Failure to comply with the withholding tax proclamation in Ethiopia may result in penalties, including:

Simply paying the tax is not enough. The withholding agent is also legally obligated to file a in the approved form. This declaration must be submitted together with the payment.

For quick reference, the most essential shifts in the Ethiopian withholding tax framework include: Ethiopia - Corporate - Withholding taxes

The primary law governing withholding tax (WHT) in is the , which was recently significantly updated by the Income Tax (Amendment) Proclamation No. 1395/2025 .

Understanding is critical for businesses, independent contractors, and finance professionals operating within the country. Ethiopia’s tax landscape underwent major updates with the enactment of Income Tax (Amendment) Proclamation No. 1395/2025 . This law fundamentally altered the local and international withholding tax (WHT) structures originally established under the foundational Federal Income Tax Proclamation No. 979/2016 .

All taxes withheld during a calendar month must be declared and remitted to the domestic tax authority branch within of the end of the month in which the income was paid. Automate Your Tax Ledger

I am looking for the best available PDF version of the current Withholding Tax Proclamation in Ethiopia. The primary legal instrument is (Income Tax Proclamation), particularly its provisions on withholding tax (Articles 50–60), as well as any subsequent amendments (e.g., Proclamation No. 979/2016 or No. 1087/2018).

Withholding tax in Ethiopia is not an independent tax but a method of collecting income tax. The primary legislation governing it is the . According to this proclamation, a "withholding agent"—typically a person or entity making a payment—is legally required to deduct a certain percentage of tax from that payment and remit it directly to the Tax Authority.

Once a withholding agent has deducted the tax, they must follow specific administrative procedures set out in the Proclamation.

A new 2.5% tax on annual turnover applies to businesses if their calculated income tax liability falls below this threshold.

These rates are general guidelines. Actual rates may be lower if a Double Taxation Agreement (DTA) is in effect between Ethiopia and the recipient's country of residence.

Any resident of Ethiopia or a permanent establishment in Ethiopia making a payment to a non-resident for items such as dividends, repatriated profits, interest, royalties, management fees, or technical fees is required to withhold tax. The tax is applied to the gross amount paid at the rate specified in the Proclamation for non-resident income.

: Winnings from games of chance are subject to withholding.

A landmark feature of the new proclamation is the explicit inclusion of digital activities.