Ethiopia Tax Rates 2026: Income Tax, Corporate Tax, VAT & Withholding Tax
Updated: 2 September 2026
Ethiopia substantially revised its federal income tax rules through Income Tax (Amendment) Proclamation No. 1395/2025, which amended Federal Income Tax Proclamation No. 979/2016. Most amendments apply to income derived from 8 July 2025. This page summarises the principal current rates applicable in 2026.
Ethiopia Employment Income Tax Rates
Employers generally withhold employment income tax from salary payments. Under the amended Article 11, the current monthly employment income tax bands are:
| Monthly employment income (ETB) | Tax rate |
|---|---|
| 0 - 2,000 | 0% |
| 2,001 - 4,000 | 15% |
| 4,001 - 7,000 | 20% |
| 7,001 - 10,000 | 25% |
| 10,001 - 14,000 | 30% |
| Over 14,000 | 35% |
Individual Business Income Tax Rates
For individuals other than Category B taxpayers, annual taxable business income is subject to the following progressive rates:
| Annual taxable business income (ETB) | Tax rate |
|---|---|
| 0 - 24,000 | 0% |
| 24,001 - 48,000 | 15% |
| 48,001 - 84,000 | 20% |
| 84,001 - 120,000 | 25% |
| 120,001 - 168,000 | 30% |
| Over 168,000 | 35% |
Category B taxpayers are subject to the special gross-sales-income regime introduced by the amendment and should apply the rules prescribed for that category rather than this progressive net-income table.
Rental Income Tax for Individuals
The amended federal law applies the following annual progressive rental-income rates to individuals:
| Annual taxable rental income (ETB) | Tax rate |
|---|---|
| 0 - 24,000 | 0% |
| 24,001 - 48,000 | 15% |
| 48,001 - 84,000 | 20% |
| 84,001 - 120,000 | 25% |
| 120,001 - 168,000 | 30% |
| Over 168,000 | 35% |
Rental income and business income are separately classified for tax purposes, even though the progressive rates for individuals are presently aligned.
Corporate Income Tax Rate in Ethiopia
The standard business income tax rate applicable to a body is 30%. Resident entities are generally taxed under the federal income-tax framework on taxable business income, subject to applicable exemptions, incentives, sector rules and international-tax provisions.
The 2025 amendment also introduced special treatment for legally registered collective investment funds and limited liability partnerships. These entities can be exempt from corporate-level income tax under the stated conditions, while distributions remain subject to applicable withholding rules.
Withholding and Schedule D Tax Rates
| Income or payment | Current general rate | Notes |
|---|---|---|
| Dividends | 15% | Generally imposed on the gross dividend under the amended law. |
| Interest | 10% | Generally 10% of gross interest, subject to specific rules and treaty relief where applicable. |
| Royalties | 10% | Resident artistic and cultural royalties may qualify for a 5% rate. |
| Non-resident management or technical fees | 15% | General non-resident tax rate under the amended provision, subject to treaty relief. |
| Non-resident insurance premiums | 15% | Applied to the gross amount under the amended non-resident provision. |
| Qualifying domestic payments for goods/services | 3% | Withholding applies to specified transactions above statutory thresholds. |
Value Added Tax (VAT) in Ethiopia
The standard VAT rate is 15%. Ethiopia's VAT framework is now governed principally by Value Added Tax Proclamation No. 1341/2024 and Value Added Tax Regulation No. 570/2025. The framework covers taxable supplies and imports, with exemptions and zero-rating applying where specifically provided by law.
Capital Gains and Investment Assets
Gains on the disposal of specified investment assets are taxed under the federal income-tax schedules. The applicable treatment depends on the type of asset, the taxpayer and whether the gain is connected with a business or permanent establishment. Because the 2025 amendment changed several Schedule D and withholding provisions, taxpayers should verify the current statutory treatment for the particular asset before calculating tax.
Tax Year, Returns and Compliance
Ethiopia's federal tax system distinguishes employment income, rental income, business income and other scheduled income. Employers must operate payroll withholding, while businesses and other taxpayers have filing, record-keeping and payment obligations under the Income Tax Proclamation and the Tax Administration Proclamation.
The 2025 amendment also introduced an alternative minimum tax regime and revised transaction-withholding rules. Most provisions of Income Tax (Amendment) Proclamation No. 1395/2025 apply to income derived from 8 July 2025, while specified Schedule D and transaction-withholding provisions took effect from 7 August 2025.