The Federal Council of Ministers in its 10th regular session held on 06 August 2022 has introduced a Regulation that imposes Social Welfare Levy on imported goods which will be in force upon official publication of the Regulation in the Federal Negarit Gazette.
The Purpose and Content of SWL Regulation
The commonly applicable taxes on imported goods in Ethiopia include: Customs Duty, Excise Tax, VAT, Surtax, and Withholding tax. Given the urgency to increase fiscal space to enable the rehabilitation and construction of conflict-ridden regions, the government is working on increasing tax revenues, hence - the introduction of this Social Welfare Levy. The purpose of the Social Welfare Levy is therefore “to fulfil the commitment of the Government to provide and finance education, health and other social services.”
The Social Welfare Levy would be levied and collected on all types of goods imported into the country save for persons and organizations with diplomatic privileges and goods that are subject to surtax as per the Import Sur-Tax Regulation No. 133/2007.
The Levy would be collected at the rate of 3% of the aggregate cost, insurance and freight (CIF) value of the goods rather than on the value of the goods. This resembles the 3% Withholding Tax that is currently paid on goods imported for commercial use. Accordingly, other payable duty and taxes on imported goods such as Customs Duty, Excise tax, VAT and Surtax will not be taken into account to form the basis for computation of the Social Welfare Levy.
The information contained in this legal update is based on the draft regulation. The official Regulation is yet to be published on Federal Negarit Gazette. The information is for general information purposes only. Nothing in this legal update is intended as legal advice.