The Ethiopian Ministry of Finance has introduced a draft income tax regulation aimed at taxing individuals residing in Ethiopia who earn income through digital platforms, freelance work, or remote employment. This proposed regulation seeks to modernize the country’s tax system by incorporating the rapidly growing gig economy and digital content creation sector into the national tax base.
Under the draft regulation, any Ethiopian resident earning income from domestic or foreign sources through freelance services or digital content creation will be subject to income tax. This applies regardless of whether the income is received in cash or in kind. Additionally, the proposal requires digital content creators and freelancers to maintain accurate and complete financial records of their earnings.
Those who fail to keep proper records may have their tax obligations estimated through presumptive taxation, where the tax authority determines income based on established guidelines. The draft regulation also introduces new data reporting requirements for companies and platforms that facilitate payments. Fintech firms and other payment intermediaries will be required to submit quarterly reports to the tax authority. These reports must include the creator’s name, address, SIM card information, IP address, and the total amount paid to the individual.
Moreover, the regulation proposes adjustments affecting the banking sector, allowing banks to deduct up to 80% of their loss reserve accounts as a deductible expense. This is contingent on the reserves being calculated according to standards set by the National Bank of Ethiopia. The draft also states that the annual gross income threshold for Category “B” taxpayers will be determined through market studies conducted by the tax authority every three years.
Additionally, the proposal includes several tax exemptions, such as interest or profits earned from government bonds and treasury bills, interest on foreign loans obtained by airlines, and royalty payments related to aircraft leases. This draft regulation follows the recent amendment of Income Tax Proclamation No. 1395/2025, which formally introduced “Digital Content Creation” as a taxable business category in Ethiopia.
