Registration of Foreign Capital According to Ethiopian Law
Ethiopia has specific laws and regulations governing the registration of foreign capital to encourage investment while ensuring proper oversight and regulation. The Ethiopian Investment Proclamation No. 1180/2020 and its subsequent amendments outline the framework for the registration of foreign capital and operation of foreign investments in the country. This article provides a comprehensive overview of the process and requirements for registering foreign capital in Ethiopia.
Legal Framework
Ethiopian Investment Proclamation No. 1180/2020: This proclamation serves as the primary legislative instrument regulating foreign investments in Ethiopia. It aims to create a conducive environment for investment, promote the country’s economic development, and ensure that investments comply with national interests.
Key Requirements for Registering Foreign Capital
1. Investment Permit
Article 11 of the Investment Proclamation No. 1180/2020 requires that any foreign investor intending to invest in Ethiopia must obtain an investment permit. The Ethiopian Investment Commission (EIC) is responsible for issuing these permits. The permit serves as the official authorization for the investor to operate in the country.
2. Minimum Capital Requirement
Article 12 of the Proclamation stipulates the minimum capital requirements for foreign investors:
- A minimum capital of USD 200,000 for a single investment project.
- If the investment is in a joint venture with a domestic investor, the minimum capital requirement is USD 150,000.
- For investments in architectural or engineering works or related technical consultancy services, technical testing and analysis or in publishing work, the minimum capital required is USD 100,000 if fully owned by foreign investors or USD 50,000 if jointly with a domestic investor.
3. Registration of Foreign Capital
Article 14 of the Proclamation details the registration of foreign capital. All foreign capital brought into Ethiopia must be registered with the National Bank of Ethiopia (NBE). This includes cash, machinery, equipment, or other tangible and intangible assets. The registration process involves:
- Submission of a detailed application to the NBE.
- Documentation proving the source and amount of capital.
- Compliance with NBE regulations regarding foreign exchange and capital importation.
4. Investment Areas Reserved for Domestic Investors
Certain sectors are reserved exclusively for Ethiopian nationals and are not open to foreign investment. These include areas such as small-scale mining, small retail trade services, and small hotels (except for star-designated ones).
Procedure for Registering Foreign Capital
- Application Submission:
- The investor submits an application for an investment permit to the Ethiopian Investment Commission (EIC) along with necessary documentation, including the business plan and proof of capital.
- Investment Permit Issuance:
- Upon review and approval of the application, the EIC issues an investment permit, allowing the investor to commence business activities in Ethiopia.
- Capital Registration with NBE:
- The investor registers the foreign capital with the National Bank of Ethiopia by providing detailed documentation on the amount and form of capital brought into the country.
- Operational Compliance:
- The investor must comply with ongoing regulatory requirements, including regular reporting to the EIC and adherence to Ethiopian tax laws and labor regulations.
Benefits of Foreign Capital Registration
- Legal Protection: Registered foreign capital is protected under Ethiopian law, ensuring the investor’s rights and assets are safeguarded.
- Repatriation of Profits: Registered foreign capital allows for the repatriation of profits, dividends, and other returns on investment in accordance with NBE regulations.
- Incentives and Support: Registered investors may qualify for various incentives, including tax holidays, customs duty exemptions, and other benefits designed to promote foreign investment.
Registering foreign capital in Ethiopia involves a well-defined legal and regulatory process aimed at promoting investment while safeguarding national interests. The Ethiopian Investment Proclamation No. 1180/2020 provides a comprehensive framework for foreign investors, detailing the requirements, procedures, and benefits associated with bringing foreign capital into the country.
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