Ethiopia has expanded its value added tax (VAT) system, requiring a wider range of businesses and professional service providers to register and comply with the tax.

Under Directive No. 1104/2025, published by the Ministry of Finance, all Category “A” taxpayers, those obliged to maintain formal accounting records, and voluntary bookkeepers must register for VAT. The directive also applies to taxpayers whose combined turnover from taxable and exempt transactions exceeds two million birr.

A significant change extends VAT registration to professional service providers with annual turnover below 2 million birr, unless they fall under Category “B” taxpayers defined in the income tax law. Officials say the measure aims to improve fairness and compliance in the application of VAT, particularly for businesses with mixed taxable and exempt supplies.

Existing taxpayers covered by the directive must register within 30 days of its entry into force. Once registered, they are required to collect VAT on all taxable goods and services supplied to the market.

The directive, issued under the authority of the 2024 VAT Proclamation, reflects Ethiopia’s broader effort to strengthen domestic revenue collection amid rising fiscal pressures.