Ethiopia is the 9th largest economy in Africa and has a 2nd biggest population of more than 100 Million people. The Ethiopian economy has grown at an average of 10% since 2010 and in 2012 Ethiopia was the Fastest Growing Economy in the world.

Addis Ababa is also the main air hub for Africa and the home of Ethiopian Airlines, which has won repeated recognition as the best airline in Africa. Ethiopian products have duty-free, quota-free access to the U.S. and EU markets under the African Growth and Opportunities Act (AGOA) and the Everything But Arms (EBA) initiative, respectively. Ethiopia enjoys also preferential access to key markets like Australia, Canada, Japan, Norway, Switzerland, China, India, Russia, the Republic of Korea, and Turkey.

These are the procedures to open a business in Ethiopia.

1. Initial Registration & Unique Company Name

Business owner (in case of PLC/share company) submits three options for the company name.

Location: Ministry of Trade or Trade Bureau at sub-city level

Process Overview

• Fill the physical forms and submit three options for the company name
• Pay the fees
• The government officer checks the digital system for duplicates and assigns a company name
• The government officer provides a letter with the registered company name

2. Memorandum, Article Of Association And Authenticating The Company

Business owner authenticates the Memorandum and Article of Association and the physical address of the business. Memorandum and Article of Authentication is applicable to PLC/share companies and is not for sole proprietors, who only need to provide their ID document for authenticating the company.

Location: Document Authentication and Registration Agency (DARA)

• Draft a Memorandum and Article of Association with shareholder agreement
• Fill the physical forms and submit along with the letter of the company name, proof of physical address and other relevant documents
• Pay the fees and receive a receipt and an appointment for the next day for authentication
• The business owners and manager (for PLC/share company) appear inperson along with the ID documents and receipt showing acknowledgement of submission. If the physical address proof is a lease agreement, the landlord needs to be present
• The government officer checks the validity of the documents submitted and the ID for each person present. Upon successful verification, the business owners and manager sign the Memorandum and Article of Association Optional.

3. Get a TIN

This is the first touch-point between businesses and revenue authorities for tax purposes. The business is liable to declare taxes (monthly, quarterly, yearly as applicable) even if they are not operational. The requirements to apply for a TIN will vary depending on the legal structure and turnover of the business. Sole proprietors apply personally and PLC/ share companies are represented by the manager. Since the manager’s biometric will be required to receive a TIN, they can only register for one company at a time. The TIN is allocated for business tax (sole proprietor) and corporate tax (PLC/Share Companies).

Location: TIN for all businesses are issued only at the sub-city (small taxpayers office)

• In person visit to the nearest sub-city office to fill a physical form, with guidance from staff
• Submit the form
• Register bio-metrics, photo, etc. for digital registration
• If server is down, visit another branch
• Finish registration and avail TIN and certificate

4. Commercial Registration

Business owner applies to register the company and obtain a commercial registration certificate which is mandatory to acquire before commencement of any commercial activity. After the commercial registration, the business is supposed to publish this information in a newspaper with a nationwide circulation, but this seldom happens. A business also needs to obtain the trade/business license within one year of receiving the commercial registration.

Location: Ministry of Trade or Trade Bureau at sub-city level

• Fill the physical forms and submit along with the Memorandum and Article of Association, authenticated physical address proof of the company address, TIN number certificate and other relevant documents
• Pay the fees
• The government officer reviews all the documents and, on successful verification, registers the company, issuing a commercial registration certificate to the business
• Optionally get a seal made. This is not a legal requirement but a common practice. It is a paid service and usually done through a private service provider
• Incase of Share holder companies, a capital deposit will be required.

5. Apply For Competency Certificate

Based on the nature and type of sector, some businesses might require a competency certificate before they apply for a trade/business license. Competency certificate is to prove that a business is competent and equipped to offer the particular services.

Location: Multiple agencies

• Fulfil all requirements (on a case by case basis) for proving competency in each of the relevant sectors
• Related agency/agencies will conduct an on-site examination of the business
• On fulfilment of all requirements, a competency certificate is provided to the business Optional

6. Apply For Trade License

Business owner needs to register for a trade/business license in order to become commercially operational. A business license, once issued, needs to be renewed every six months in a fiscal year.

Location: Ministry of Trade or Trade Bureau at sub-city level

• Fill the physical form and submit it along with the commercial registration certificate, TIN certificate and other relevant documents
• Submit a competency certificate if applicable (refer to step 6 for details)
• Pay the fees
• The government officer reviews all the documents and, on successful verification, issues the trade/business license.

7. Register For Pension And Income Tax For Employees

If business has hired employees, business declares and registers employees for pension and income tax.

Location: Federal tax office under Ministry of Revenue (for PLC/share companies) or Sub-city office under Regional Revenue Authority

Declaration: Fill a declaration form along with employee details and documents

Pension: Fill a separate form for pension. This form will be filled by every employee as well. Get a pension registration certificate and employee pension cards (Optional).

8. Renew Trade/Business And Other License

Business submits tax clearance letter to renew their trade/business license. Other licenses associated with the business maybe renewed if applicable, e.g. transport licence.

Location: City centre office under Trade Bureau or Trade Bureau at sub-city level

• Fill out a form and submit with relevant documents including tax clearance letter
• Obtain a renewed trade/business license

9. Get a Tax Account

Business registers for VAT (Value Added Tax) or TOT (Turnover Tax) and, if applicable, declares additional taxes like excise, profit, withholding and dividend tax. Few sectors like health, education, etc. are exempt from VAT/TOT. All other businesses register for VAT or TOT based on the following conditions:

TOT

• PLCs whose turnover is less than 1 million, declare monthly on actual
• Sole proprietors whose turnover is between 500,000 and 1 million, declare taxes quarterly on actual
• Sole proprietors whose turnover is less than 500,000, declare taxes on a presumptive estimate annually

VAT

• Voluntary VAT registration if 75% or more of businesses clients are VAT registered
• Turnover of more than 1 million in past or future year on a rolling basis

Location

• Federal tax office under Ministry of Revenue (for PLC/share companies)
• Sub-city office under Regional Revenue Authority (for sole proprietor with > 500K turnover)
• Woreda office under Regional Revenue Authority (for sole proprietor with < 500K turnover)
• Large taxpayers office (for businesses with annual turnover above 40M)
• Medium taxpayers office (for businesses with annual turnover from 5M to 40M)
• Merkato No. 1 and Merkato No. 2 taxpayers office (for traders in Merkato)

For TOT

• Provide trade license, TIN certificate and other documents
• Case officer enters data into back-end system. Digital system pulls information from the Trade Bureau and suggests TOT. The information is gathered from the availed documents and added into the SIGTAS (digital system used only by Tax Authority)
• Registration for TOT complete
• Verbal instructions by the case officer on tax requirements & payment. Collect brochure on the process of paying taxes if (optional)
• Apply and get permission to print invoices manually
• Apply and procure cash register from government approved supplier
• Install the cash register at your business premises
• Registering for additional taxes, if applicable is also done at this point

For VAT

• If VAT fill a separate VAT registration form, submit and register
• Avail VAT certificate
• Verbal instructions by the case officer on tax requirements and payment. Collect brochure on the process of paying taxes (optional)
• Apply and get permission to print invoices manually
• Apply and procure cash register from government approved supplier
• Install the cash register at your business premises
• Registering for additional taxes, if applicable is also done at this point

Conclusion

Starting a business in Ethiopia does not have to be expensive. You can start your own business with minimal investment and grow it over time. You can easily know what business you need to open if you know what Ethiopia exports and import.

Ethiopia primarily exports coffee, oil seeds, leather products, pulses, meat and meat products, fruits, vegetables, live animals, gold, flowers and electricity. Ethiopia majorly imports fertilizers, fuel and petroleum, tech products, capital goods and consumer goods. Remember to do your research, create a business plan, and stay committed to your goals.