Ethiopian Investment Commission (“EIC”), issued an amendment titled as “Amendments to the Investment Incentive Regulation” (“The Regulation”) on January 14, 2025, introducing key changes to tax exemptions, customs duties, and mining incentives…
The amendment raises employment thresholds for tax exemptions, permits duty-free importation of certain vehicles, and allows additional benefits for strategic mining operations.
Key Changes Introduced
- Higher employment thresholds for income tax exemption to stimulate job creation:
the amendment significantly raises the eligibility threshold for income tax exemption incentives granted to investors that facilitate overseas employment for qualified Ethiopians. Under the previous Regulation exemptions were granted on a tiered basis, starting with a one-year exemption for employing 100 to 300 individuals, and scaling up to three years for those employing over 501 workers. The amendment significantly raises these thresholds. The new framework requires a minimum of 2,000 to 3,000 employees for the initial one-year exemption, while the highest tier -a three-year exemption-applies only to businesses employing more than 5,000 Ethiopians.
- Exemptions of Motor Vehicles from Custom Duties: Under previous Regulation, the Ministry of Finance (“the Ministry”) could grant total or partial exemptions from custom duties for vehicles used in investment projects by way of a Directive, except for pickup and station wagon vehicles. While this structure remains largely unchanged, anew sub-article introduces a notable exception. Subject to approval by the Ethiopian Investment Board, the Ministry may now grant duty-free importation of pickup and station wagon vehicles. This exemption specifically benefits companies operating in the mining, petroleum, agriculture, tourism, and construction sectors in remote areas of Ethiopia. By allowing duty-free access to these vehicle types under certain conditions, the amendment aims to support investment in geographically challenging regions.
- New Authority to Grant Incentives for Mining Sector Investment: The amendment empowers the Ethiopian Investment Board to grant additional benefits to companies engaged in strategic mining and petroleum operations. It also provides that exemptions from customs duties and taxes granted under agreements signed before the amendment’s effective date remain in effect, preserving incentives for existing investments.
