Amendments to the Value Added Tax and Excise Tax
Recent VAT changes
Proclamation 1157/2019 made changes to the amount of VAT that must be withheld in certain circumstances. Before the proclamation came into force, when VAT was withheld by the buyer per the previous proclamation, the buyer withheld the full amount of the 15% VAT payable. In return, the buyer provided the seller with a voucher related to the VAT withheld. Now, per Proclamation 1157/2019, a buyer need only withhold half (50%) of the 15% VAT payable from the seller; the buyer provides a voucher for the amount so withheld and the buyer pays the balance of the VAT in cash to the seller.
Proclamation 1157/2019 also made a change to the VAT reporting period. Before the changes, all VAT-registered entities had to file on a monthly basis. Now companies with annual turnover of ETB 70M (about USD 2.035M) or more must file monthly and companies with annual turnover less than ETB 70M must file a VAT return every three months.
Proclamation 1186/2020 made changes to the Excise Tax. Under the previous proclamation, Excise Tax was calculated on the cost of goods sold. Now, per Proclamation 1186/2020, the excisable value of excisable goods manufactured in Ethiopia is the ex-factory selling price of the goods, without including the VAT payable on the supply of the goods, the cost of excise stamps, if any, and the cost of returnable containers.
The excisable value of fees, commissions, and charges payable for services is based on an arm’s length determination, and in any other case it is the fair market value of the services. The value shall not include the VAT, if any is payable on the supply of the services.