Addis Ababa — Ethiopia’s Ministry of Finance has issued a directive supporting income tax exemptions for investors operating in free trade zones, in a move that could strengthen the tax case for import-based businesses supplying manufacturers and other investors.
In a letter addressed to the Ministry of Revenue and copied to the Ethiopian Investment Commission, the Ministry of Finance cited Article 12(1) of Council of Ministers Regulation No. 586/2018 on Tax Incentives as the legal basis for the measure.
The ministry said the regulation allows it to issue additional guidelines for investors in sectors not explicitly covered in the regulation, provided there is “sufficient economic justification” and the purpose of the regulation has been achieved.
According to the letter, investors engaged in import activities in free trade zones should be encouraged because they help maintain the flow of production and service delivery, prevent input shortages, and support manufacturers by supplying inputs and other goods.
The ministry therefore stated that investors operating in free trade zones who import goods from abroad and market them are exempt from income tax on the taxable income earned from those imported and marketed goods.
The document urges the Ministry of Revenue to implement the measure accordingly.
The letter is signed by Ahmed Shide, Minister, and bears reference to Regulation No. 586/2018, indicating the exemption is tied to Ethiopia’s broader tax incentive framework for investment.
Why it matters?
The directive signals official support for extending tax incentives beyond manufacturing into free-trade-zone import operations, especially where those businesses are positioned as supply-chain enablers for production. That could improve the commercial attractiveness of free trade zones and lower the tax burden for qualifying importers serving Ethiopia’s industrial base.