The “new income tax proclamation 2017” is Ethiopia’s Income Tax (Amendment) Proclamation No. 1395/2017 in Ethiopian-calendar numbering. The Federal Negarit Gazette prints it in English as Proclamation No. 1395/2025. Published in Gazette No. 64 on 1 September 2025, it amends—not replaces—the Federal Income Tax Proclamation No. 979/2016. Its changes reach beyond salary tax brackets to rental and business schedules, digital income, withholding, tax administration and an alternative minimum tax. Different provisions have different commencement dates.
What changed in Ethiopia’s income tax law?
The amendment updates the personal income schedules and makes wider changes to how income is sourced, classified, reported and taxed. It also revises rules affecting businesses and withholding. The new rates are not a complete guide to a taxpayer’s liability: the applicable schedule depends on income type and taxpayer category, and other rules may affect the calculation.
- It replaces the monthly employment-income schedule and updates annual schedules for individual rental and business income.
- It treats certain income earned by nonresidents from digital services in Ethiopia as Ethiopian-source income and adds reporting obligations for qualifying online platforms.
- It revises technical-services and permanent-establishment provisions, and introduces an alternative minimum tax framework.
- It changes rules for other income categories, withholding and taxpayer administration.
What are the amended personal income tax schedules?
The following thresholds and rates are those set out in the 2025 Federal Negarit Gazette amendment. Employment income is measured monthly; rental and business income in the individual schedules is measured annually. These schedules are not interchangeable. The business schedule expressly excludes Category B taxpayers, and the personal schedules should not be applied to companies or other taxpayer categories without checking the law.
Monthly employment income
| Monthly employment income (ETB) | Schedule rate |
|---|---|
| Up to 2,000 | 0% |
| 2,001–4,000 | 15% |
| 4,001–7,000 | 20% |
| 7,001–10,000 | 25% |
| 10,001–14,000 | 30% |
| Above 14,000 | 35% |
Annual rental income and individual business income
| Annual taxable income (ETB) | Schedule rate |
|---|---|
| 0–24,000 | 0% |
| 24,001–48,000 | 15% |
| 48,001–84,000 | 20% |
| 84,001–120,000 | 25% |
| 120,001–168,000 | 30% |
| Above 168,000 | 35% |
The annual business schedule applies to individuals other than Category B taxpayers. The figures refer to taxable income, not automatically to gross receipts or total rent collected. Do not treat the rate beside a bracket as a flat rate on all income: determine taxable income and calculate liability under the statutory schedule and applicable rules.
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When do the amendments take effect?
The proclamation does not set one start date for every change. Its commencement provisions distinguish among types of tax and transactions:
| Provision | Commencement stated in the Gazette |
|---|---|
| Most amendment provisions | Income derived from 1 July 2017 E.C. |
| Alternative minimum tax | Income tax collected as of 8 July 2025 |
| Schedule D tax and transaction withholding under renumbered Article 97 | From 1 August 2017 E.C. |
The Gazette also provides that the former income-tax provisions, and repealed turnover-tax provisions, continue for the preceding tax year. Because the proclamation uses both Ethiopian-calendar dates and a Gregorian date, check the specific provision and the relevant income or transaction date rather than applying a single effective date to every case.
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How does the amendment treat digital services and creator income?
Income a nonresident earns by providing digital services in Ethiopia is treated as Ethiopian-source income under the amendment. The law also creates reporting duties for qualifying online platforms concerning creator income. The reporting threshold is to be set by directive; the proclamation itself does not establish a figure in the information summarized here.
Creators must include relevant digital-content income in their annual return whether or not a platform reports it. A platform’s reporting duty and a creator’s tax-return duty are distinct obligations. Whether particular income falls within the rule depends on the service, source and applicable implementing instruments.
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What changes affect technical services and permanent establishments?
The amendment defines technical services broadly. The listed areas include accounting, auditing, economic and investment, financial, legal, management, engineering, architectural, surveying, information-technology and social-affairs services, as well as similar professional services.
For some construction, assembly, installation and supervisory projects, the revised permanent-establishment duration threshold is more than 91 days during a tax year or any one-year period. That threshold is not a universal test for every nonresident or every service arrangement; the project type, activities and other statutory conditions matter.
What is the alternative minimum tax?
The amendment adds an alternative minimum tax mechanism, together with related credit rules and exceptions. It applies to income tax collected as of 8 July 2025, as stated in the Gazette’s commencement provision. The proclamation’s framework should not be reduced to a single universal minimum rate: application depends on the relevant article, taxpayer type, exceptions and available credits. Taxpayers should check the full text and applicable implementing rules before calculating an amount.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What other income and administration rules changed?
The amendment also addresses several income categories and tax procedures. It changes treatment or rates concerning royalties, dividends, interest, games-of-chance winnings, asset disposals, undistributed profit and repatriated profit, alongside withholding rules. The relevant rate and start date must be confirmed in the provision governing that income; the personal schedules above do not supply those rates.
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On administration, the proclamation adjusts declaration, advance-payment, withholding and information-sharing rules. It includes information and withholding processes for some employees of foreign missions and international organizations who do not have diplomatic privileges. These operational requirements can depend on the person’s status and the payer’s responsibilities.
Which version of the law should taxpayers consult?
Use the full text of Federal Negarit Gazette No. 64 as the primary source for the amendment’s number, publication date and provisions. Its English text identifies the instrument as Proclamation No. 1395/2025, published on 1 September 2025; its Ethiopian-calendar designation is 1395/2017. The Ministry of Justice’s English index record displays inconsistent metadata—Law ID 1395/2024 and date December 30, 2025—while its Amharic record identifies 1395/2017. For the proclamation number and publication date, the Gazette is the clearer source.
Read the amendment alongside the applicable regulations and directives. The Ministry of Finance’s Tax Compliance Guide for Foreign Investors in Ethiopia describes Regulation No. 410/2017 as providing implementation detail, including on employment income and depreciation, and explains that directives supplement the proclamation and regulations. That guide predates the 2025 amendment, so it is background rather than a current statement of tax rates or a consolidated version of the law.
What to check before applying a rate
- Identify the income type and whether the amount is monthly or annual taxable income.
- Confirm the taxpayer category; in particular, the individual business schedule excludes Category B taxpayers.
- Check the date the income was derived, tax collected or transaction took place against the commencement rule for the relevant article.
- Review the full amended provision and applicable regulation or directive, especially for digital income, withholding, technical services and alternative minimum tax.
- For a filing position, account for the taxpayer’s facts and any later applicable legal instruments.
The Gazette’s preamble says the amendment is intended to update rates to reflect current economic realities, broaden the tax base, improve administration of tax incentives and guard against aggressive tax avoidance and evasion. Those are stated objectives, not evidence by themselves of measured economic or revenue effects.
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