COUNCIL OF MINISTERS REGULATION No. 270/2012 DOWNLOAD (.pdf)
COUNCIL OF MINISTERS REGULATION ON INVESTMENT INCENTIVES AND INVESTMENT AREAS RESERVED FOR DOMESTIC INVESTORS
This Regulation is issued by the Council of Ministers Pursuant to Article 5 of the Definition of Powers and Duties of the Executive Organs of the Federal Democratic Republic of Ethiopia Proclamation No. 691/2010 and Article 39 of the Investment Proclamation No.769/2012.
PART ONE GENERAL
1. Short Title
This Regulation may be cited as the “Investment Incentives and Investment Areas Reserved for Domestic Investors Council of Ministers Regulation No. 270/2012”.
In this Regulation unless the context otherwise requires:
1/ “Proclamation” means the Investment Proclamation No. 769/2012;
2/ the definitions provided for in Article 2 of the Proclamation shall also apply to this Regulation;
3/ “Agency” means the Ethiopian Investment Agency re-established under the Council of Ministers Regulation No. 269/2012;
4/”Board” means the Investment Board referred to in
Article 6(1) of the Council of Ministers Regulation No. 269/2012;
5/”capital goods” means machinery, equipment and their accessories needed to produce goods or render services and include workshop and laboratory machinery and equipment necessary for same;
6/ “construction material” includes basic inputs necessary for the construction of investment projects;
7/ “customs duty” includes indirect taxes levied on imported goods;
8/ “income tax” means tax levied on profits from business and categorized as the revenue of the federal government, regional governments or as their joint revenue.
3. Investment Areas Reserved for Domestic Investors
1/ The following areas of investment are exclusively reserved for Ethiopian nationals:
a) banking, insurance and micro-credit and saving services;
b) packaging, forwarding and shipping agency services;
c) broadcasting service;
d) mass media services;
e) attorney and legal consultancy services;
f) preparation of indigenous traditional medicines;
g) advertisement, promotion and translation works;
h) air transport services using aircraft with a seating capacity up to 50 passengers.
2/ For the purpose of sub-article (1) of this Article, a business organization may have Ethiopian nationality, provided that its total capital is owned by Ethiopian nationals.
4. Investment Areas Allowed for Foreign Investors
1/A foreign investor shall be allowed to invest in areas of investment specified in the Schedule attached hereto, except those areas provided for in number 1.3.3, 1.4.2, 1.7, 1.11.3, 1.11.4, 5.3, 6.2, 8.2,9.2,9.3 and 12 of the Schedule.
2/ Notwithstanding the provisions of sub-article (1) of this Article, the Board may allow foreign investors to invest in areas other than those specified in the Schedule, except those areas provided for in Article 6 (1) and (2) of the Proclamation and Article 3(1) of this Regulation.
3/ A foreign investor who invests pursuant to sub-article (1) or (2) of this Article may acquire a private commercial road transport vehicle necessary for his business operations.
PART TWO INVESTMENT INCENTIVES
EXEMPTION FROM INCOME TAX
5. Income Tax Exemption for New Enterprise
1/ Any investor who invests to establish a new enterprise shall be entitled to income tax exemption as provided for in the Schedule attached hereto.
2/Any investor who invests to establish a new enterprise in:
a) the State of Gambela Peoples;
b) the State of BenshangullGumuz;
c) the State of Afar (except in areas within 15 kilo meters right and left of the Awash River);
d) the State of Somali;
e) Guji and Borena Zones of the State ofOromia; or
f) South Omo Zone, Segen (Derashe, Amaro, Konso and Burji) Area Peoples Zone, Bench-Maji Zone, Sheka Zone, Dawro Zone, Kaffa Zone or Konta and Basketo Special Woredas of the State of Southern Nations, Nationalities and Peoples; shall be entitled to an income tax deduction of 30% for three consecutive years after the expiry of the income tax exemption period specified in the Schedule attached hereto.
6. Income Tax Exemption for Expansion or Upgrading of Existing Enterprise
Any investor expanding or upgrading his existing enterprise pursuant to Article 2(8) of the Proclamation shall, with respect to the additional income generated by the expansion or upgrading, be entitled to income tax exemption as provided for in the Schedule attached hereto .
7. Additional Income Tax Exemption for Investors Exporting Products or Services
Any investor who exports or supplies to an exporter as production or service input, at least 60% of his products or services shall be entitled to income tax exemption for two years in addition to the exemption provided for in the Schedule attached hereto.
8. Condition for Reducing Incentive
Notwithstanding the provisions of Article 5, 6 and 7 of this Regulation, the income tax exemption to be granted to an investor who engages in an area of manufacturing industry or information and communication technology development, without constructing his own production or service rendering building, shall be one year lesser than what is provided for in the Schedule attached hereto.
9. Duty to Submit Information
An investor shall be entitled to the exemptions specified in Article 5, 6 and 7 of this Regulation provided that he submits all the required information to the relevant tax authority.
10. Commencement of Period of Income Tax Exemption
1/ The period of exemption from income tax shall begin from the commencement date of production or provision of service by the investor.
2/ For the implementation of sub-article (I) of this
Article, the appropriate investment organ shall notify the relevant tax collecting authority the commencement date of production or provision of service by the investor.
11. Declaration of Income During Income Tax Exemption Period
An investor who is entitled to income tax exemption shall declare, every year, the income he has obtained during the exemption J1eriod to the appropriate tax collecting authority.
12. Loss Carry Forward
1/ An investor who has incurred loss within the period of income tax exemption shall be allowed to carry forward such loss for half of the income tax exemption period after the expiry of such period.
2/ Notwithstanding the provisions of sub-article (I) of this Article, for the purpose of calculating the period of loss carry forward, a half-year period shall be considered as a full income tax period.
3/ Notwithstanding the provisions of sub-article (I) and (2) of th is Article, an investor who has incurred loss during the income tax exemption period may not be allowed to carry forward such loss for more than five income tax period.
EXEMPTION FROM CUSTOMS DUTY
13. Exemption of Capital Goods and Construction Materials from Customs Duty
1/ Any investor engaged in one of the areas of investment specified in the Schedule attached hereto, except those specified under numbers 7, I I, 14 and 15 of the Schedule, may import duty-free capital goods and construction materials necessary for the establishment of a new enterprise or the expansion or upgrading of an existing enterprise.
2/ For the implementation of sub-article ( 1) of this Article, the investor shall submit, in advance, the list of capital goods and construction materials to be imported duty-free and get approval of same from the appropriate investment organ.
3/ If an investor entitled to a duty-free incentive buys capital goods or construction materials from local manufacturing industries, he shall be refunded with the customs duty paid for the raw materials or components used as inputs for the production of such goods.
4/ An investor eligible to a duty-free incentive pursuant to this Article, shall be allowed to import spare parts the value of which is not greater than 15% of the total value of the capital goods within five years from the date of commissioning of his project.
14. Exemption of Motor Vehicles from Customs Duties
The total or partial exemptions of motor vehicles from customs duties shall be determined by directive to be issued by the Board based on the types and nature of investment projects.
15. Transfer of Duty-Free Imported Goods
1/ Capital goods or construction materials or motor vehicles imported free of customs duty may be transferred to persons with similar duty-free privileges.
2/ Notwithstanding the provision of sub-article (I) of this Article, the capital goods or construction materials or motor vehicles imported free of customs duty may be transferred, upon effecting payment of the appropriate customs duty, to persons having no similar duty-free privileges.
31The investor may re-export the duty-free imported capital goods or construction materials or motor vehicles.
4/Any investor who contravenes the provisions of this Article shall be punishable in accordance with the relevant provisions of the Customs Proclamation.
16. Repealed and Inapplicable Laws
1/ The Investment Incentives and Investment Areas
Reserved for Domestic Investors Council of Ministers Regulation NO.84/2003 (as amended) is hereby repealed.
2/ No regulation, directive or customary practice shall, in so far .as it is inconsistent with this Regulation, be applicable with respect to matters provided for in this Regulation.
17. Transitory Provisions
1/ Notwithstanding the provision of Article 16 of this Regulation, incentives granted pursuant to the Investment Incentives and Investment Areas Reserved for Domestic Investors Council of Ministers Regulation No. 84/2003 (as amended) and the directives issued there under shall continue to be effective.
2/ Where an investor eligible for incentives granted pursuant to the Investment Incentives and Investment Areas Reserved for Domestic Investors Council of Ministers Regulation NO.84/2003 (as amended) and directives issued there under has not yet exercised his right, opts instead to be a beneficiary of incentives provided for in this Regulation, he may notify the appropriate investment organ and be entitled thereto.
18. Effective Date
This Regulation shall come into force on the date of publication in the Federal Negarit Gazette.
Done at Addis Ababa, this 29th day of November, 2012
PRIME MINISTER OF THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA