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6.5. Deduction of Cross-Border Payments and Non-Deductible Expenses

Generally, all business expenses are deductible, unless specifically disallowed. The following expense types are not deductible or have limited deductibility for Ethiopian tax purposes:

  • Personal expenses
  • Income tax and recoverable VAT
  • Entertainment expenses
  • Donations and gifts, unless allowed by prescribed authority
  • Punitive damages and penalties
  • Contribution to voluntary pension or provident fund exceeding 15% of monthly salary of employee
  • Interest payments in excess of rates prescribed by National Bank of Ethiopia and commercial banks increased by 2% points
  • Creation of provisions, reserves or special purpose funds, unless specifically allowed
  • Representation expenses in excess of 10% of salary of employees