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Tax on Royalty Payments in Ethiopia

Tax Laws Tax Regulations

Ethiopian Tax on Royalty Payments

Royalty Tax Payments in Ethiopia - Quick Facts

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Ethiopian Revenue & Customs Authority (ERCA)

Income Tax Proclamation No. 286/2002 is the basis of tax on royalties.

In Ethiopian income tax law royalty is defined to mean, "a payment of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work.

This is including cinematography films, and films or tapes for radio or television broadcasting, any patent, trade work, design or model, plan, secret formula or process, or for the use or for the right to use of any industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience."

Income Tax Proclamation No. 286/2002 is the basis of tax on royalties.

Tax on royalties is a flat rate of five percent (5%). The person who effects payment is required to withhold the foregoing tax and account to the Tax Authority within fifteen (15) days of the end of each calendar month, and each payment must be accompanied by a statement with respect to each taxpayer who received payments during the month.

The obligation of the payer to withhold tax has priority over all other obligations to withhold amounts from payments to a payee (the taxpayer).

Where the payer resides abroad and the recipient is a resident, the recipient will pay tax on the royalty income within the time limit set out in the Proclamation.

Tax on royalty payments is a final tax instead of a net income tax.

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