The Value Added Tax (VAT) and sales tax are indirect tax systems of consumption taxes. … Though it operated for more than four decades, sales tax was formally introduced in Ethiopia in 1993 by the Proclamation No 68/1993 and until its abolition with replacing by VAT it passes through several amendments.
How does VAT work in Ethiopia?
There are two tax rates applicable for VAT in Ethiopia: 15 percent, which is the standard VAT rate applicable to all taxable goods and services, zero rate applicable to a certain category of goods and services including exports among others and exemption on food staff, agricultural, education, health and the like, as …
What is VAT tax in Ethiopia?
VAT is levied on the supply of goods and services in Ethiopia and on imports. … The standard rate of VAT is 15%. However, exports are zero rated. Registration for VAT is required for persons making taxable transactions greater than ETB 500,000 at the end of any period of 12 calendar months.
What triggers the introduction of VAT in Ethiopia?
Ethiopia introduced value added tax (VAT) in the year 2003 as a replacement to sales tax. … This may be caused by factors including poor VAT administration, i.e., the incapacity of tax authorities to implement the attributes of the tax in practice.
How do you define VAT?
A value-added tax (VAT) is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. The amount of VAT that the user pays is on the cost of the product, less any of the costs of materials used in the product that have already been taxed.
How do I register for VAT in Ethiopia?
How to Register Value Added Tax (VAT) Number in Ethiopia
- Have the required information and documents. …
- Locate the institution that registers VAT number. …
- File application for VAT number registration. …
- Collect your VAT number registration certificate. …
- Refer the relevant legal documents if you would like to learn more.
How do I calculate 15 VAT in Ethiopia?
- Solution : GST % = 15. Amount = 25000.
- Step 1 : GST Price = (25000 * 15 ) / 100. = 3750 Br.
- Step 2 : Net Price = 25000 + 3750. = 28750 Br. Hence the VAT Price is 3750 Br and Net Price is 28750 Br.
How much is Ethiopian tax?
The Sales Tax Rate in Ethiopia stands at 15 percent.
How many types of taxes are there in Ethiopia?
The Ethiopian tax system comprises direct and indirect taxes. Direct taxes include personal income tax, rental tax, withholding tax, and corporation tax, among others. The main types of indirect taxes are VAT, customs duty, excise and turn over taxes. Main taxes are summarized in the table below.
What are the basic problems of VAT administration in Ethiopia?
The study paper discovered that lack of awareness about vat, Laws and procedures not clear and simple, Fraud off tax collectors and Unwillingness of tax payers to register for VAT are the main challenge in Vat implementation and Consumers unwillingness to buy goods and services with VAT, Poor tax enforcement capacity …
How do you solve Value Added Tax?
Value Added Tax Payable is normally computed as follows:
- Computing Net VAT Payable on VAT “exclusive” Sales/Receipts. Total Output Tax Due or Total Vatable Sales/Receipts x 12% …
- Computing Net VAT Payable on VAT “inclusive” Sales/Receipts. Total Output Tax Due or Total Vatable Sales / 1.12 x 12%
What are VAT refunds?
What is a VAT refund? A VAT refund is the reimbursement of the VAT that you paid on goods purchased in Europe as a non-resident. If the product you bought included 20% of VAT, you can get the amount corresponding to this consumer tax paid back to you when you leave the territory.
What is VAT example?
A dealer pays VAT by deducting the tax paid on purchases (input tax) from his tax collected on sales (output tax). In other words, VAT = Output Tax – Input Tax. For example: A dealer pays Rs. 10.00 @ 10% on his purchase price of goods valued Rs. … 10.00 to his seller while purchasing those goods.
What are the two types of VAT?
VAT has two components, viz.
- Output VAT.
- Input VAT.
Why is VAT used?
VAT is a form of consumption tax – that is a tax applied to purchases of goods or services and other ‘taxable supplies’. For a business, VAT plays an important role and can be charged on a range of your goods and services. Charities will have different rules governing their VAT.