JULY 2025 – ETHIOPIA
AMENDED INCOME TAX RATES 2025-2026
It is important that employers note the following:
Amendment of the Income Tax Proclamation
Ethiopia’s House of Peoples’ Representatives has approved an amendment to its Federal Income Tax Proclamation, now referred to as Income Tax Proclamation No. 1395/2017, replacing the previous Proclamation No. 979/2016. The amendment was passed during an emergency parliamentary session on 17 July 2025, with the changes officially taking effect from 7 July 2025.
The amended income tax rates and bands introduced under Proclamation No. 1395/2017 represent the final and legally binding tax structure applicable from 7 July 2025, which marks the start of the Ethiopian tax year 2018 E.C. Ethiopia follows its own calendar system, which is approximately seven to eight years behind the Gregorian calendar used internationally.
Among other provisions, the revised law introduces measures aimed at easing the tax burden on lower-income earners while strengthening tax administration and enforcement mechanisms. The employment income tax brackets have been updated, including a significant increase in the monthly tax-free threshold from ETB 600 to ETB 2,000. From a practical perspective, the revised tax rates shown below will apply to income earned from 1 July 2025 onwards.
To view the Income Tax Proclamation No. 1395/2017, follow the link.
Please note: The first half of the document is in Amharic (the official language), while the second half is in English.
