Our Global Network

Doing business in Ethiopia

How quickly can I set up a business?

Company set up takes an average period of 3 – 4 weeks.

What is the minimum investment needed?

Any foreign investor is required to allocate a minimum capital of USD 200,000. – (two hundred thousand) for a single investment project.

However, if the foreign investor is jointly investing with a domestic investor, the minimum capital required of a foreign investor is USD 150,000. – (one hundred fifty thousand).

Notwithstanding the above requirements, if a foreign investor investing in architectural or engineering works or related technical consultancy services, technical testing, and analysis or in publishing works, the minimum capital required shall be:

  • USD 100,000.00 (one hundred thousand) if the investment is made on his/her own.
  • USD 50,000.00 (fifty thousand) if the investment is made jointly with a domestic investor.
How can I raise finance?

Foreign investors may raise finance from:

  • Own source
  • One may acquire external loan for his/her investment as per the applicable directive of the National Bank of Ethiopia.
What are the legal requirements for setting up my business?
Establishment (a branch of your overseas business):
  • Not a separate legal entity but an extension of the overseas parent company.
  • Must produce company incorporation documents from the country of the international office and register in the concerned government offices to obtain trading license, VAT registration certificate, Tax Identification Number (TIN).
  • If have a Permanent Establishment (PE) in Ethiopia, then profits from this PE are liable to Ethiopian Corporation tax.
Private Limited Company:
  • Gives a perception of a local business, with longevity.
  • Minimum of two shareholders and maximum of fifty.
  • Minimum capital is ETB 15,000 with par value of minimum ETB 100.
  • Corporation tax shall be paid on company profits.
  • Employees’ income tax, WHT, and VAT returns must be filled on a monthly basis.
  • Business profit/loss tax returns must be filled with in four months following the end of the financial year of the company.
  • Tax clearances are mandatory in order to get the renewal of the trading license.
Public Share Company:
  • Shareholders have limited liability.
  • Minimum capital is ETB 50,000, par value of shares is minimum ETB 100.
  • Governed by board of directors.
  • Corporation tax shall be paid on company profits.
  • Employees’ income tax, WHT, and VAT returns must be filled on a monthly basis.
  • Business profit/loss tax returns must be filled with in four months following the end of the financial year of the company.
  • A dividend tax of 10% shall be paid to the tax office when dividend is paid to shareholders.
What structure should I consider?

Foreign investors may establish:

  • a branch of an overseas business.
  • a locally incorporated company.
What advice can you give me in regards to payroll and taxation requirements?

Our office provides company incorporation service so that the foreign investor get investment license, Tax Identification Number (TIN), VAT Certificate and Business license.

The foreign investor can concentrate on its core activities and outsource the following support services to our company.

  • HR – Recruitment service
  • Payroll service including monthly tax filing.
  • Accounting service including monthly VAT & WHT filling and yearly filing of Profit and dividend taxes.
  • Tax advice
Is there anything else that I should know?

The following are major taxes that the foreign investor must be aware of.

  • Corporate tax – Corporate businesses are required to pay 30% flat rate of business income tax.
  • Value Added Tax (VAT) – VAT is a “goods and services tax” on supplies made, the standard rate of which is 15%. If a business makes taxable supplies in excess of Ethiopian Birr 1,000,000 in any 12 months, then it MUST be registered for VAT.
  • Withholding Tax (WHT) – Companies shall withhold tax at the rate of 2% of the gross amount of payment made for the following.
    • The supply of goods in Ethiopia involving more than 10,000 Birr in one transaction or supply contract.
    • The supply of services involving more than 3,000 Birr in one supply contract
  • A withholding agent shall provide the recipient of the withholding income with a withholding tax receipt in a form approved by the tax authority. The withholding amount shall then be paid to the authority within 30 days after the end of the month.
  • Dividend Income – Every person deriving income from dividends from a share company or withdrawals of profits from a private limited company shall be subject to tax at the rate of 10%. The withholding agent shall withhold or collect the tax and account to the Tax Authority.

The following are investment areas with joint investment with domestic investors where the foreign investor is allowed to a maximum of 49% ownership.

  • Freight forwarding and shipping agency services
  • Domestic air transport services
  • Cross-country public transport service using buses with seating capacity of more than 45 passengers
  • Urban mass transport service with large carrying capacity
  • Advertisement and promotion services
  • Audio-visual services; motion picture and video recording, production, and distribution
  • Accounting and auditing services.
Our firms in Ethiopia
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