Ethiopia now imposes a 15% VAT on nonresident digital service providers, with new registration and compliance rules.
Ethiopia’s Ministry of Finance has issued VAT Proclamation No. 1341/2024, introducing a 15% value-added tax on digital services provided by nonresident businesses to Ethiopian residents.
The proclamation, which will take effect upon approval by the House of Peoples’ Representatives, aims to bring cross-border digital transactions under the VAT framework.
Under the new rules, nonresident providers of remote services must register for VAT if their annual taxable sales exceed ETB 2 million.
The 15% VAT applies regardless of whether the service provider has a permanent establishment in Ethiopia, including for services physically performed in the country or supplied via electronic distribution platforms.
The proclamation also clarifies residence criteria for service recipients and defines VAT liability in platform-based transactions. Non-compliance with the new requirements may result in penalties of ETB 100,000 per infraction.
VAT Proclamation No. 1341/2024 repeals the previous VAT Proclamation No. 285/2002 as part of Ethiopia’s broader initiative to align its tax framework with international digital taxation standards.
