The primary legislation for withholding tax in Federal Income Tax Proclamation No. 979/2016 , which was significantly updated by the Income Tax (Amendment) Proclamation No. 1395/2025 Key Proclamation Documents (PDFs) Income Tax (Amendment) Proclamation No. 1395/2025
A new Digital Service Tax (DST) has been introduced, capped at 5%, applying to both residents and non-residents earning income from digital services provided in Ethiopia.
View the full for the original base legislation.
Ethiopia, a country located in the Horn of Africa, has been making significant strides in recent years to modernize its tax system and improve revenue collection. One key aspect of this effort is the withholding tax proclamation, which aims to ensure that taxes are collected from individuals and businesses at the source of income. In this story, we will explore the withholding tax proclamation in Ethiopia, its benefits, and best practices.
: Threshold raised to ETB 10,000 (previously ETB 3,000) per contract. withholding tax proclamation in ethiopia pdf best
To ensure legal compliance, businesses need access to unedited, official versions of the legislation. Top Verified Digital Sources
The 2025 reforms represent a move toward a more "fair and modern" system, forcing businesses to prioritize transparency in their financial reporting to navigate the increased withholding obligations and the new digital tax reality.
The (formerly the Ethiopian Revenues and Customs Authority) is the primary authoritative source. You can visit their official website at www.mor.gov.et , though PDFs are often available through third-party legal portals.
: The most recent update (enacted July 2025) which increased many withholding rates and thresholds. Summary of New Income Tax Changes (Scribd) KPMG Summary of Proclamation 1395/2025 Federal Income Tax Proclamation No. 979/2016 : The foundational law for income and withholding tax. Full Text - English (EthioData) Technical Notes & Guide (Scribd) Current Withholding Tax Rates (2025/2026) The following rates apply under the latest amendment: Domestic Goods and Services : 3% (increased from 2%). Threshold (Goods) : Payments exceeding ETB 20,000 Threshold (Services) : Payments exceeding ETB 10,000 The primary legislation for withholding tax in Federal
Withholding Tax Proclamation — Ethiopia (PDF)
The Ethiopian government has been reforming its tax system to generate better revenue to finance public expenditure. As part of these reforms, there has been a focus on increasing compliance through modernized withholding systems and adjusting tax brackets for individuals (such as the 2026 PAYE reforms).
Keep separate ledger accounts for withheld taxes and archive physical receipts for at least five years to prepare for routine tax audits.
Withholding tax is a type of tax that is deducted from an individual's or business's income by the payer and remitted to the tax authority. In Ethiopia, withholding tax is governed by the Withholding Tax Proclamation No. 608/2008 and the Income Tax Proclamation No. 282/2002. 1395/2025 A new Digital Service Tax (DST) has
By following these recommendations, taxpayers can ensure compliance with the withholding tax proclamation in Ethiopia and avoid penalties.
Key Highlights of the 2026 Tax Reforms (Proclamation 1395/2026)
Once you have downloaded the , use this cheat sheet to find the most important clauses.
Ethiopia's Startup Proclamation offers significant tax benefits for eligible startups, including:
: All federal and regional state organs, public enterprises, and ministries.