Offers corporate income tax exemption for expansion and upgrading of investment

In January 2023, the Ministry of Finance released Directive No. 941 of 2022, which outlines the eligibility criteria for tax incentives aimed at encouraging investment expansion or upgrading. The directive offers two types of tax benefits: income tax exemption and exemption from custom duties. Specifically, investors who reinvest their resources or profits back into expanding or upgrading their investment will be eligible for these benefits.

To qualify for the tax incentives, the expansion or upgrade must increase the existing enterprise's production or service rendering capacity by at least 50%, or introduce new production or service rendering lines that increase the variety by at least 100%. Upon meeting these criteria, investors are entitled to receive (i) income tax exemption on the income generated from the expansion or upgrading, and (ii) duty-free import of capital goods necessary for the expansion or upgrading.

The directive was issued in accordance with Article 5 of the Investment Incentives Regulations No. 517/2022, which provides for income tax exemption on income earned from expanding or upgrading existing investments.

• Type:

  • Treatment and operation (Corporate taxation)
  • Promotion and facilitation (Investment incentives)

• Industry:

  • Not industry specific

• Sources:

  • Dagnachew & Mahlet Law Firm Limited Liability Partnership, INCENTIVES FOR EXPANSION/UPGRADING OF INVESTMENT, https://dmethiolawyers.com/incentives-for-expansion-upgrading-of-investment/, 29 Jan 2023
  • mofed.gov.et, A Directive to Provide for the Application of Tax Incentives for Expansion/Upgrading of Investment No. 941/2023, https://www.mofed.gov.et/media/filer_public/c0/68/c068f63b-b8ff-4f49-9d8e-cf6bf213ea5a/941-a_directive_to_provide_for_the_application_of_tax_incentives_for_expansion_of_investment_no_941-2023pdf.pdf, 23 Jan 2023