Tag: Ethiopian tax law

Mizan Law Review Vol 5, No 2 (2011)

Mizan Law Review publishes peer reviewed scholarly articles that identify, examine, explore and analyze legal and related principles, stipulations and concepts based on research findings. Mizan’s articles aim at interpretation, description, exploration and diagnosis towards the solution of problems (or legal issues) including proactive critique and projection that assist the development of laws.(Source African Journals on-line   http://www.ajol.info)

BETWEEN ‘LAND GRABS AND AGRICULTURAL INVESTMENT: LAND RENT CONTRACTS WITH FOREIGN INVESTORS AND ETHIOPIAS NORMATIVE SETTING IN FOCUS

Elias N. Stebek

Abstract

This article examines whether the land rent contracts and the Ethiopian legal framework on rural land use rights can assure win-win mutual benefits expected from large-scale land transfers to foreign investors. The article further examines the challenges in the realization of the Seven Principles for Responsible Agricultural Investments prepared by FAO, IFAD, UNCTAD and the World Bank Group as a framework of standards for the current global dialogue on large-scale farmland acquisitions. I argue that land-use insecurity in the Ethiopian context results from the extensive powers of executive offices that are empowered to dispossess holders and reallocate land to investors. These powers can be even more discretionary where land transfers are made without prior mapping and demarcation of protected forests and wildlife, and where registration and the issuance of land-holding certificates to smallholder farmers and pastoralists have not yet been made. The article suggests the need to rectify the gaps in the land transfer contracts and most importantly, the need to render the government a custodian (and not owner) of land in conformity with the FDRE Constitution and to ensure that the termination of land use rights is decided by courts so that executive offices would not perform the dual functions of revoking and reallocating rural land use rights.

Download Full TEXT

THE POLITICS UNDERPINNING THE NONREALISATION OF THE RIGHT TO DEVELOPMENT

Belachew Mekuria Fikre

Abstract

The right to development stands out as one of the controversial rights ever since its articulation in the 1970s. The adoption of the 1986 United Nations Declaration on the Right to Development underlines the importance of international cooperation for it to be realised. I argue that the emphasis on ‘development aid’ rather than the broader ‘development cooperation’ has contributed a great deal to the politicisation of the right and consequently undermined its materialisation. Indeed, there is the need for semantic and conceptual clarity in the use of the term ‘international assistance and cooperation’ that has deceptively supplanted ‘international cooperation.’ While the former is a term used under Article 2(1) of the International Covenant on Economic, Social and Cultural Rights with a view to laying down the broader States Parties’ obligations, the latter is what the Declaration on the Right to Development exclusively employs. I argue that even if development assistance is indispensable, taking it as the sole approach to the realisation of the right to development is both wrong and unhelpful.

Download Full TEXT

ETHIOPIAN LAW OF INTERNATIONAL CARRIAGE BY AIR: AN OVERVIEW

Hailegabriel G. Feyissa

Abstract

Ethiopia’s aviation history goes back to the late 1920s. And, carriage of goods and passengers by air dates at least as far back as the 1940s – the decade which witnessed the establishment of Ethiopian Air Lines Corporation (now Ethiopian Airlines). Despite Ethiopia’s relative success in commercial aviation, domestic literature on commercial air law has been scanty. Court decisions involving air carriage are rare, and one can seldom find a course on air law in the curricula of Ethiopian law schools. This article is an attempt to briefly address the gap in literature and encourage further academic discourse on Ethiopian law of air carriage with particular attention to the law and practice regarding international carriage by air.

Download Full TEXT

TO TAX OR NOT TO TAX: IS THAT REALLY THE QUESTION?  VAT, BANK FORECLOSURE SALES, AND THE SCOPE OF EXEMPTIONS FOR FINANCIAL SERVICES IN ETHIOPIA

Taddese Lencho

Abstract

The Ethiopian Value Added Tax of 2002 follows the standard approach of exempting financial services from VAT. Not all ‘financial services’ are, however, exempted from VAT. A number of services provided by the financial institutions are made taxable by the VAT laws of Ethiopia. No subject in this regard has probably attracted as much attention and controversy as that of sale by foreclosure of property held as security by banks. Both sides (i.e., members of the financial industry and the tax authorities) seemed locked in their conviction over the treatment of foreclosure sales in VAT. Members of the financial industry (in particular banks) are convinced that foreclosure sales enjoy the privilege of exemption in VAT while some within the Tax Authorities are equally convinced that foreclosure sales should be chargeable with VAT. These controversies have played out in the courtrooms, the press and a number of communications between the Tax Authorities and the members of the financial industry. This article examines these controversies and analyzes the scope of exemptions for financial institutions under Ethiopian VAT laws.

Download Full TEXT

Amhara Regional State VALUE ADDED TAX(VAT) PROCLAMATION NO. 285/2002

VALUE ADDED TAX(VAT) PROCLAMATION NO. 285/2002

via ANRS Revenue Autrhority.

ANRS Revenue Autrhority

VALUE ADDED TAX(VAT) PROCLAMATION NO. 285/2002

WHEREAS, the current sales tax does not allow collection of the tax on the added value created wherever a sales transaction

WHEREAS, the value added tax minimizes the damage that may be caused by attempts to avoid and evade the tax and helps to ascertain the profit obtained by the taxpayers;

WHEREAS, the tax enhance saving and investment as it is a consumption tax and does not tax capital;

WHEREAS, replacement of the current sales tax by value added tax enhances economic growth and improves the ratio relationship between Gross Domestic Product and Government Revenue;

NOW, THEREFORE, in accordance with Article 55(1) and (11) of the Constitution, it is hereby proclaimed as follows:

SECTION ONE

General
  1. Short Title
    This proclamation may be cited as the “Value Added Tax Proclamation No.285/2002.”
  2. Definitions
    For the purpose of this Proclamation, unless the context otherwise requires:

    1. ” accounting period” means a calendar month. The month of Nahase and Pagumen shall be aggregated and treated as one calendar month;
    2. “Agent” means any person who acts on behalf of and on instruction from another person;
    3. “Association of persons” means an association of individuals or an association that includes one or more members who are not individuals, but not including any association falling within the definition of “body”;
    4. “Authority” means the Federal Inland Revenue Authority;
    5. “Body” means any company, registered partnership, entity formed under foreign law resembling a company or registered partnership, or any public enterprise or public financial agency that carries out business activities including body of persons corporate or unincorporated whether created or recognized under a law in force in Ethiopia or elsewhere, and any foreign body’s business agent doing business in Ethiopia behalf of the principal:
    6. “Export” means taking goods out of Ethiopia;
    7. “goods” means all kinds of corporeal movable or immovable property, thermal or electrical energy, heat, gas, refrigeration, air conditioning, and water, but does not include money;
    8. “Money” means:
      1. a coin or note that is legal tender in Ethiopia; or
      2. a bill of exchange, bank draft, promissory note, postal order, or money order; or
      3. a stamp, from or card that has a monetary value and is sold or issued by the Government for the payment of any fiscal charge leveled under any law except where the coin, note, stamp, from, or card is disposed of as a collector’s piece, an investment article, or an item of numismatic interest;
    9. “Import of Goods” means bringing goods into Ethiopia according to the customs legislation;
    10. “Permanent Establishment” means a fixed place of taxable activities through which those activities of a person are wholly or partly carried on. The following shall, in particular, be considered to be a permanent establishment, an administrative office, branch, factory, workshop, mine quarry or any other place for the exploitation of natural resources, and a building site or place where construction and/or assembly works are carried out.                                                                             READ MORE

THE LAW OF CORPORATE TAXATION IN ETHIOPIA

THE LAW OF CORPORATE TAXATION IN ETHIOPIA

BERHANE G/MARIAM

ADVISOR: PROFESSOR TILAHUN TESHOME
SUBMITTED TO:
THE SCHOOL OF GRADUATE STUDIES IN PARTIAL FULFILLMENT OF THE DEGREE OF MASTERS IN BUSINESS LAWS (LL.M) ADDIS ABABA,

JANUARY 15, 2010
ADDIS ABABA UNIVERSITY SCHOOL OF GRADUATE STUDIES

Abstract
The taxation of business organizations generally falls into two basic models-“Corporate” taxation and “Partnership” taxation. Corporate taxation typically imposes a tax on the income of certain types of business organizations and also taxes the profits distributed to the holders of the
ownership interests. The partnership taxation model, on the other hand, taxes the income derived by the organization directly to the owners whether or not distributed. This Paper assesses the treatment of corporate taxation in the Ethiopian tax law and argues that the corporate tax issues are not properly addressed in a manner that attracts corporate business investment.

PROCLAMATION NO. 99/1998 PROCLAMATION TO PROVIDE FOR THE PAYMENT OF TAX ON COFFEE EXPORTED FROM ETHIOPIA

PROCLAMATION NO. 99/1998

A PROCLAMATION TO PROVIDE FOR THE PAYMENT OF TAX ON COFFEE EXPORTED FROM ETHIOPIA

WHEREAS, consolidating the various taxes and duties levied by different Proclamations and Regulations into a single tax facilities execution;

WHEREAS, converting specific rates into advalorem ensures the equability of the tax;

WHEREAS, it is necessary to lay down procedures to protect revenue against fluctuations due to change in prices and adjust the tax rate following market trend.

NOW THEREFORE, in accordance with Article 55(1) of the Constitution of the Federal Democratic Republic of Ethiopia, it is hereby proclaimed as follows:

 

1. Short Title

This Proclamation may be cited as “Tax on Coffee Exported from Ethiopia Proclamation No. 99/1998.”

2. Definitions

In this Proclamation:

1) “FOB” means selling price of coffee quoted at the port of loading, agreed between the Coffee exporter and his customer and approved by the National Bank of Ethiopia, from which freight and insurance costs are excluded.

2) “Tax” means the tax payable on Coffee exported in accordance with this Proclamation.

 

3. Basis of Computation of Tax

The FOB price of the coffee exported shall be the basis for the computation of the tax.

4. Rate of the Tax

The rate of the Tax shall be 6.5%(six and half per cent) of the FOB price.

 

5. Collection of the Tax

The Tax on Coffee exported shall be computed and collected by the Customs Authority.

 

6. Payment of the Tax

1) The Tax shall be paid at the Customs Station where the Coffee is declared for export.

2) If the Coffee is not exported on the date on which it shall have been exported and in the meantime the Council of Ministers increased the rate of the Tax, the exporter shall pay the difference between the increased rate and the rate that has actually been paid.

 

7. Refund

No refund to Tax once paid will be made.

 

8. Power to Issue Regulations

The Council of Ministers is hereby empowered to issue regulations amending the rate of the Tax specified under Article 4 of this Proclamation following fluctuations in the quantity and price of Coffee exported.

9. Duty to Cooperate

1) Any person or organization has the duty to co-operate with the Customs Authority in the implementation of this Proclamation.

2) The National Bank of Ethiopia has the duty to cooperate with the Customs Authority in the supply of information regarding the sales date of the Coffee, contract number, the name and address of the exporter, the quantity and price of the Coffee.

 

10. Formalities

The provisions concerning customs formalities of export merchandise under the Re-Establishment and Modernization of Customs Authority proclamation No. 60/1997 shall apply to Tax payable in accordance with this Proclamation.

 

11. Repeals

The following laws are hereby repealed:

1) Transaction Tax Proclamation No. 205/1963

2) The third schedule (export duties) attached to the Customs Tariffs Regulation No. 42.1976.

3) Coffee Surtax Regulation No. 280/1964 and all subsequent amendments.

4) Cess on Coffee Exported from Ethiopia Regulations No. 47/1976.

 

12. Transitory Provisions

Customs duty, transaction tax, Surtax and Cess due prior to the coming into force of this Proclamation shall be paid in accordance with the relevant laws then in force.

 

13. Effective Date

This Proclamation shall enter into force as of the 19th day of February, 1998.

Addis Ababa, this 19th day of February, 1998.

NEGASO GIDADA (DR.)

PRESIDENT OF THE FEDERAL DEMOCRATIC

REPUBLIC OF ETHIOPIA

 

PROCLAMATION NO. 110/1998 A PROCLAMATION TO PROVIDE FOR THE PAYMENT OF STAMP DUTY

PROCLAMATION NO. 110/1998

A PROCLAMATION TO PROVIDE FOR THE

PAYMENT OF STAMP DUTY

WHEREAS, it has become necessary to amend the stamp duty levied on documents in a manner which would contribute to the development of art, the activities of financial institutions and the transfer of capital assets;

NOW, THEREFORE, in accordance with Article 55(1) and (11) of the Constitution of the Federal Democratic Republic of Ethiopia, it is hereby proclaimed as follow:

1. Short Title

This Proclamation may be cited as the “Stamp Duty Proclamation No. 110/1998”

2. Definitions

In this Proclamation

1. “Award” means a decision in writing rendered by an arbitrator(s) on a reference made otherwise than by order of court in the course of suit by parties to a compromise, conciliation or arbitral submission or other similar matters;

2. “Bond” includes any instrument, whereby a person obliges himself to pay money to another, on condition that the obligation shall be void, if a specific act is performed or is not performed, as the case may be; or any instrument attested to by a witness and not payable to order or bearer, whereby a person obliges himself to pay money to another;

3. “Collective Agreement” means an agreement relating to conditions of work, concluded in writing between one or more representatives of trade unions and one or more employers or agents or representatives of employers organizations;

4.”Contract of Employment” means an agreement formed where a person agrees, directly or indirectly, to perform, work for a definite or indefinite period or, piece work in return for remuneration;

5. Instrument” means a written document by which any right or obligation is or purports to be created, recorded, transferred, extinguished or by which its scope is limited or extended;

6. “Minister” means the Minister of Finance;

7. “Notarial Act” means an act of attestation and certification performed by person(s) authorized to perform such acts;

8. “Person” means any natural person or any organization irrespective of having juridical personality;

9. “to Execute Instrument” means to draw, issue, to carry into effect or to negotiate an instrument;

10. “Security Deed” means any instrument whereby a borrower or guarantor gives to a lender a charge upon a part or the whole of his property;

11. “Articles of Association” include memorandum of association;

3. Instruments Chargeable with Stamp Duty

The Following instruments shall be chargeable with stamp duty:

1.     memorandum and articles of association of any business organization, cooperative or any other form of association;

2. award;

3. bonds;

4. warehouse bond;

5. contract and agreements and memoranda thereof;

6. security deeds;

7. collective agreement;

8. contract of employment;

9. lease, including sub-lease and transfer of similar rights;

10. notarial acts;

11. power of attorney;

12. documents of title to property.

4. Rates of Stamp Duty

1. The applicable rates of stamp duty for each instrument mentioned under Article 3 shall be those specified in the Schedule attached hereto and constituting an integral part hereof.

2. The rate payable at any subsequent execution of an instrument shall be as specified in the same schedule.

 

5. Mode of Valuation

1) Where the value of the right or obligation executed by means of an instrument can be determined, the rate chargeable on such instrument shall be the percentage of such value as specified in the schedule.

2) Where the value of the right or obligation executed by means of an instrument cannot be determined, the amount chargeable on such an instrument is the fixed amount specified for each such instrument in the schedule.

3) Where an instrument is chargeable with stamp duty in respect of any amount expressed in any currency, other than Birr, such amount shall be computed on the basis of the prevailing rate of exchange.

4) Where an instrument is chargeable with stamp duty on an ad-valorem basis in respect of any stock or of any marketable security, such amount shall be computed on the average value of the stock or security prevailing at the time when the instrument is made.

5) Any instrument comprising or relating to several distinct matters shall be chargeable with the aggregate amount of duties payable in respect of each separate instrument.

6.a) The stamp duty payable on documents transferring title shall be calculated on the value of the property involved as agreed upon between the transfer and the transferee, provided however that such valuation is approved by the Federal Inland Revenue Authority;

b) Where the value agreed between the transfer and the transferee is not acceptable to the Federal Inland Revenue Authority, the value of the property involved in the transfer of title shall, for the purpose of calculating the stamp duty, be determined by a special committee which shall be appointed for such purposes by the Federal Government Revenue Board.

6. Liability

1. Unless otherwise provided herein the beneficiary of an instrument shall be liable to pay the stamp duty thereon.

2. The person making (drawing) or issuing an instrument in Ethiopia shall, upon its exectuion, be liable for the payment of stamp duty provided, however, that when an instrument is made (drawn) or issued outside Ethiopia the person who is first executing it in Ethiopia shall be liable for the payment of stamp duty.

3. Unless otherwise specified in the lease agreement the stamp duty in respect of the lease agreement shall be paid by the lessee.

4. The borrower shall be liable for the payment of stamp duty chargeable on security deeds.

5. The transferee shall, unless otherwise agreed, be liable for the payment of stamp duty chargeable on documents transferring title to property.

6. Parties to a contract or to an agreement are jointly and severally liable for the payment of stamp duty thereon.

7. The employer shall be liable for the payment of stamp duty on contracts of employment.

8. Parties to an award are jointly and severally liable for the payment of stamp duty thereon.

9. The employer and employees are jointly and severally liable for the payment of stamp duty on collective agreement.

 

7. Time and manner of Payment

1. The stamp duty shall be paid:

a) on memorandum and articles of association, before or at the time of registration;

b) on awards, before or at the time of issuance of the award;

c) on contracts or agreements, before or at the time of signature;

d) on leases or sub-leases, before or at the time of signature;

e) on notarial acts, at the time of issuance;

f) on security deeds, before or at the time of signature;

g) on documents of title to property, before or at the time issuance is effected.

2. a) The payment of a stamp duty under Birr fifty(50) shall be effected by affixing stamp of appropriate value to the instrument.

b) When the stamp duty exceeds Birr fifty(50) or where the type and nature of instrument so requires, the Federal Government Revenues Board may by directive provide that stamp duty be paid by means other than affixing stamp.

3.a) Whoever executes or receives an instrument bearing an adhesive stamp shall at the time of execution cancel the same, so that it cannot be used again.

b) Persons required to cancel the adhesive stamp shall cancel it in such manner as will be prescribed by the Federal Inland Revenue Authority.

c) Any instrument bearing an adhesive stamp which has not been canceled as prescribed by the Federal Inland Revenue Authority shall be deemed, so far as such stamp is concerned, to be unstamped. The responsibility arising from the non cancellation of the stamp shall be on the person executing or receving the instrument bearing an adhesive stamp and not on the person submitting the document for execution.

 

8. Power of the Federal Inland Revenue Authority

The Federal Inland Revenue authority is hereby vested with powers to:

1. collect the stamp duty determined under, and implement the provisions of this Proclamation;

2. require persons liable to pay stamp duty to submit for its inspection any registers and books, papers, documents and proceedings necessary for the determination of stamp duty, or where necessary to require the attendance of such persons who shall give the necessary explanation in the course of its inspection of such records;

3. to determine by estimation and collect the stamp duty payable under this Proclamation if the concerned person fails to comply with its requests provided in sub-article 2 of this Article.

 

9. Right to Appeal

Persons dissatisfied with the decision of the Federal Inland Revenue Authority in respect of the amount of stamp Duty may, within 21 days from the date of notification of the decision rendered in writing, make an appeal against the decision to the Federal High Court.

 

10. Effect of nonpayment of Stamp Duty

1. No instrument chargeable with stamp duty shall be admitted in evidence for any purpose by any person having, by law or consent of parties, authority to receive evidence or shall be noted upon or authenticated by any such person or public office, unless such instrument is duly stamped.

2. Sub-article 1 of this Article shall not affect the validity of the instrument when submitted as evidence in any proceedings in a criminal court.

3. Any instrument inadmissible in evidence in accordance with this Proclamation shall be admitted in evidence on payment of two times the amount due which shall not be less than 10 Birr.

4. The application of any penalty pursuant to the foregoing Articles shall not bar the prosecution of any person in accordance with Article 12 of this Proclamation.

 

11. Exemptions

1. The Minister may for good cause grant exemption from payment of stamp duty.

2. Public bodies on which the Federal Government of Ethiopia Financial Administration Proclamation No. 57/1996 applies shall be exempt from payment of stamp duties.

3. Goods imported for sale by traders having import license shall be exempt from payment of stamp duty when first registered in the name of the trader.

4. Documents may be exempted from the payment of stamp duty in accordance with international agreements and conventions approved by the Government.

5. Subject to reciprocity, the Minister may grant embassies, consulates and missions of foreign states exemption from payment of stamp duty.

6. Share Certificates shall be exempt from stamp duty payable on the register of title of property.

 

12. Penalty

1. Any person:

a) executing or signing, otherwise than as a witness, a document chargeable with stamp duty without the same being stamped;

b) who, with intent to defraud the appropriate payment of duty, conceals facts bearning on the true nature of any instrument;

shall be liable on conviction to a fine not less than Birr 25,000 and not exceeding Birr 35,000 and to rigorous imprisonment for a term not less than 10 years and not more than 15 years.

2. Any person:

a) appointed to sell stamps or stamped papers, who disobeys Regulations issued under this Proclamation; or

b) not so appointed, sells or offers for sell stamps or stamped papers;

shall be liable on conviction to a fine not less than Birr 5,000 and not exceeding Birr 20,000 and to rigorous imprisonment for a term not less than five years and not more than 10 years

13. Repeal and Savings

1. The stamp Duty proclamation No. 334/1987 is hereby repealed and replaced by this proclamation.

2. The provisions of the Stamp Duty Regulations No. 221/1959 shall remain in force insofar as they are not in consistent with this Proclamation.

 

 

 

14. Directives

The Federal Government Revenues Board may issue directives for the proper implementation of this proclamation.

15. Effective Date

This Proclamation shall enter into force as of the 12th day of May, 1998.

Done at Addis Ababa, this 12th day of May, 1998.

NEGASO GIDADA(DR.)

PRESIDENT OF THE FEDERAL DEMOCRATIC

REPUBLIC OF ETHIOPIA