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Comparison between new and old salary income tax rates in Ethiopia

Here are the formulas on how to calculate personal (employee) salary income tax, pension, gross and net income in Ethiopia using the latest tax rates. For comparison purpose, we have also added the old net salary, pension and income tax caluculation methods.

Salary Income Tax = (Gross Salary * Tax Rate) - Deduction

Employee Pension - Gross Salary x 7%

Net Income = Gross Salary - Salary Income Tax - Employee Pension - Other Taxes (If applicable)

Employee Pension - 7%

Company Pension - 11%

New Tax Rates

No.

Salary Range (ETB)

Tax Rate

Deduction (ETB)
1.

0 - 600 Birr

Non-Taxable

-
2.

601-1,650 Birr

10%

60 Birr
3.

1,651 - 3,200 Birr

15%

142.50 Birr
4.

3,201 - 5,250 Birr

20%

302.50 Birr
5.

5,251 - 7,800 Birr

25%

565 Birr
6.

7,801 - 10,900 Birr

30%

955 Birr
7.

Over 10,900 Birr

35%

1,500 Birr

Old Tax Rates

No. Salary Range (ETB) Tax Rate Deduction (ETB)
1. 0 - 150 Birr Non-Taxable  -
2. 151 - 650 Birr 10% 15 Birr
3. 651 - 1,400 Birr 15% 47.50 Birr
4. 1,401 Birr - 2,350 Birr 20% 117.50 Birr
5. 2,351 Birr - 3,500 Birr 25% 235 Birr
6. 3,551 Birr - 5,000 Birr 30% 412.50 Birr
7. 5,001 Birr and Above 35% 662.50 Birr

Sample Calculation

Calculation Using The New Tax Rates Calculation Using The Old Tax Rates

Example

If the salary of an employee is 2,000 Birr.

By referring to the above table, we can see that 2,000 birr falls in the No. 4 row. So, Tax Rate = 15% and deduction = 142.50

Income Tax = (2,000 Birr x 15%) - 142.50 Birr

Income Tax = 300 Birr - 142.50 = 157.50 Birr

Employee Pension = 2,000 Birr x 7% = 140 Birr

Employee Net Income = 2,000 Birr - 157.50 - 140 = 1702.50 Birr

Net Income = 1,702.50 Birr

Example

If the salary of an employee is 2,000 Birr.

By referring to the above table, we can see that 2,000 birr falls in the No. 4 row. So, Tax Rate = 20% and deduction = 117.50

Income Tax = (2,000 Birr x 20%) - 117.50 Birr

Income Tax = 400 Birr - 117.50 = 282.50 Birr

Employee Pension = 2,000 Birr x 7% = 140 Birr

Employee Net Income = 2,000 Birr - 282.50 - 140 = 1,577.50 Birr

Net Income = 1,577.50 Birr

So, for a person earning 2,000 birr per month, the new ethiopian taxation system will increase his/her net income by almost 125 birr. 

Other Tax Types

Taxation from Building / House Rental in Ethiopia

Employment, Salary, Business, Building Rental Tax Rates in Ethiopia

Tags: Salary Income Tax Calculation in Ethiopia,, Salary Income Tax in Ethiopia,, Salary Pension Calculation in Ethiopia,, Gross & Net Salary Calculation in Ethiopia,

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