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INCOME TAX REGULATION NO. 78/2002

 COUNCIL OF MINISTERS REGULATIONS NO. 78/2002 REGULATIONS ISSUED

PURSUANT TO THE INCOME TAX PROCLAMATION

These Regulations are issued by the council of Ministers pursuant to Article 5 of the

Definitions of Powers and Duties of the Executive Organs of the Federal Democratic

Republic of Ethiopia Proclamation No. 4/1995 (as amended) and Article 117 of the

Income Tax Proclamation No. 286/2002     

PART I

General

1.    Short Title

These Regulations may be cited as the "council of Ministers Income Tax Regulations No. 78/2002.

2.    Definitions

1.    In these Regulations:

a)   "Proclamation" means the Income Tax Proclamation No.286/2002.

b)   " Tax Authority" shall mean the Federal Inland Revenue authority Head Office or any of its branch offices

established in any part of Ethiopia and the tax authorities of the regional states;

2.    A word or term in these Regulations shall have the same meaning that it has in the Proclamation;

PART II

Tax Payable Under Schedule "A"

3.    Income Exempt from Tax

       The following categories of payments in cash or benefits in kind shall be excluded from computation of income taxable

       under Schedule" A";

a)  Amounts paid by employers to cover the actual cost of medical treatment of employees;

b)  Allowances in lieu of means of transportation granted to employees under contract of employment;

c)  Hadship allowance;

d)  Amounts paid to employees in reimbursement of traveling expenses incurred on duty;

e)  Amounts of traveling expense paid to employees recruited from elsewhere than the place of employment on joining

and completion of employment or in case of foreigners traveling expenses from or to their country, provided that such

payment are made pursuant to specific provisions of the contract;

f)   Allowances paid to members and secretaries of boards of public enterprises and public bodies as well as to members

and secretaries of study groups set up by the Federal or Regional Government;

g)  Income of persons employed for domestic duties;

h)  The Tax Authority is empowered to determine the amount of payments specified under Article 3(b), )d) and (e);

4.    Adding Tax on Income

If the tax on income from employment, instead of being deducted from the salary or wage of the employee, is paid by the

employer in whole or in part, the amount so paid shall be added to the taxable income and shall be considered as part thereof.

PART III

Tax Payable Under Schedule "B"

5.   Taxable Income

 

Pursuant to Part III of the Proclamation, taxable income from sources chargeable under Schedule "B" shall be calculated

as follows:

1.    Gross income shall include:

a)   All payments in cash and all benefits in kind received by the lessor from the lessee;

b)   All payments made by the lessee on behalf of the less0r according to the contract of lease;

c)   The value of any renovation or improvement made under the contract of lease to the land or building, where the

cost of such renovation or improvement was borne by the lessee in addition to rent payable to the lessor;

 

2.   In calculating taxable income, only those items mentioned under Article 16 (1) (C) of the Proclamation shall be

deductible from gross income.

 

 6.  Advance Payments

 

Unless the tax payer maintains books of account, if the amount of rent paid to the lessor or sub-lessor covers a period longer

than one(1) year, the total amount of income from such rent shall be attributable to the fiscal year in which the payment was

made, but the tax on such income payable for said fiscal year shall be computed by prorating the taxable income over the

number of years covered by the amount paid.

             

7.   Business Lease

           

Income from the lease of business, including goods, equipments and buildings which are part of the normal operation of a business, shall be taxable under Schedule "C"