Legal Update on the Revised Property Tax Levied by the Addis Ababa City Administration
The land tax, sometimes referred to as the property tax, is regarded by the government as one of the most significant sources of revenue for the government and is used to meet the increasing demand for services and infrastructure delivery in the city. As per the government, the lack of accurate rental and property tax estimation contributes to much lower revenue generated from this sector.
According to the Urban Land Lease and Urban Tax Proclamation No. 80/1968, city residents were required to pay property taxes which were determined by how much the residence might rent for and homeowners are expected to contribute between 1.5 and 4.5 percent of the annual rent they receive. The rental estimates used to calculate this tax have not been reviewed since 1968 until just recently.
The power to collect property tax was more contentious than the debate over whether it was even necessary to do so in the first place. On January 11, 2023, the joint session of the House of Federation and House of Peoples’ Representatives passed a resolution granting the authority to collect property taxes to regional and city administrations.
The Addis Ababa City Administration, in the meanwhile, conducted a study to increase its income from property taxes based on the 1968 Proclamation, while the federal government is still drafting a property tax proclamation. In this study, homes in Addis Ababa were categorized into three levels based on their position status, material composition, and service identities; they also disclosed that they had received a new monthly rental rate.
The Addis Ababa City Administration has made the following decisions to execute tax levying and collection systems as well as to increase the sector’s income while taking into account the capacity of taxpayers, infrastructure needs, and the purchasing power of the current currency.
- Pursuant to Article 6(2) of the Urban Land Lease and Urban Tax Proclamation No. 80/1968, property tax is imposed by the estimated lease of the property. Also, as the study confirmed estimated lease price differs mainly based on the level, material composition, service, and standard of the location.
- According to the above-mentioned provision, in order to estimate the lease, upon the study, the price of 1-meter square monthly rent is specified as follows:
|Standard level of the property||For residential purposes (in birr)||For business purposes (in birr)|
|Wood and mud houses||Condominium||Villa and apartments||Wood and mud houses||Condominium||Villa and Apartments|
|3 and 4||148||161||267||282||398||417|
- In order to ease the burden for taxpayers who haven’t paid the current year’s tax, they will only pay 50% of property tax for residential purposes and 75% for business purposes. But in the next fiscal year for both residential and business purposes the tax-paying system will be undertaken in accordance with the 1968 Proclamation.
Property tax is calculated in the following manner:
Property tax = Area of the house (in meter square) x (monthly lease x 12) x tax rate
For example, if the house is a condominium level 1 which is 54 meter square the tax will be estimated as follows:
Property tax = 54 x (247×12) x tax amount = 7,097.52 birr
- Urban house tax estimation table
|Annual house lease estimation (in birr)||Amount of tax paid (in birr)||Rate||Tax (in birr)|
|Up to 600||600||0.01||6|
|600. – 1,200||600||0.015||9|
|1,201 – 1,800||600||0.02||12|
|1,801 – 2,400||600||0.025||15|
|2,401 – 3,600||1,200||0.03||36|
|3,601 – 4,800||1,200||0.035||42|
|4,801 – 6,000||1,200||0.04||48|
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