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Regulations
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CHAPTER 1
General
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91hYear No. 19
ADDIS ABABA-31't December, 2002
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1. Short Title
These Regulations may be cited as the' 'Council of
Ministers Value Added Tax'Regulations No. 7912002.
2. Definitions
In these Regulations, unless the context requires
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1) "Authority", means the Federal Inland Revenue
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2) "Customs Authority" means the Ethiopian Customs
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3) "Minister" and "Ministry" shall mean the Minister
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4) "Proclamation" means the Value Added Tax
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Proclamation No. 285/2002; and
5) "Tax" or "V AT" means the Value Added Tax
~fit?;!Iilfj!! f-tllJt\m- f-tlJJ.Oyt h(a."" ;t-tlil ~m- II
Imposed by the V(\lueAdded Tax Proclamation.
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Taxable Activity
1) For purposes of the definition of a taxable activity
under Article 6 of the Proclamation, anything done
in connection with the commencement or termination of a taxable activity is treated as carried out
in the course or furtherance of that taxable activity.
2) Taxable activity does not include:
(a) an activity carried on by a natural person.
essentially as a private recreational pursuit or
hobby or an activity carried on by a person other
than a natural person which would, if carried on
by a natural person, be carried on essentially as a
private recreati9nal pursuit or hobby; or
(b) an activity to the extent that the activity
involves the making of exempt supplies.'
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Time of Supply
1) Article 3, Sub-Article (6) of these Regulations, treats
the repossession of goods under a credit agreement
as a supply of the goods. The supply occurs:
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The Customs Authority(a) shall collect at the time of import and on behalf
of the Authority, any tax due under the
Proclamation on an import of goods and, at the
time, obtain the name and the taxpayer identification number, if any, of the importer, and
the invoice values in respect of the import; and
(b) shall make arrangements with the Ethiopia
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Value of a Supply
1) The value of a supply may be reduced by any price
discounts or rebates allowed and accounted for at the
time of the supply of goods or the rendition of
services. Post-supply price adjustments must be
accounted for in accordance with Article 13 of the
Proclamation.
2) Where a portion of the price of a supply represents
tax imposed by the Proclamation that is not accounted for separately, the value of the supply is the price
reduced by an amount equal to the product of the tax.
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7) Expenses allocated by the head office to a separatelyregistered division may be treated as taxable supplies
by the head office.
8) Transactions between the head office and separatelyregistered divisions, or between separately-registered divisions may be closely scrutinized by the
Authority to prevent the use divisional registration to
obtain unintended tax benefits referred to in Article
60 of the Proclamation.
9) Separate divisional registration is discretionary with
the Authroity and, to be eligible, the head office
applicant must satisfy all of the following conditions:
.
(a) The applicant must be a registered person for
VATpurposes, but not a person who voluntarily registered under Article 17 of the
Proclamation;
(b) The application must be in writing and include
the applicant'-s taxpayer identification number
and VAT certificate number;
(c) The applicant must conduct its operation as an
incorporated company;
(d) The applicant will experience an onerous compliance burden if it must submit a single return
for its entire business operations. The applicant
must describe in detail the problems likely to be
encountered if divisional registration is not
approved, and the reasons why a consolidated
. VAT return for the entire business for each
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the conditions imposed on divisional registration, the entity must notify the Authority in
writing of the change within 30 days of the date
any condition to be met;
(c) The Authority may cancel a divisional registration if the conditions are no longer satisfied
or if the Authority believes that cancellation is
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(e) The cancellation of divisional registration shall
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a superannuating fund;
(t) Trustee, finanacial advisory, and estate planning services, and
(g) Leases, licenses, and similar arrangements
relating to property other than a financial
instrument.
7) For purposes of Article 20, Sub-Article (6) of these
Regulations, accounting and record package
services include a financial clearing system that
may be part of the settlement process, the posting of
financial transactions to customers' accounts the
maintenance of customers' accounts, and the rendering of services ancillary to the services just
described.
8) The mere acquisition of a debt is not a taxable
transaction, including debt acquired by a factor.
The services related to debt recovery, litigation, and
the management of the recovery of the amount due
from debtors are taxable, including sales accounting services under a factoring arrangement and
other services related to factoring.
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f+L"'1.~
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Directives issued pursuant to those Regulations.
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i' 0"":( ",+;t ~ ,o-h ",.,.;t (I) (,,) f+1."11~
services rendered by workshops employing
h;1-hl\- ." fODIf' OD-o""+L~Dt fDtIf"~ f"I1A
physically or mentally disabled individuals.
fDtIIP~
CD~9" f"iJ9"~
~~+7f>~'
"''I'l~
2) To qualify for the exemption under Sub-Article
~c~"''f
"D7.1+C9.T~ iJ:f'sP~'i "1A "'I\-"'~
above more than 60 per cent of the workshop's
.
-o!F"~1I
employees must be disabled. The 60 per cent
I' htLlJo,,~ O,o-h ",.,.;t (ji) f+OD"h+~ h;1-hl\threshold is measured by the number of disabled
."
f ODIf' OD-o""+m:f'Dt "-If), fDt ~"'..,. hIP t-+
7f>!FT~ ODl1hA ~ OOD'" "I1A ~~+7f>~ ODIf'iT~
and total employees in the previous 12 months,
f+l;11m
~C~.,.~
'iT~1I hlPt-+7f>~ ODl1hA :!;
except that if the workshop has been in existence
OOD'" "I1A~~+7f>~
ODIf'iT~
fDtl;11in~
for less than 12 months, then the threshold is
q" 4-..,.!1 CDt-"" h., O~..,. m:""" IP t-+7f>~ ODl1hA
measured for the number of months the workshop
f"I1A ~+7f>~'
ck'l'C OOD"'~ OOD~l1~ "~II
has been in existence.
~v.' h':( ~C~1: P't- hJ:Oul hll CDt-""0;1-~
33. Books and other Printed Materials
hlf., ~C~1: P't- ,,~ O"fqT~ l.tLl"" ''''''''
1) The exemption under Article 8, Sub-Article (2)(p)
1Pt-rf-7fo'f -0 ,. OOD"h.I"""'1"..,"AII
of the Proclamation applies to a printed book or an
0;:' OD~,'ht;:""
update of a book. The exemption applies to a bound
i'
0"":( ",+;t ~ ,o-h ",+;t (I) (CD)h;1-hl\- ."
or unbound printed version of scripture of any
h"ODIf'
frf-1. "11~
+L~Dt
fDtIf"~
";1-+00l..,
religion.
OD' ,'ht;:""
h'i
ODbmt;:"'"
CD:";1-ce "117~
"DtCDm h""""~ "~II ~IJ h;1-hl\- ." fODIf'
2) The exemption for books generally does not apply
OD-o"" ";1-rf-00CD~9" "A;1-+00f~~lI7lf""
to an audio recording that is a spoken reading of a
;tth-c:~ ~9"C +L~Dt.,..,. ~lfl"AIi
printed book, except that the exemption under
",.,.;t 1 (CD)"'~"P'~t-'
I' f"":( ",.,.;t ~ ,o-h~~..,.
Article 8, Sub-Article (2)(p) of the Proclamation
l1sP~ o+,,~
CD~9" hq~ f"I1A
""qT~
applies to import and supplies of talking books (in
f+H;1:( +'1';1& OD','ht;:"" CD1."1C ODt10- CD~9"
cassettes or other forms of recording) specifically
0"1C ~h'l' ODt1rm l.tL +L'Dt hDtIf' Oh+.,.C
designed for the blind or severely handicapped.
"tt.I\-~ +'1';1& OD','ht;:"" + L~ Dt "~If' 9"11
?lit
. ..,.t- , hrC""
29.
2003
2004
CHAPTER 3
Supplies Subject to Zero Tax Rate
Off.e" fOlJilh.l1 ~tI :J'tlil
fDIJ.hL~I1:flD- ".}>CP"'~
34. Substantiation of Zero Rating
@! ff.e"fOlJilh.l1 ~tI "'L~DIJ. oPlf)'1 ilI\OIJill'-;""
Where a registered person has applied the rate of zero
I\".}>C
P-I:
ff.e'
f "'oP"1 0 lD- (}lD- 0 Il tJ 1.111 oP IP~..,.
percent to a supply under these regulations, the regisfOlJilhL1
~tl1 "'L~DIJ. 11.l1 hlf';; ff.e' fOlJilhL1
tered person shall obtain and retain such documentary
~tl1 l\oPm+9"
11<h fDIJ.11.C~"'"
'hfi O:J'tI(}. IMP'
proof acceptable to the Authority substantiating the
~ 11)1 .,.+I1f,"""
11\ :flD-1 f (}.,.('0 oP lj{ sP~ .,.+11 I\->
person's entitlement to apply the zero rate to the supply.
oP 111 ,,1\ 0""::
35. Export of Goods or Services
c9~ iJ:J>sP~1 'hfi "1~"l1\->"'~1
m1.lD-6f.I" ill\oPl\tI
1) In this ArticlelD-il1':Ii' OlltJ "'+'"
(a) "export country" means any country other than
0) " iJ:J>sP~ fDIJ.1\11-0"" "1 C" OIJ1\"" h"- ""f"k 1
Ethiopia and includes any place which is not
lD-Q;t. 11\ OIJfi:flD-9" "1C ll.1f1: h"- ""f"k 1 lD-6f.I"
situated in Ethiopia, but does not include any
fDIJ.1~1 OIJfi:flD-19" P:J' f,ca9"t-~::
1f'i9"
specific country or territory that the Minister of
f11"11fi
h.\'1'iDIJ. ~OIJ"" DlJ.til""~ ODlJ.fmll)lDFinance
and Economic Development may by
oPoP t.1 iJ:J> sP~fi
"1 ~ "l 1\->.,. ~ fDIJ.1\11-0"" "1 C
Directive designate as one that is not an export
.,.11 I\->"f,m (}.('o9" 11I\->fDIJ.(}f,oPlD-1 f.,.1\ f "1 C
country;
mf,9" "l""" "f,ca9"C9"==
(b) "exported from Ethiopia" in relation to any
1\) "h"- ""f" k 1 m 1. lD-6f.I""1 C f.,.1\ 11-" OIJ1\"" f.,.oP
movable goods supplied by any registered
"10 (}lD- 07i16f.1" mf,9" 0,&;,0. 7i16f.1" il9"9""""
person under a sale or credit agreement, meansoP IPl"" hDIJ.1+C 11:flD- fDIJ.1+.,,+ (}. iJ:J>sP~ ;JC
1) consigned or delivered by the registered person to
0""'":the recipient at an address in an export country as
Ii- 0"'oP"1 0 lD- (}lD- .,.+ (n~, 111\0"" "1 C 0 DlJ.1~
evidenced by documentary proof acceptable to the
".('ot-?f f.,.l\h l\oPlf). O"l11C "il1{llD- 111\P'
..,.
Authority; or
111\lD- f (}.,.('0 oPlj{ f.,.l
~ 11)1 .,.+ 11f,"
2) delivered by the registered person to the owner or
;J1m:
fDIJ.:}1f
charter of any foreign-going aircraft when such
I- "lD-e"TI\). iJ:J>sP~m1.DlJ.I\
11-0"""1C
aircraft is going to a destination in an export
h If., f"'oP"1 0 lD- (}lD- m1.lD-6f.I" "1 C 1\DIJ.'t.('o
country and such goods are for use or consumption
"lD-e'TI\1 111\0."" mf,9" .,.ht-f, iJ:J>sP~1
ll.1illtl11 mf,9" iJ:J>sP~0 "lD-e'T 1\). lD-il'l'
in such aircraft, as the case may be;
01'.}>9" I\f, fDIJ.lD-lt-hlf.,:
2) The following supplies are zero-rated exports within
If}t.
C
fDIJ.1\
1
1-".}>CP"'~
0"
I- fDIJ.h.,.lt-"" m1.lD-6f.I"
Article 7, Sub-Article (2)(a) of the Proclamation:
"1
(0)
oPlPl""
Off.e'
f
OlJilhL1
(a) a supply of goods where the supplier has
"'+'" ~ 10-il "'+'" 1
~tI :J'tlil fDIJ.hL~I}:flD- fi:flD-;
entered the goods for export, pursuant to the
0) ".}> t-{llDm1.lD-6f.I" 'h 1-\1\ 11- 0 ~9"~tI
"If ;Eo
Customs Proclamation, and the goods have
oPlPl"" -\tll\t-ll.f"1
flJPl\l1:flD- 'hfi 0".}>t-{l1lDbeen exported from Ethiopia by the supplier;
m1.lD-6f.I" "1C f.,.1\11- iJ:J>sP~:
h"-""f"k1
(b) a supply of goods where the Authority is
m1.lD-6f.I" "1C f.,.1\111\) 0".}>t-{l1lD- h"-""f"k1
satisfied that the goods have been exported
ill\oPlf).
f:J'tI(}.
111\P'~1I)1 OIJl;J166J. 111
from Ethiopia by the supplier;
11:flD- iJ:J>sP~:
(c) a supply of goods where the goods are not
m) ".}>CP-I: O.,.LfJoP 1.ff. 0"-""f"k1 lD-il'l' 1A"0~
situated in Ethiopia at the time of supply and are
.}>t- (llD- 0~9"~ tI "If ;Eo oP IPl"" 1\" 1 C
'hfi
not to be entered into Ethiopia for home
"
lD-il1' ~}!:J' 'h1-\lD-lt- m1."1C oP~(t f0lJ1il1
consumption
pursuant to the Customs
1}:flD- iJ:J>sP~:
Proclamation by the supplier of the goods;
oP) hlltJ O:J'~ h"'"l"~"" ;JC 0""
+'I'''-~ Olt.,
'"
(d)
a supply of services directly in respect of
oP11.('o f "'(}m "1 ~ "l 1\->""
(i) movable property situated outside Ethiopia at
(i) "1~"l1\->-I: O"'(}mO"" 1.ff. h"-""f"k1
the time the services are rendered;
lD-Q;t.f., 0 l .,.,+.,,:J>7i 111l"":
(ii)
goods temporarily imported into Ethiopia
(ii) O~9"~tI "If ;Eo9"iJt-~ ~ oPlPl"" 01.ff.1
under Chapter 5 of the Customs
ce.,"" m1. "-""f"k 1 fDIJ.10- iJ:J>sP~:
Proclamation; or
(iii) "h"-""f"k1
m1.lD-6f.I" "1C 1\"-1\11(iii)
a supply of goods referred to in (a) or (b) of
iJ:J>sP~" 0 "'(}mlD- ""C~9" fDIJ.1i
L ).
the definition of "exported from Ethiopia" ,
04.1.~ (1\) (Ii) mf,9" (1\) (I) f"'oPl\h-l:
(e)
a
supply
of goods in the course of repairing,
iJ:J> sP~ ".}>CP"":
(oP) (ii) "'L~DIJ.
IP) flltJ
renovating, modifying, or treating any goods to
"'+'" 10-il "'+'" 1
I\DlJ.If111:flD- iJ:J>sP~ 1'1fi: iJ.('o."..,.: 0IJ?f?f1
which Sub-Article (2)(d)(ii) of this Article
mf,9" t'htl9"fi 00lJ .('ol"l ,1."" 1'.}>9" I\f, fDIJ.lD-ltapplies and the goods supplied
iJ:J>sP~ 'hfi
(i) are worled into, affixed to, attached to, or
(i)
O'h.,lltJ iJ:J>sP~ I\f, f"'l\m~:
f"'1mOD-:
otherwise form part of those other goods; or
mf,9" f'h.,IlV- "11~
h'h"IlV- ;JC f""'~
(ii) being consumable goods, become unusable
flf). iJ:J>sP~:
or worthless as a direct result of being used in
(ii) 01'1fi OiJ.('o."..,.:00lJ?f?f1 mf,9" 00lJil.,.l1h1
that repair, renovation, modification, or
P't-sP~ ,1."" 1'.}>9" I\f, fOlJf,lD-lt- mf,9"
treatment process;
tI~~
~.?(,..,. .?UtIJ
"TC
MtmL1/.\tJ
UhAVIfJ1o' ,"'tfle:"
iJ:J>."J.~~'1+
~i "..,11-0'1+
~; , ;,J\h_f\~~Al\f1'fr..!)
ODf..n~f1''''.('' P't- "11.("
I1IJC~ t;Q.""e-. t~.M~1A-1, f"'~
v-1.;J- ODlPl+
~.nP,1.t"l'"
f~').Jfh:tAm- ;~tDh';/.\ +-Ott- 0"7.1OD+
"6"C' 1.1f. ~(a1', ,,:rrtJJ:o, f+lhl1:fm-1
1-ol.,."f
.
mad~.byar~~s~r~person to a registeredrecipientwho
. :willexporttf\e.goodsin zero-rated,if all of the following
conditions are met:
(a) the recipient exports the property as soon after the
g<><;>ds
are delivered
recipient;
1~' ~iti
Ii :1""1"'''''1 +111121"''''
2006
~m-u
.
~) u,}l\~ h+~ f:"~')itrC:" h1~"A-""" ~"..,.
Ii) l\:"~")itrc"" ~;Jtt:l1~hll'~ 1\1A.,.w-'f
,.' .
oit.,..,.c 119'':f')h'ilJ:J>sP'f1.(i) .,."m- m~fO y.,.". hliA fl\.:r-f-kn
,.
..,11""'h!tCfI1 f-L'/.~A:II"'"
h~"""A-l
mQ;1. htf ~ h,) Y: (1? hh. .}of-kl;iClJe"l
",
'
'
,.
.'.
.'
..1'"
'.,
~ ' . ~.
""
'~'. .
"
plaCein Ethiopia;or
1A'
In:~ ~t-I:\
~;MfI",;Jtl.1IJ
Me
Xii
2007
1X-Jln:~ ~I..t-A
~Jl""
Iin~
Ii,"',
""}~
f"}"'~
JP~
38.
I-
U) "'11"-1: OOD"}.,.".,.ia
""
f"7.1~"} ~C~:,.
1\)
th)
c-
~-
}-
"*9" 1\1D-1'"7~l'"
:"Cb OD.,.fC
j-
hlJ'~
f.,."I\LI\""
(atlJ4 10. f"7.1 OD~Q;1,1D-")~ "}:,.ia.4>(\
~fa- ~") "l1118~ ODI.l.,. "iaL" 1. ""IJ'"}9"1I
11\"}
:!;- f~C?f ODt."""} "7ia"'''I\~ oODi.,.".,.ia
""
~C~..,. "7ia"'''I\~
.,.1.C1- ""m(a~u
IJ'tj9"
~fa-"} :fit- OD"}.,.".,.ia ~iah;l':f
~lia f"'tn"li
ODt.:""} hOD"'~I~=6 ~lJ' hbi1-fo=t: ;JC f"7ia"'''I\~
.,...,flC OOD"}.,.".,.ia
11\"} ~C~:,. "7ia"'''I\~
""
"1J'lJ'Au
1931I1December,2002-Page2008
the supply.
3) A going concern is an income-producing activity
4)
1K' liti
oou'.,.".,.h
i'
Iin~
~.9".
I'
IIi' 0ou,.,.
9)
1931I1December,2002-Page2009
of a going concern.
10) The 21-day period within which the notice must be filed
is determined under the time of supply rules in Article
11 of the Proclamation.
11) If the transferee previously was not a registered person,
the supply can qualify for zero rating only if the
transferee is registered by the date the transfer takes
place.
12) If the parties file the required notice and the transfer
does not qualify as .a zero-rated supply of a going
concern under Article 7, Sub-Article (2)(d) of the
Proclamtion, the consideration charged for the supply is
treated as being exclusive of VAT, the transfer is
subject to tax, and the transferee can claim a tax credit to
values, except that this rule does not apply to goods for
Ii'
"I\q:fm-II
t!)ji-
tlPtIPtl
f"7lD-tlJ"" P'AtlJ1
39.
f"7.l~
tlDtlPtl
Page2010
Directives
1.1~ f"7.flljO"" +1
f,tJ 1.111 1\CP:(. hfllj ri..,. +1 "f..?"r: ffllj f,tflj A:I
~1..t-I\'e
Jl'l"ht-l1.1'e
tT11l\.h
m c}>I\f, "7.t"'''''C
{lcnc;