The notice shall be delivered not less than
thirty (30) days before the day of the seizure.

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?;. Federal Negarit Gazeta
– No. 34 4′” July. 2002-Page 1895
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1:, 5) If the Tax Authority makes a finding that the
collection of the tax is in jeop~dy! a demand forimmediate payment of such tax may be made by the
Tax Authority and, on failure or refusal to pay the tax, collection thereof by seizure shall be lawful
without regard to the 3D-days period p~ovided in
Sub-Article (1) and the days provided in sub-Article
6) The effect of a seizure on employee remuneration
payable to a taxpayer shall be continuous from the
date such seizure is first made until the liability out ofwhich such seizure arose is satisfied or becomes
unenforceable by reason of lapse of time.
7) The following shall be exempt from seizure:
(a) such amount of employee remineration or other
periodic income payable to an individual asdoes not exceed the exempt amount according
to Schedule A; and
(b) all other income and property that are not liable
to attachment or lien under Ethiopian law.
78. Enforcement of Seizure
1. Any person in possession of (or obligated with respect to) property subject to seizure on which a
seizure has been made shall, unless such property is,
at the time of such demand, subject to an attachment
or execution under any judicial process or is encum-
bered by law with the preferred right of other
creditors as stipulated under Article 30, on the
demand of the Tax authority surrender such property (or discharge such obligation)
2. Any person who fails or refuses to surrender any property subject to seizure, on demand of the Tax
Authority, shall be personally liable to the govern-
ment in a sum equal to the value of the property notso surrendered, but not exceeding the amount of
taxes for the collection of which seizure has been
made (together with costs and interest on such sum).
3. In addition to the personal liability imposed by Sub-
Article (2), if the failure or refusal to surrender iswithout reasonable cause, such person shall be liable
for an additional charge equal to fifty percent (50%) of the amount recoverable under Sub-Article (2).
4. Any person in possession of property who surrenders or makes payment in accordance with this Article
shall be discharged from any obligation or liability to
the delinquent taxpayer or to any other person arising
from such surrender or payment.
79. Production of Books
If a seizure has been made or is about to be made on any
property, any person having custody or control of any
books or records containing evidence or statements
relating to the property subject to seizure shall, on
demand of the Tax Authority, exhibit such books or
records to the Tax Authority.
80. Preferential claim to Assets
1. From the date on which tax becomes due and payable
under this Proclamation, subject to the prior secured
claims of creditors, the Authority has a preferential
claim over all other claims upon the assets of the
person liable to pay the tax until the tax is paid.

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CD-.f'(I)o). f,oPt~t1S Federal Negarit Gazeta
– No. 34 41hJuly,2002-Page 1896
2) Where a person is in default of paying tax, the Authority may, by notice in writing, inform that
person of the Authority’s intention to apply to the
Registering Authority to register a security interest in any asset situated in Ethiopia which is owned by that
person, to cover any unpaid tax in default, together
with any expense incurred in recovery proceedings.
3) It the person on whom a notice has been served
under Sub-Article (2) fails to pay the amount
specified in the notice within 30 days after the date
of service of the notice, the Authority may, by
notice in writing, direct the Registering Authority
that the asset, to the extent of the defaulter’s interest
therein, shall be the subject of security for the total
amount of unpaid tax.
4) Where the Authority has served a notice on the
Registering Authority under Sub-Article (3), the
Registering Authority shall, without fee, register
the notice of security as if the notice were an
instrument of mortgage over or charge on such
asset, as the case may be, and such registration shall,
SUbject to any prior mortgage or charge, operate
while it subsists in all respects as a legal mortgage
over or charge on the land or building to secure the
amount due.
8!. Jeopardy Assessment
In exceptional cases where the Tax Authority has
reasonable grounds to believe that the collection of tax is in jeopardy, and where a state of urgency exists, the
Tax Authority may issue an administrative order to the
Bank with a statement of justification supplementing its
order to block the accounts of the taxpayer and secure
information thereon, and may make an immediate
assessment of tax for the current period; provided,
however; that the Tax Authority shall obtain court
authorization within ten (10) days from the date of
issuance of its administrative order and further that such
powers may only be used to elucidate information
relevant to the assessme~t.
82. Priority ofclaim on Tax. Withheld
1) Tax withheld by a withholding agent under this
Proclamation:(a) is held by the withholding agent in trust for the
Tax Authoritv:
(b) is not subject to attachment in respect of a debt or
liability of the withholding agent; and
(c) in the event of liquidation or bankruptcyuf the
withholding agent, does not form part of the
estate in liquidation, assignment, or bankruptcy
and the Tax Authority has a first claim before
any distribution of property is made.
2) An amount that a withholding agent is required
under this Proclamation to withhold from a
payment is:
(a) a first charge on that payment; and
(b) withheld prior to any other deduction which
the withholding agent may be required to make
by virtue of an order of any court or any other
Taxpayer Safeguards
Any property seized under this Section shall be seized,
held. and accounted for onlv bythe Tax Authority. No
other agency of the government may require the property
seized under thfs section to be transferred or given over
to it for any cause whatsoever. If any property seized
under this Section is sold, any portion of the proceeds in
excess of the taxpayer’s liabilities under this section
shall be returned promptly to the owner of the property.

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I,I.ChO “”f Federal Negarit, Gazeta – No. 34
4thJuly, 2002-Page 1897
Rewar-ds and Administrative Penalties
84. Reward for Verifiable Information
1) ,
Where a person provides a verifi’able and objective
infoqnation of tAXevasion through concealment,
, under reporting, fraud or any other improper
means, the infonner shall be granted upto twenty
percent (20) of the amount of tax evaded at the time
of collection of the said tax.
2) The infonner shall notbe entitled to such a reward
(a) he/she has participated in the tax evasion; or
(b) where such reporting is part of hislher em-
ployment duty.
3) Details shall be provided by the directives of
the Tax Authority
85. Reward for Outstanding Perl’onnance
1) The Tax Authority shall reward tax payers and tax
officers for outstanding perfonnance and dis-
charge of duties.
2) ,
Details shall be provided by the directives of the
Minister of Revenue.
~6. Penalty for Late Filing or Non-Filing
A taxpayer who fails to file a timely tax declaration is
liable for a penalty equal to: (a) 1,000 Birr for the first thirty (30) days (or part
thereof) the declaration remains unfiled);
(b) 2,000 Birr for the next thirty (30) days (or part
therepf) the declaration remains unfiled);
(c) 1,500 Birr for each thirty (30) days (or part
thereof)thereafter that the declaration remains un-
87. Penalty for Undcrstlltement ofTax
1) If the amount of tax shown on a declaration understates the amount of tax required to be shown,the taxpayer is liable for a penalty in
the amount of 10% (ten per cent) of the
understatement or 50% (fifty per cent) if the understatement is considered substaintial in accor-
dance with Sub-Article (2) of this Article).
2) The understatement is considered substantial if it exceeds the smaller of the fonowing two amounts:
(a) twenty-five percent (25%) of tbe tax required
to ~ shown on the return; or
(b) 20,000 Bin”.
3) The penalty shall continue to apply until, the Appeal Commission or a Court, as the case may be,
shall have rendered its final decision.
88. Penalty for Late Payment
A taxpayer who fails to pay tax liability on the due date
is subject to: (a) a penalty of 5% (five percent) of the amount of
unpaid taxon the first day after the due date has
passed: and f
(b) an additional 2 % (two percent) of the amount 0
the tax that remains unpaid on the first day of
each month thereafter.
89. Penalty for Failure to Keep Proper Records
1) The taxpayer shaH be liable for a penalty of 20% of
the tax assessed if he failed to keep proper books of
account, records, and other doc1.unmts ~gmdm.g a
certain tax year.
2) If the Tax Authority finds that a tnpayer has failed
for two consecutive tax years, to keep proper books
of account, records, and other documents:

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:11;’ 93.
Exoneration of Taxpayer from Liability
In the event that errors that led to incorrect deter-
mination and execution of tax obligations are corrected
independently before commencemC(nt of a tax ex-
amination, the taxpayer shall be released from liability, with the exception of paying the tax and interest.
Criminal Offences
94. Procedure in Tax Offence Cases
A tax offence is a violation of the criminal law of
Ethiopia and shall be charged, prosecuted, and appealed in accordance with the Ethiopian criminal procedure
95. TIN Violations
If a person subject to tax is convicted of obtaining more
than one TIN, that person shall be liable to pay a fine of
not less than 20,000 Birr and not more than 50,000 Birr
and to imprisonment of five (5) years per additional TIN
ohtained. Tax Evasion
A taxpayer who evades the declaration or payment of
tax commits an offense and, in addition to the penalty
for the understatement of income referred to in Article 86, may be prosecuted and, on conviction, be subject to
imprisonment for a term of not less than five (5) years.
97. Making False or Misleading Statements
1) A tax payer who:
(a) makes a statement, to an officer of the Tax
Authority, that is false or misleading in a
material particular; or
(b) omits from a statement made to an officer of
the Tax Authority any matter or thing without
which the statement is misleading in a material
commits an offence and is liable on conviction.
2) Where the statement or omission is made without
reasonable excuse,
(a) and if the inaccuracy of the statement undetec-
ted may result in the underpayment of tax by anamount not exceeding 1,000 Birr, the tax payer
shall be liable to a fine of not less than 10,000
Birr and not more than 20,000 Birr, and
imprisonment for a term of not less than one (1)
year and not more than three (3) years, and
(b) if the underpayment of tax is in an amount
exceeding Birr 1,000, he shall be liable to a
fine of not less than twenty thousand Birr and
not more than 100,000 Birr and imprisonment
for a term of not less than three (3) years and
not more than five (5) years.
3) Where the statement or omission is made knowin-
Illv or recklessly, .
(a) and if the inaccuracy of the statement undetected
may result in an underpayment of tax by anamount not exceeding 1,000 Birr, to a fineo f
not less than 50,000 Birr and not more than 100,000 Birr, or imprisonment for a term of not
less than five (5) years and not more than ten (10) years; and
(b) if the underpayment ottax is in an amount
exceeding Birr 1,000, to a fine of not less than
75,000 Birr and not more than 200,000 Birr, or
imprisonment for a term of not less than ten (10)
years and notmore than fifteen (15) years.

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lill’ 98.
Obstruction of Tax Administration
1) A person who,
(a) obstructs or attempts to obstruct an officer of
the Tax Authority in the performance of
duties under this Proclamation, or
(b) otherwise impedes or attempts to impede the
administration of the Proclamation,
commits an offence and is liable on conviction to a
fine of not less than 10,000 Birr and not more than 100,000 Birr, and imprisonment for a term of two
(2) years.
2) The following and similar other actions are con-
sidered to constitute obstruction:(a) refusal to satisfy a request of the Tax
Authority for inspection of documents,
reports, or other information related to a
taxpayer’s income-producing activities;
(b) non-compliance with a Tax Authority request
to report for an interview;
(c) interference with a tax officer’s right to enter
the taxpayer’s business premises.
99. Offences by Tax Authority Employee
Any person employed for carrying out the provisions
of this Proclamaton who: (a) directly or indirectly, asks for or receives in
connection with any of the officer’s duties, a
payment or reward, whether pecuniary or
otherwise, or promise or security for thatpayment or reward, not being a payment or
reward to ~ch the officer is lawfully entitled to receive, or
(b) enters into or acquiesces in an agreement to do or
to abstain from doing permit, conceal, or con-
nive at any act or thing whereby the tax revenue
is or may be defrauded, or which is contrary to
the provisions of this Proclamation or to the
proper execution of the officer’s duty;
(c) exeeds the authority conferred upon the Tax
Authority or misuses such authority;
commits an offence and is liable, on conviction, to a
fine of not more than 50,000 Birr and to imprisonment
for a term of not less than ten (10) years and not more
than twenty (20) years.
100. Unauthorized Tax Collection
Any person who is not authorized to collect tax under
this Proclamation collects or attempts to collect tax (or
an amount the person describes as tax) commitsan
offence and is liable, on conviction, to a fine of not less
than 50,000 Birr and to imprisonment for a term of not
less than five (5) years and not more than ten (10)
101. Aiding or Abetting
A person who aids, abets, incites,or conspires with
another personto commit a violation againstthis
Proclamation also commits an offence under this
proclamation and shall be subject to prosecution, and
shall on conviction be liable to a fme and imprisonment
not in excess of the amount of fme or period of
imprisonment provided for the offence aided or a betted.
102. Offences by Entities
1) Subject to the provisions of Sub-Article (3) of this
Article, where an entity commits an offence, the
manager of that entity at the time of the Commission of
the offence is treated as havingcommitted the same
offence and is liable to a fme and imprisonment under
this Proclamation.

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"f M1.of:;t" "111 (, 1"7.-1: fhC1.-I:;r ~il)(, 1Dt-f: ~111:" O"l-oC flfP'AffJ'1- ;}Ik ~:Plro.'1T h11.~"lI111'1-1: 0"0.9'1- DI/.~it:"C CDf.1jO ~"'fI-oI1flD- ftJAA 11fP'AffJ1 f.l'1fDflft- II lif~" 1"'1.. -f:lD- itf"' 1.lD- P'AffJ1Cj "'''lflC Ii" 1Dt i;lD- .,. m (, '1-1: f..,-o C ~ il1 0.ID- 11 fP'A ffJ1 Iffjf U) O..,-oC h4-r-"f oo.,.~h 1- 'lit f CDfY:.,.(, h1-1.I..., CDf.1jO f"l-oC"l~;r h1-"li"liA fDt.,.Co- "'IooAh;J=9'"f1 foooocoocCj lD-"'t). f ooltm Tf f) h"'l.o-T ~o.-f:;r9'"f ;1C ..,,1-'1:" !ITID-1 "'ICj:flD-1jO f K",h.C;: DfI ltl.~9'"f CDf.1jO ool.)f,,"f 00 0 0 a: Federal Negarit Gazeta - No. 34 4thJuly, 2002-Page 1901 2) Subject to the provisions of Sub-Article (3) of this Article, where an entity commits an offence by failing to pay an amount of tax, including an amounttreated by this Proclamation as though it were tax, every person who is the manager of that entity at that time, or was a manager within six (6) months prior tothe date of commission shall jointly and severally, be liable with that entity and that other person to the TaxAuthority for the amount. 3) Sub-Articles (1) and (2) do not apply where: (a) the offence is committed without such per- son's knowledge or consent; and (b) such person has exercised the degree of care, diligence and skill that a reasonably prudent person would have exercised in comparable circumstances to prevent the commission ofthe offence. 4) Any person who refuses to supply goods or render services to a withholding agent, by reason of himwithholding an amount of tax from the payment to that person, shall personally be liable to a fine of not less than Birr 5,000 and not exceeding Birr 10,000 and to imprisonment for a term of not less than one year and not more than two years. 5) In Sub-Articles (1) and (2), "manager" means, (a) in the case of a partnership, a partner or manager of the partnership or a person pur- porting to act in either of those capacities; (b) in the case of a body, a director, manager, or officer of the company or a person purporting to act in any of those capacities; and (c) in the case of an association of persons, a manager or a person purporting to act in that capacity. 103. Publication ofNames 1) The Authority shall from time to time publish by notice in daily Gazettes a list of persons who have been convicted of offences under Articles 93 to 101. 2) Every list published in terms of Sub-Article (1) shall specify: (a) the name and address, of the enterprise or of the person; (b) such particulars of the offence as the Authority may think fit: (c) the tax period or tax periods in which the offence occurred; (d) the amount or estimated amount of the tax evaded;and (e) the amount, if any, of the additional tax imposed. SECTION X Appeal Procedure 104. Review Committee Members of the Review Committee shall be appointed by the Minister of Revenue or the competent authorityof the regional government, as appropriate, upon the recommendation of the head of the Tax Authority. 105. Powers And Duties ofReview Committee 1) The Review Committee shall be accountable to the head of the Tax Authority and shall have the following duties: (a) to examine and decide on all applications submitted by tax payers for compromise of penalty, interest, and waiver of tax liability; (b) to gather any written evidence or information relevant to the matter submitted; 005A005A005A001100440045005C00560056004C0051004C0044004F0044005A0011004600520050 -1'~-1iW:~fC i:i:i;;;-;;32:F;JILflJ' 'h'T'C c!i!1 M. ~%.,..} Iiltl!! 'H'''. FederaJ Negarit Gazeta - No. 34 4tl' July, 2002-Page 1902 dt) (}9"cout- ~f.. f0lf.17'ro-'} 1-P,f..(}OIf.outh,} t.1 y.: roo’}
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t..c;..,. ~~k””” f f..,?f)~ f)f.. f..IfCjA:: (c) to summon any person, who directly or
indirectly has dealt with the assessment, to
appear before it for questioning him about the
case under its investigation; and
(d) to review determination made by the Tax
Authority for accuracy, completeness, and
compliance with this Proclamation.
2) The !=ommittee shall only review applications
submitted to it within 10 days of receipt of tax
assessment notification.
3) The Head of the Tax Authority may approve the
recommendations or remand the case, with his
observations, to the committee for further review,
106. Waiver of Penalty
The Review Committee may waive administrati’e
penalties in accordance with the directives issued by
the Minister of Revenue.
Right of Appeal against Assessment of Income
1) Any taxpayer who objects to an assessement may
appeal to the Tax Appeal Commission (hereinafter
referred to as the “Appeal Commission”) upon the
fulfillment of the requirements hereunder.
2) No appeal shall be accepted by the Appeal
Commission, unless:
(a) a deposit of th~y-five percent (50%) of the
desputed amount is made t6 the Tax
Authority; and
(b) the appeal is lodged with the Appeal Com-
mission within thirty (30) days following the
day of receipt of the Assessment Notice or
from the date of decision of the Review
108. Date of Lodging Appeal
The date on which an appeal is submitted shall be the
date of: (a) its registration by the archives of the Appeal
Commission if it is delivered other than by
registered mail; or
(b) registration by the post office if sent by regis-
tered mail.
109. Contents of Memorandum of Appeal
1) The memorandum of appeal shall be sumbitted in
diplicate and shall include:
(a) a statement of the specific subject matter of
the appeal and the reason for the appeal:
(b) the taxpayer’s name, address, and TIN,
(c) as attachements, any relevant supporting
documents and a photocopy of the receipt for
the appeal deposit.
2) Where anyone of the first three conditions under
Sub-Article (1) is missing, the Appeal Committee
shall require the aDDellant to correct the de- ficiency within five (5) days, failing of:
w~ich the appeal shall be rejected.
110. Service of Documents
1) Prior to the first hearing of any appeal:
(a) a copy of the memorandum of appeal shall be
served on the Tax Authority by the Appeal
Commission; and
(b) the Tax Authority shall submit its reply to the
Appeal COmmission while at the same timegiving a copy thereof to the appeallant.
2) The appellant shall have the burden of proof with
a view of establishing his or its claim.

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July, 2002-Page 1903
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,..,-nC ,e…,q~ ,.q’.:: 111.
Decision of Appeal Commission
1) After reviewing the case, the Ap~al Commission
shall issue a written decision setting out the TIN of
the appellant and the date of decision, the names
of the panel members and the panel’s chair
person, and a statement of the decision.
2) The statement of the Commissions decision shall
(a) the holding (whether the appellant’s claim is
justified and accepted partly or wholly,whether the claim is remanded with instruc-
tions to the Tax Authority; and the amount the
appellant is required to pay, if any, and other
necessary detailes of appeallant’s liabilities);
(b) the factual findings, citation to the aplicable
law, legal interpretation, a conclusion on each
relevant issue presented; and any dissenting
(c) a summary ofthe appellant’s appeal rights.
3) The decision shall be signed by the panel mem- bers present, and the Seal of the Appeal Commis-sion shall be affixed thereon.
4) The Appeal Commission(;may decide ,ex-parte
(a) any appellant fails to give counter reply when
neccssary, or to appear before it on two
occasions, after lodging appeal;or
(b) the Tax Authority, after receiving the
memorandum of appeal, fails to give reply or
to appear before it on two occasions.
112. Appeal from Decision of Appeal Commission 1) Any party dissatisfied with the decision of the
Appeal Commission may appeal to the competent
court of appeal on the ground that it is erroneous
on any matter of law within 30 days from the date
of receipt of the written decision of the Appeal
2) The court of appeal shall hear and determine any
question of lawarising.on appeal and shall, after
reaching its decision tlrereon, return the case to the
J) An appeal to the next court of appeal from the
decision of the lower court of appeal may be made
by either party, within thirty (30) days of the
decision of the lower court of appeal.
4) A taxpayer’s appeal shall not be accepted by the
court unless at the time the appeal is lodged, the
taxpayer has paid the tax liability determined by
the Appeal Commission.
113. Bstablishement of Appeal Commission
1) The following Tax Appeal Commissions shall be
(a) Federal Appeal Commission, at the Federal
(b) Regional Appeal Commission, in each
Regional Government town;
(c) Zonal Appeal Commission, in each Zonal
town; and ,
(d) Woreda Appeal Commission, in each
Woreda Administrative town.

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“‘-., Federal Negarit Gazeta
– No. 344110July, 2002-Page 1904
2) Notwithstanding the provisions of Sub-Article (1), if the Regional Government finds it unneces-
sry to have a separate Appeal Commission at any
of the above mentioned levels, it shall make an
arrangement in such a way that such areas may be
covered by the Appeal Commission established in
the neighboring locality.
3) The Federal Appeal Commission shall be account-
able to the Minister of Justice; City administration,
appeal commissions to the executive organs of city
administration, region, zone, woreda, as the case
may be.
114. Appointment of Members
1) Members of Appeal Commission at every level
shall be appointed from among persons having
good reputation, acceptability, integrity, general
and professional knowledge, and from among
persons who have not committed any offense in
connection with tax and tax administration.
2) The Minister of Justice or executive organs of city
administrations and regions, as the case may be,
shall issue directives setting out the criteria to be
applied in the selection, appointment and com-
position of members of Appeal Commissions.
3) On the basis of said directive members of the
appeal commissions and panels shall be selected
and appointed by the Minister of Justice or the
appropriate city administration, regional, zonal or
woreda executive organ, as the case may be.
4) The Appeal Commission’s President shall be
appointed by appropriate entities listed under
Article 113(3)above.
5) Each Appeal Commission may have more than
one (1) panel. In such cases each panel shall have
five (5) members and s~all elect one (1) members
to serve as Chair person.
6) The person term of office of an Appeal Commis-
sion member shaH be two (2) years. A member
appointed to chair an Appeal Commission or a
panel shall serve in that capacity for two (2) years
or the remaining period of Ithat other member’s
term if he is a substtute.
7) The Chairperson and other members of the
Commission shall be entitled to receive such
attendance fees for sitting on panels as shall be
fixed from time to time by the Minister or the
Executive body of the Region, as appropriate.
115. Powers and Duties of Appeal Commission and of its
1) The Appeal Commission shall have the authority: (a) to confirm, reduce, or annul any assessment
appealed against on the basis of established
factual grounds and the law, and make such
further consequential order thereon as may
seem just and necessary for the final dis-
position of the matter;
(b) to instruct the Tax Authority or the taxpayer
to submit new facts, if any; and
(c) to order the Tax Authority or the taxpayer or
any other person or governmental department
or agency, as the case may be, to produce
supporting evidence relevant to the tax-
payer’s allegation.

1,,” li1tilf61J.t-1 ~;M+ ;JtillJ rfr’l’C01
fk1M;+’) xun “,…
Federal Negarit Gazeta -No. 34 4th
July. 2002-Page 1905
I’ )J1JS,.IJ. f,f.”‘II)’S fa.””
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foo'{i;J1&11:,:n?,’f 118.TransitionalProvisions
lifI~’ foo'{i;J1&11:’;J1. . .
n. .
..IL jH repealed
~a,,:s. ~ereunder, shall continue to
Ii’ “UhCP~ OPt-‘It,f. O.””aij~tFf>i!T’¥i~l,~:if . .
,~¥t?all lIabilItIes ~at w:e already due an.d
Ift’1:f(J)o’j”OoohLI: It,f.~~’i~~.’I’~t~.~ .~
.’~yabI9i ~pon the cormng. Into force ~fthls
m,f.9″ h07e;:f”,.9″ ””I1i~’i!J;f~..t.~l:~l”,}”: “‘~’~;:;::’-‘;;,;;;:;.t~l..tlOn o~ are accrued.In respect.of Income
fi1h.1i, F &-e; h07’i”:f”,.9″ Ibit=i- F &-?,’f . .
9’ririn fiCle, busIness, profession, vocatIonsor any
f1-,T’ ,0. m,f.9″01rUT ‘1-00″‘0’ 0″”’00 otheractivitytaxablethereunder.
Ah+ OH.UhCP~ f1-?’~ ih1-‘f v-Ir
1-L”””~+ 2) All existing Tax Appeal Commissions shall con-
hlt:f”,.11 tinue to function until such time as new Tax

hCP~ 1:’;J1.?”f OOlPlT’,f.”‘I’1’Sfa.”” Appea)Commissionhas been established in accor-
?-‘1,jP’f “lth.”,,*!tCJDo .(‘llt OhV-~1.”, OF&- dance with the provisions of this Proclamation.
It” IlrT ‘,f.”‘I’1’S fa.”” I’t””‘fl.f’tj’f rN” 119. Repealed and Inapplicable Laws
F&-:f”,., “”~.1-ftoo1.”” 007t}~”,f.+.,.ltlr” 1) The Income Tax Proclamation No. 173 of 1961
lifIu’ ‘1-?’~ “e;
1-L”””~+ f07,
&-:f”” ii”:”1′ and all amendments thereto are hereby repealed.
Ii’ h07’i”:f”,.9′”‘o. “‘I1IC ltft07lhLI:flDlfJ”,. 2) Payment of Tax on Gains from Capital
h”‘~ ~.,.C
lifttr/Ijf2r h~07?’?’I?’=t: . Proclamation No. 108/1994 is hereby repealed.
I’ ht}1::1’A CP;J61:1T .,.:,.9″
It,.”‘I{lC ft07lhLI: 3) Federal Tax Appeal Tribunal Establishement
flDlfJ”” hCP~ ~.,.C n~/Iufn’ Proclamation No. 23312001.
r’ f~1.&-1: f”‘111C
,f.”‘It)’Sfa.”” “1-‘1” ft07!t!t9″ 4) All laws which are inconsistent with this
flDlfJ”” Ijf1rhCP~ ~.,.C
fleDr Iiinr’ Proclamation shall not apply on matters covered
OH.U h”‘~ 1-1ilCPI:::
under this Proclamation.
!!. hH.u “”.~;JC f~l~ 07’i”:f”,.9″ A.h-‘f
ih1-‘f OIf.UhCP~ “,.h.,. O+'{iL~ “JoJSf”fIt~120.
1-L’.”” ~Th~tj &-:f””,-:: This ProclamatIon shall come Into force as of the 4
“.0″,” f ~. day of July 2002, and shall apply to all incom.e.,paid,
Jl anT “”‘°’10-,- +, received or earned from Hamle 1/1994 E.C. onward.
f.U hCP~hfa~n +, IUn!!,.9′” 1:9′”C’fO’i”000””) .
‘h’) f..h. :”f’k f
“~lfJroC hm9′” A.Ii+, Iii f1!! ,.,-
Done at Addis Ababa. this 4thday ofJuty, 2002.
1.,.t: n.”” 1’S10. It,.1- L ,.”” ~ Thft”,.11
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n +, Ijn!! “9”
‘1CO? 1D1:1.1.f’c11i
fh.Tf’kl ~1.&-It’£”l’PtJ&-fI.1’£ &T{I,,-h
T&.IlJS’T 2) An Appeal Commission’s Chairperson shall:
(a) make preliminary examination of
memoranda of appeal;
(b) prepare the agenda for the panel;
(c) preside over and guide the proceedings;
(d) ensure that the arguments are properly recor-
ded in the minutes and that the decision
conforms to the prescribed form; and
(e) submit an annual report about the aCCOm-
plishment (performance) of the commission
he presides over.
116. Burden ofProof
The burden of proving that an assessment is excessive
or that a decision of the Authority is wrong lies on the person objecting to the assessment or decision.
117. Power to Issue Regulations and Directives
1) The Council of Ministers shall issue regulations
for the proper implementation of this
2) The Minister of Finance and Economic DeveJop-
ment shall issue directives for thecarrying out of
any power delegated to him under this