On 12 July 2022, a new Investment Incentive Law No. 517/2022 was published by the Ethiopian Council of Ministers. The new Law aims to expand the scope of investment incentives and boost investment in Ethiopia. The law provides the following incentives:
- The Law applies to Income Tax and Duty incentives that are granted to encourage investment in eligible sectors.
- Investors are eligible for incentives beginning from the date they obtain a business license or expansion permission, as specified in the annexed schedule. Among the investments that are entitled to income tax exemption is an investor who helps secure employment opportunities for Ethiopians living abroad. To benefit from the exemption, the investor must present evidence to the Ministry of Labor and skill although it shall not exceed six years.
- Investors who invest in areas that have low infrastructure development are entitled to an income tax deduction of 30% for three consecutive years after the expiry of the tax holiday.
- The Law has expanded the range of sectors that are entitled to tax incentives as well as introduced focused incentives for certain sectors that it seeks to grow or encourage investment in rural areas.
- Some of the key sectors that the law has focused on are ICT, hospitality, health, agriculture, transport and logistics.
- An investor who invests in an area far from the main towns or areas with poor infrastructure will be entitled to an additional 30% income tax deduction for three consecutive years after the expiry of the tax holiday.
- Additionally, new investments will enjoy a five-year income tax exemption if they invest in hotels and hotel equivalents in select tourist destinations.
