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10. INCENTIVES AND SPECIAL REGIMES

To encourage investments, employment, exports etc. government of Eritrea provides various incentives to companies / investors with preferential investment sectors / areas as follows:

Mining

Following incentives are available for companies engaged in mining activities or holding mining license:

  • Assets are depreciated on straight line method over a period of 4 years which is an allowable expense for tax purposes
  • 5% of gross income is allowed as deduction provided the same is re-invested either in mining activities or in other approved investments in Eritrea
  • Carry forward of operating losses for a period of 10 years subject to certain conditions
  • Holders of mining license and their contractors are eligible for reduced import duty of 0.5% on equipment, machinery, vehicles and spare parts required for mining operations
  • Exemption from municipal taxes for holders of mining license
  • No withholding and service tax on the acquisition of equipment, freight and mobilization cost
  • No withholding tax on dividends

Free Zones

Free Zones are developed by the government for the primary reason to boost exports, provide employment opportunities, to develop a know-how technology, to develop the human resource capacity, and to enhance foreign trade and exchange.

Companies engaged in developing / managing free zones or establish their industrial / commercial organizations in approved free zones are eligible for following incentives:

  • No taxes on dividends declared
  • Exemption from CIT, personal income tax and any tax on profits
  • Tax exemption on bank interest from bank accounts

General Incentives and Guarantees

Duties and taxes on imports and exports

  • Capital goods, intermediates, industrial spare parts and raw materials are subject to reduced customs duty of 2%
  • Reduced sales tax of 3% on raw materials and intermediate inputs
  • Rebate on sales tax on all materials and inputs used for producing goods for export
  • No export duties and sales taxes on export of products