Excise Tax Changes in Ethiopia: Ethyl Alcohol Sees Sharp Rate Reduction, Telecom Services Face New Taxes

Addis Ababa, Ethiopia (23 May 2023)

In a recent development, the Excise Tax Proclamation underwent amendments that have resulted in noteworthy changes to the excise tax rates for select items. The decree aims to streamline the tax system, expand the tax base, and align the tax rates with economic considerations and became effective as of April 27, 2023. Let’s delve into the insights:

Items with Reduced Excise Tax Charges:

• Previously subject to a high excise tax rate of 60%, ethyl alcohol has witnessed a remarkable adjustment. The new excise tax rate for ethyl alcohol now stands at 10%, reflecting a substantial reduction.
• Sugar (except for medicinal purposes), gum, ready-to-eat chocolate, and sweet candies now face a reduced charge rate of 10% instead of the previous 20%. Businesses operating in the confectionery industry may experience positive effects from this adjustment.
• Animal or vegetable fats and oils, prepared for consumption, containing 40 grams or more of saturated fat per 100 grams, or with unidentified saturated fat content, and derivatives thereof, except for medicinal purposes: The charge rate has been reduced from 30% to 10%.
• The charge rate for salt, cloth, and clothing has been uniformly decreased from their previous rates to a consistent 10%. Investors involved in the textile and clothing sectors should evaluate the potential implications on profitability and market competitiveness.
• Carpets and textile floor coverings, formerly subject to a 30% excise tax charge, have now experienced a significant reduction, with the new rate set at 15%, half of the previous charge.

Increased Excise Tax Rate on Telecommunication Services:

Telecommunication services, including mobile and wireless telephone services encompassing Internet, Voice, and SMS, have been brought into the excise tax framework. Previously untaxed, these services are now subject to a charge rate of 5%. Investors operating in the telecommunications sector need to assess the impact of this newly imposed tax on their business operations and revenue streams.