Ethiopia Loosens Tax Net to Support Supply Chains

Mintesinot Nigussie

Ethiopia has granted income tax exemptions to investors engaged in import activities within free trade zones, extending fiscal incentives to support supply chains and ease the flow of goods into the domestic market. In a directive issued by the Ministry of Finance, authorities said businesses importing goods from abroad and supplying them to the local market from within free trade zones will be exempt from income tax on the revenue generated from those activities.

The measure is based on Council of Ministers Regulation No. 586/2026, which provides the ministry with authority to extend investment incentives beyond predefined categories when there is economic justification. The regulatory framework is part of a broader shift towards a more flexible incentive system aimed at aligning tax relief with industrial and trade priorities.

Ethiopia’s investment policy already provides a range of incentives, including income tax holidays for manufacturers operating in industrial parks and export-oriented sectors, as well as customs duty exemptions on capital goods used for investment establishment and expansion. The latest directive builds on this structure by incorporating import-linked activities within free trade zones into the incentive system.

The ministry said import-focused investors play a key role in ensuring the smooth supply of inputs to manufacturing investors and in supplying goods to the domestic market. “Investors engaged in import activities within free trade zones play a significant role in ensuring the smooth supply of inputs to manufacturing investors and in supplying other goods to the market. By helping maintain uninterrupted production and preventing disruptions in product supply, their contribution is considered substantial, and it is therefore deemed appropriate that they should be granted incentives,” the directive stated.

The directive, addressed to the Ministry of Revenues and the Ethiopian Investment Commission, also calls for the immediate implementation of the exemption. The move is expected to reduce costs for importers operating in free trade zones and improve the availability of inputs for local manufacturers.

Businesses in logistics, wholesale trade and manufacturing sectors are likely to benefit from the new tax relief, as it lowers the cost of bringing goods into the country and supports smoother supply chain operations.

The policy reflects the government’s efforts to make Ethiopia more attractive for investment in trade and logistics while addressing bottlenecks in the domestic supply chain. Officials believe the incentives will help prevent production disruptions and ensure steady availability of goods in the market.

Overall, the income tax exemption for import activities in free trade zones marks a significant step in Ethiopia’s push to strengthen its supply chain infrastructure and support broader economic activity.