Proposed Amendments to the Value Added Tax (VAT) Bill in Ethiopia

In response to the evolving landscape of global e-commerce and the need for a more equitable tax system, Ethiopia has proposed significant amendments to its Value Added Tax (VAT) Bill. These amendments aim to compel foreign digital service providers like Amazon, Google Play, and Apple to register for VAT, ensuring they contribute to the national tax base. Additionally, the proposed changes seek to refine tax exemptions within the financial sector, adjust VAT applicability for certain transport services, and enhance the efficiency of tax collection through regional delegation. This legal brief examines the key provisions and rationale behind these amendments, highlighting their importance in modernizing Ethiopia’s tax framework and promoting fiscal fairness.

This legal brief analyzes the proposed amendments to Ethiopia’s Value Added Tax (VAT) Bill, which aim to include foreign e-commerce companies such as Amazon, Google Play, and Apple in the VAT registration requirement. The amendments also address tax exemptions in the financial sector, VAT applicability to certain transport services, and delegation of tax collection responsibilities.


The current VAT framework in Ethiopia, is undergoing significant amendments to address modern economic activities and ensure fair tax practices. The proposed bill mandates that foreign companies providing digital services in Ethiopia register for VAT and comply with local tax regulations.

Key Provisions of the Proposed Amendments

  1. VAT Registration for Foreign E-commerce Companies
    • Foreign companies like Amazon, Google Play, and Apple must register for VAT in Ethiopia.
    • These companies are required to open bank accounts in Ethiopia, from which VAT will be deducted.
    • If companies fail to register, individuals receiving remote services valued over one million birr annually must pay VAT by calculating the amount paid.
  2. Amendments to Financial Sector Tax Exemptions
    • The tax exemption for the financial sector will be redefined based on the nature of services, not the institution.
    • Only services related to lending, collecting deposits, trading stocks, bonds, other securities, managing investment funds, and establishing pension funds will remain exempt.
    • Services provided by financial institutions for a fee, such as commissions and service fees, will be taxable.
  3. Transport Services VAT Applicability
    • Vehicles with less than eight seats, excluding three-legged vehicles, will be subject to VAT.
    • The exemption for transport services will not apply to private vehicles with less than eight seats, to ensure support is limited to public transport services.
  4. VAT on Electricity and Water Supply
    • VAT will be applied to electricity and water consumption as per the guidelines issued by the Ministry of Finance.
    • This measure aims to reduce costs for low-income members of society, who benefit the most from tax exemptions.
  5. Delegation of Tax Collection Responsibilities
    • The Ministry of Revenue will delegate tax collection to regional offices where it lacks branches.
    • This aims to address issues of fairness and ensure proper administration of VAT by involving regional revenue offices.

Rationale for the Amendments

The Minister emphasized the importance of updating the legal framework to reflect international standards and address evolving economic activities. The proposed changes are intended to:

  • Ensure foreign e-commerce companies contribute to the national tax base.
  • Clarify and limit tax exemptions in the financial sector to prevent misuse.
  • Focus VAT exemptions on services directly benefiting the public.
  • Improve tax administration and reduce regional disparities in tax collection.


The proposed amendments to Ethiopia’s VAT Bill represent a comprehensive effort to modernize the tax system, ensure equitable tax practices, and improve revenue collection. By compelling foreign e-commerce companies to register for VAT and redefining exemptions, the government aims to enhance its fiscal policy and adapt to global economic trends.

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