Background  |  Investment Law   Privatization

Investment Law

The Government encourages foreign investors to invest in a broad range of industries; foreigners are allowed to hold up to 100% equity ownership. Investors are legally protected against the expropriation and nationalization of assets. Ethiopia has ratified the convention establishing the Multilateral Investment Guarantee Agency (MIGA) of the World Bank Group. It has also signed bilateral investment promotion agreements with a number of OECD countries.

The current import duty regime is as follows:

   Duty-free imports of spare parts up to 15% of the value of capital goods imported;
   Capital goods imported without the payment of import duties and other import taxes may be transferred to another investor enjoying similar privileges;
   Exemption from custom duties or other import taxes are granted on raw materials that are required in the production of export goods. Taxes and duties paid on raw materials are drawn back at the time of export of finished products. The duty drawback scheme applies to all taxes at the time of importation, as well as those paid on local purchases.

All Ethiopian products (except coffee) and services destined for export are exempted from the payment of export taxes. The following tax holidays are applicable as defined:

   Exemption from profit tax for a minimum period of three years, which may be increased to five years depending upon the type and location of investment, with additional exemption of one to two years for investment in expanding enterprises (Proclamation No.37/1996);
   Carrying forward of tax losses during a tax exemption period for three to five years after the expiry of the tax holiday depending upon the geographical region of investment;
   Income derived from an expansion in an existing enterprise, whose invested capital is in accordance with the Council of Ministers Regulation, No. 7/1966, Article 6(2), is exempted from the payment of income tax for a period of two years for pioneer activities and one year for promoted activities.

Export products from Ethiopia to the European Union are entitled to duty reductions or exemptions and are free from all quota restrictions under the Lome Convention. Trade preferences include duty-free entry of all industrial products and a wide range of agricultural products including fruits, vegetables, pulses and oil seeds.

Under the Generalized System of Preference (GSP), a wide range of Ethiopia's manufactured products are entitled to preferential duty treatment in the USA, Canada, Switzerland, Norway, Sweden, Finland, Austria and Japan, as well as most European Union countries. Furthermore, no quantitative restrictions are applicable to Ethiopian exports on any of the 3,000-plus items currently eligible for GSP treatment.

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