Value Added Tax is a relatively new addition to the tax regime in Ethiopia; it was introduced in 2002. On this page, you can find the rate of VAT in Ethiopia, voluntary and Obligatory registration of VAT in Ethiopia, and the obligation of VAT registered taxpayers. 

Here are the highlights of the Value Added Tax Proclamation.

Imposition and Rate of Tax

VAT is levied at a rate of 15% on taxable supplies made by registered persons, taxable imports, and reverse-charged supplies. However, certain supplies are zero-rated.

The VAT payable is calculated by applying the specified rate to the value of the supply or import. The liability for VAT arises at the time of supply or import and must be accounted for to the Tax Authority. VAT payable by a registered person can be recovered from the recipient of the supply, with some exceptions.

Zero Rate and Exemption of VAT

Supplies listed in Schedule 1 of the Proclamation are zero-rated, while those in Schedule 2 are exempt. Zero-rated supplies are subject to a 0% VAT rate, whereas exempt supplies are not subject to VAT. A supply that qualifies as both zero-rated and exempt will be treated only as zero-rated.

TOP

VAT Registration

Obligatory Registration

The VAT Proclamation requires individuals to register if their taxable supplies exceed Birr 2,000,000 in a 12-month period, with certain exemptions such as the sale of capital goods.

Voluntary Registration

Voluntary registration is available for those with annual taxable supplies exceeding Birr. The Tax Authority mandates registration for those meeting these criteria, provided they adhere to proper record-keeping and other tax obligations.

Obligation of Registered Persons

Registered persons must prominently display their VAT certificate at all business locations and include registration details on digital platforms. Additionally, they are required to inform the Tax Authority of any significant business changes within 30 days, ensuring proper VAT administration and compliance.

Filing a VAT Return and Payment of VAT

Registered persons must file a VAT return for each accounting period by the last day of the month following the period's end, regardless of whether they owe VAT. Unregistered large persons or government entities receiving reverse charged supplies must also file a return for the month by the same deadline. VAT payments for registered persons are due with the return submission. Similarly, VAT due from unregistered large persons or government entities for reverse charged supplies must be paid by the return filing deadline. For taxable imports, VAT is due at the time of import.

TOP