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Rental Income Tax in Ethiopia


Tax Laws Tax Regulations

Ethiopian Rental Income Tax

Ethiopian Rental Income Tax Made Easy To Understand

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Ethiopian Revenue & Customs Authority (ERCA)


Income Tax Proclamation No. 286/2002


Rental of buildings


Income tax is imposed on the income from rental of buildings and collected at the following rates:

1. On income of bodies (share companies, plc's for example) thirty percent (30%) of taxable income,

2. On income of persons according to Schedule B (shown below) of the Income Tax Proclamation No. 286/2002


Taxable Income from Rental


(per year)

Income Tax payable

From Birr

to Birr

0

1800

Exempted Thresh-hold

1801

7800

10%

7801

16800

15%

16801

28200

20%

28201

42600

25%

42601

60000

30%

Over 60000

35%


Income from rental of building is calculated as follows:


If the tax payer leased furnished quarters, the amounts received attributable to the lease of furniture and equipment is included in the income.

Sub-lessors pay the tax on the difference between income from sub-leasing and the rent paid to the lessor, provided that the amount received from the sub-lessor is greater than the amount payable to the lessor.


Deductions


Deductions apply in computing taxable income:

For taxpayers not maintaining books of account; taxes paid (except income taxes) with respect to the land and buildings being leased, and one fifth (1/5) of the gross income received as rent for buildings, furniture and equipment as an allowance for repairs, maintenance and depreciation of such buildings, furniture and equipment.

For taxpayers maintaining books of account, the expenses incurred in earning, securing, and maintaining rental income. Deductible expenses include (but are not limited to) the cost of lease (rent) of land, repairs, maintenance, and depreciation of buildings, furniture and equipment as well as interest on bank loans and insurance premiums.


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