Ethiopia Drafts Rules to Tighten Oversight of Investment Tax Incentives

Ethiopia is drafting a directive to tighten oversight of investment incentives, requiring investors to sign performance agreements, maintain separate accounts for each project and submit annual reports before benefiting from tax and customs exemptions.

The Ministry of Finance outlined the proposed requirements during a consultation on the draft directive, which is intended to implement the investment incentives regulation, protect government revenue and establish transparent procedures for granting incentives.

Under the proposed rules, investors would be required to use duty-free imported goods exclusively for their intended purposes and maintain project-specific financial records. The directive would also establish monitoring and accountability mechanisms and provide for action against investors and other parties that fail to meet their obligations or commit violations.

The ministry said the directive aims to eliminate ineffective tax incentives, reduce tax expenditure and improve government revenue. The additional revenue would help finance infrastructure development, which the ministry identified as part of efforts to create a more favourable environment for investment.

The draft seeks to consolidate development-related incentives under a unified framework, while strengthening controls over how beneficiaries access and use tax and customs concessions.

The proposed requirements would introduce additional compliance obligations for investors benefiting from incentives, including performance commitments, annual reporting and restrictions on the use of exempted imports. The ministry has not specified when the directive will be finalised or take effect.

Source: FSX Business News