Employment Income Tax Calculation in Ethiopia (Schedule' A' Income)
UPDATE [July 26, 2016] - New Tax Rate in Ethiopia - Employment, Salary, Business, Building Rental Tax Rate Revisions in Ethiopia
1.Every person deriving income from employment is . liable to pay tax on that income at the rate specified in Schedule A, set out in Article 11. The first Birr 150 (one hundred fifty Birr) of employment income is excluded from taxable income.
2. Employers have an obligation to withhold the tax from each payment to an employee, and to pay to the Tax Authority the amount withheld during each calendar month. In applying the preceding, income attributable to the months of Nehassie and Pagumen shall be aggregated and treated as the income of one month.
Employment income (Per Month-birr)
Income tax payable
0 - 600
601 - 1,650
1,651 - 3,200
3,201 - 5,250
5,251 - 7,800
7,801 - 10,900
Determination of Employment Income
1. Employment income shall include any payments or gains in cash or in kind received from employment by an individual, including income from former employment or otherwise or from prospective employment.
2. The type of taxable fringe benefits and the manner of their assessment shall be determined by Regulations to be issued by the Council of Ministers.
3. Income received in the form of wages does not include representation and other similar expenditures (on social functions, guest accommodations, etc.)
The following categories of income shall be exempt from payment of income tax here under:
A. income from employment received by casual employees who are not regularly employed provided that they do not work for more than one (1) month for the same employer in any twelve (12) months period;
B. pension contribution, provident fund and all forms of retirement benefits contributed by employers in an amount that does not exceed 15% (fifteen percent) of the monthly salary of the employee;
C. subject to reciprocity, income from employment, received for services rendered in the exercise of their duties by:
- diplomatic and consular representatives, and
- other persons employed in any Embassy, Legation, Consulate or Mission of a foreign state performing state affairs, who are national of that state and bearers of diplomatic passports or who are in accordance with international usage or custom normally and usually exempted from the payment of income tax.
D. income specifically exempted from income tax by:
- any law in Ethiopia, unless specifically amended or deleted by this Proclamation;
- international treaty; or
- an agreement made or approved by the Minister.
E. the Council of Ministers may by regulations exempt any income recognized as such by this Proclamation for economic, administrative or social reasons.
F. payments made to a person as compensation or a gratitude in relation to:
- personal injuries suffered by that person;
- the death of another person.