VAT Exemptions Revised in Ethiopia by the Ministry of Finance

A new directive has been issued by the Ministry of Finance, giving a new direction on the treatment of items exempt from Value Added Tax (“VAT”). With the intent to relieve certain economic stress observed in society, the Ministry of Finance (“MoF”) has revisited the exemptions of items from VAT.

The Directive issued by the MoF identifies the continuation of items exempt from VAT application as addressed by Value Added Tax Proclamation No. 285/2002 and Value Added Tax Regulation No. 79/2002. The Directive further includes decisions made by the MoF in relation to goods and services exempt under international agreements to which Ethiopia is a signatory, as well as arrangements for the payment of VAT to continue in full force.

This being considered, all other items deemed exempt from VAT application under different legislation or decisions of the MoF will hereinafter be subject to VAT once the directive is issued on the website of the Ministry of Justice and the Ministry of Finance.

Considering the items listed as being exempt from VAT, a handful of noticeable products are found under the categories of cereals and pulses, agricultural inputs, cooked or prepared foods or drinks, capital goods provided by capital lease agreement, anti-malarial mosquito net, condoms, and chemicals for water treatment.

This seems to hold a positive incentive for capital goods provision through operating lease of equipment, machineries, and vehicles. Industrialization goals may be sought considering investment laws allow foreign involvement in the activity in this sector through the leasing of industry-specific heavy equipment, machineries and specialized vehicles. Advancements in mechanization may be targeted for a better output on infrastructure and production.

Disclaimer: The views and opinions expressed do not reflect the official policy or position of DABLO. The writing is not intended to be, and should not be used as, a substitute for taking legal advice in any specific situation.

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