1. Areas of Investment
All areas of investment are open for foreign investors other than the following:
- Areas reserved exclusively for the government:
- Postal services with the exception of courier services;
- Transmission and supply of electrical energy through the integrated national grid system; and
- Passenger air transport services using aircraft with seating capacity of more than 20 passengers.
- Areas reserved for Ethiopian nationals:
- Banking, insurance and micro credit and saving services;
- Travel and shipping agency services;
- Broadcasting services; and
- Air transport services using aircraft with a seating capacity of up to 20 passengers
- Areas reserved for domestic investors:
- Retail trade and brokerage;
- Wholesale trade (excluding supply of petroleum and its by-products as well as wholesale by foreign investors of their products locally produced);
- Import trade (excluding LPG, bitumen and up on the approval from the Council of Ministers, material inputs for export products);
- Export trade of raw coffee, chat, oil seeds, pulses, hides and skins bought from the market and live sheep, goats and cattle not raised or fattened by the investor;
- Construction companies excluding those designated as grade 1;
- Tanning of hides and skins up to crust level;
- Hotels(excluding star-designated hotels), motels, pensions, tea rooms, coffee shops, bars, night clubs and restaurants excluding international and specialized restaurants;
- Travel agency, trade auxiliary and ticket selling services;
- Car-hire and taxi-cabs transport services;
- Commercial road transport and inland water transport services;
- Bakery products and pastries for the domestic market;
- Grinding mills;
- Barber shops, beauty salons, and provision of smith workshops and tailoring services except by garment factories;
- Building maintenance and repair and maintenance of vehicles;
- Saw milling and timber making;
- Customs clearance services;
- Museums, theaters and cinema hall operations;
- Printing industries.
2. Capital Requirement
Under the Investment Proclamation No.280/2002 (as amended), a foreign investor, who invests on his own, except in consultancy services and publishing, is required to invest not less than US$ 100,000 in cash and/or in kind for a single project. However, if he invests in partnership with domestic investor(s), the minimum capital required of him is US$ 60,000. The minimum capital required of a wholly foreign investor investing in consultancy services or publishing is US$ 50,000, which may be in cash and/or in kind. But this capital amount is lowered to US$ 25,000 if he invests in partnership with domestic investor(s). A foreign investor reinvesting his profit or dividends, or exporting at least 75% of his outputs, however, is not required to allocate a minimum capital.
3. Major Investment Incentives
To encourage private investment and promote the inflow of foreign capital and technology into Ethiopia, the following incentives are granted to both domestic and foreign investors engaged in areas eligible for investment incentives:
a) Exemption from import customs duty
One hundred per cent exemption from the payment of import customs duties and other taxes levied on imports is granted to an investor to import all investment capital goods, such as plant, machinery and equipment, construction materials, as well as spare parts worth up to 15% of the value of the imported investment capital goods. However, the following investment areas are not eligible for exemption from import customs duty:
- Hotels(excluding star-designated hotels), motels, tearooms, coffee shops, bars, night clubs and restaurants, which do not have international standards;
- Wholesale, retail and import trade;
- Maintenance services;
- Commercial road transport and car-hire services;
- Postal and courier services;
- Real estate development;
- Business and management consultancy services;
- Advertisement services;
- Cinematography and similar activities;
- Radio and television broadcasting services;
- Theatre and cinema hall operations;
- Customs clearance services;
- Laundry services;
- Travel agency, trade auxiliary and ticket selling services; and
- Lottery and games of similar nature.
Investment capital goods imported without the payment of import customs duties and other taxes levied on imports may be transferred to another investor enjoying similar privileges.
In accordance with the Revised Export Trade Duty Incentive Scheme Establishing Proclamation No. 543/2007, three export incentive schemes are also available for exporters. They are Duty Draw-Back Scheme, Voucher Scheme and Bonded Manufacturing Warehouse Scheme.
In addition, all Ethiopian products, with the exception of few products (e.g. semi-processed hides and skins), destined for export are exempted from the payment of any export tax and other taxes levied on exports.
b) Exemption from the payment of income tax
Any income derived from an approved investment in new manufacturing, agro-industry and information and communication technology (ICT) development or agriculture is exempted from the payment of income tax for the periods as shown in the following table, depending upon the volume of export and the location in which the investment is made.
Profit tax holiday is granted subject to Council of Ministers Regulation No.84/2003 (as amended) issued pursuant to the Investment Proclamation No. 280/2002 (as amended).
Conditions for Eligibility
Income tax exemption
Income tax exemption for investments made in relatively underdeveloped regions
An investor engaged in a new manufacturing, agro-industry, ICT or agriculture :
- exports at least 50% of his products or services
- supplies at least 75% of his products or services, to an exporter, as a production or service input
- under special circumstance the Board may grant
up to 7
up to 8
- exports less than 50% of his products or services, or supplies his products or services only to the domestic market
- under special circumstance the Board may grant
up to 5
up to 6
- exports at least 50% of his products or services and increases, in value his production or services by over 25% through the expansion or upgrading of an existing enterprise
c) Carry forward of losses
Business enterprises that suffer losses during the tax holiday period can carry forward such losses for half of the income tax exemption period following the expiry of the exemption period.
4. Investment guarantee and protection
a) Guarantee against expropriation
The Constitution of the Federal Democratic Republic of Ethiopia protects private property. The Investment Proclamation also provides investment guarantee against measures of expropriation and nationalization that may only occur for public interest and in compliance with the requirement of the law. Where such expropriations are made, the Government provides adequate compensation corresponding to the prevailing market value of property and such payment is effected in advance.
Ethiopia is a member of the World Bank-affiliated Multilateral Investment Guarantee Agency which issues guarantees against non-commercial risks to enterprises that invest in signatory countries. The country has also concluded bilateral investment promotion and protection agreements with a number of developed and developing countries.
b) Remittance of funds
Foreign investors are guaranteed to make the following remittances out of Ethiopia in convertible foreign currency at the prevailing exchange rate on the time of remittance:
- Profits and dividends accruing from investment;
- Principal and interest payments of external loans;
- Payments related to technology transfer agreements;
- Proceeds from the sale or liquidation of an enterprise;
- Proceeds from the transfer of shares or of partial ownership of an enterprise to a domestic investor;
Expatriates employed in an enterprise may remit, in convertible foreign currency, salaries and other payments accruing from their employment in accordance with the foreign exchange regulations or directives of the country.