The 2025 Income Tax Amendments

To keep pace with the rapidly evolving digital landscape, the Federal Democratic Republic of Ethiopia recently enacted Proclamation No. 1395/2025. This amendment modernizes the 2016 Income Tax regime, specifically targeting digital services and enhancing the progressive nature of the tax system.

Strategic Updates for Taxpayers:

Digital Content Creation: The law now explicitly brings digital content creators and online service providers into the tax net. Income generated from digital platforms must be declared, reflecting the reality of today's service-oriented economy.

Revised Income Thresholds: In a move to protect low-income earners, the tax-free threshold for employment income has been increased. The new brackets are more progressive, with rates ranging from 0% to 35% for those earning over ETB 14,000.

Withholding and Advance Payments: Taxpayers are now required to pay 25% of their prior year’s tax as a quarterly advance. Additionally, the withholding rate for domestic payments has been adjusted from 2% to 3% for most entities.

Tax on Gains: The disposal of immovable property and shares now carries a capital gains tax of 15% and 30%, respectively, emphasizing the importance of accurate asset valuation during transfers.

Compliance with these new requirements is essential for both residents and non-resident entities operating within the Ethiopian jurisdiction.

For more inquiries, you may contact us at info@haftomlaw.com