September 23, 2021

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What Is Withholding ? Who Has To Pay?

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Withholding tax is a type of tax that is deducted from the payroll, not from the collection account. It is a tax that is deducted from the account when a person makes a transaction by making an account in the law. With Holdingstax also includes a tax deduction from self-income. Accordingly, both the person receiving the income and the tax deductible person pays the income.
What Is Withholding in Ethiopia ?

Withholding tax

Withholding tax is a type of tax that is deducted from the payroll, not from the collection account. It is a tax that is deducted from the account when a person makes a transaction by making an account in the law. With Holdingstax also includes a tax deduction from self-income. Accordingly, both the person receiving the income and the tax deductible person pays the income.

The bodies responsible for deducting taxes from the participant’s account
The following are the people who are required to deduct tax from their payment at the time of purchase:

▪ Lawful corporations, corporations, limited liability corporations, corporations, cooperatives, etc.
▪ Public, Federal, Regional, Addis Ababa City Administration and Dire Dawa Administration
▪ For-profit organizations – associations and religious organizations established for various non-profit organizations;
▪ Non-governmental organizations (NGOs): “Ethiopian Charities” or “Ethiopian Associations” or similar organizations established abroad in Ethiopia in accordance with the Civil Society Proclamation;
▪ The Ethiopian Commodity Exchange (ECX) on behalf of the buyer in connection with the transaction through the Commodity Exchange;
▪ Individual taxpayers who are responsible for deducting profit margins tax from their paid account
▪ Senior taxpayers engaged in the following business sectors are required to deduct tax, regardless of their annual sales.

➢ Any star hotel or any resort;
➢ Contracts 1 to 4
➢ Any real estate developer;
➢ Food manufacturing industries;
➢ Any individual who buys in the Ethiopian Commodity Exchange is a taxpayer for the transaction made through the Commodity Exchange;
➢ Hospitals and outpatient clinics in accordance with the requirements of the Ministry of Health;
➢ Universities and colleges as well
➢ Any individual taxpayer who receives and distributes goods from manufacturing industries.

Non-tax exempt entities:

The following are not required to deduct tax from your payment at the time of purchase.

❖ Micro Enterprises:
❖ Exporters (only for inputs for export products) established by diplomatic and international agreements, foreign diplomatic consular missions, embassies, UN bodies and similar diplomatic bodies;
❖ Individual taxpayers outside of the individual taxpayers who are required to pre-tax under the directive issued by the Ministry of Revenue.

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