Ethiopia’s Ministry of Finance has clarified the implementation of the Income Tax Proclamation No. 1395/2025, easing concerns among wholesalers over the minimum alternative tax by linking it to actual profit margins rather than total sales.

The Ministry said the revised interpretation aims to make tax calculations more equitable and reflective of real business performance. Under the new approach, when a wholesaler’s selling price and profit margin are explicitly defined in a contract with a manufacturer or importer, the minimum alternative tax will apply only to the agreed profit margin instead of the total sales revenue.

Officials indicated that this change provides substantial relief to businesses that had struggled with the previously imposed 15 percent minimum profit margin requirement. The Ministry noted that the adjustment is intended to correct ambiguities in the earlier enforcement of the law and ensure fair treatment of taxpayers.

However, to benefit from this new calculation method, wholesalers must submit legal documentation to tax authorities verifying the contractual agreement that specifies both the selling price and profit margin.

The Ministry stated that the clarification precedes the final approval of the enforcement directive by the Council of Ministers, and serves to maintain transparency and consistency during the transition.