DOING BUSINESS IN ETHIOPIA IN 2017
Since 2003, Healy Consultants Group PLC has assisted our Clients with starting companies in Ethiopia. Our services include i) Ethiopia business registration ii) government license registration iii) Ethiopia corporate bank account opening iv) employee recruitment v) visa strategies and vi) office rental solutions.
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Advantages and Disadvantages
Advantages of Ethiopia company registration
- An Ethiopia limited liability company (LLC) can be incorporated with only 1 director and 2 shareholders, who can be of any nationality and must not be residents of Ethiopia. The minimum paid-up capital required to register the company with the Ethiopian authorities is only US$750 and our Clients do not need to travel to this country to complete the engagement;
- Ethiopia is one of the fastest growing economies in Africa with i) a GDP of US$121.4 billion and growth rate at an average of 10.1% ii) a population of 88.9 million and a iii) Foreign Direct Investments (FDI) inflow of US$953 million;
- Companies formed in Ethiopia can enjoy the following tax benefits:
- Ethiopian government offers incentives to foreign investors in the bid to attract FDIs to Ethiopia. For instance investors looking to import investment capital goods including i) construction materials, ii) plant machinery and equipment and iii) spare parts not manufactured within Ethiopia are guaranteed 100% exemption from customs import duty;
- Local products and services in Ethiopia produced and intended for export are not subject to any form of taxation otherwise applicable on exports;
- Investors looking to engage in new agribusiness or manufacturing activities in Ethiopia will enjoy a 5-6 years tax holiday from income tax provided they export at least 50% of all their products;
- Some of the investment guarantees entrepreneurs will enjoy in Ethiopia include i) freedom to carryforward of business losses for up to 3 years within a tax holiday ii) protection of private property through the Investment Code iii) free repatriation abroad of profits, interests, dividends and capital gains in foreign currency;
- Ethiopia is signatory to trade agreements and member to a number of trade organizations including i) Common Market for Eastern and Southern Africa (COMESA) ii) Duty-Free Quota-Free (DFQF) iii) African Growth and Opportunity Act (AGOA) iv) Everything But Arms (EBA) initiative with a number of countries offering a wide market access.
Disadvantages of Ethiopia company registration
- Companies registered in Ethiopia are subject to i) corporate tax rate of 30% ii) a Value Added Tax (VAT) of 15% iii) withholding taxes and capital gains tax of up to 30%. Individuals are also subject to higher income tax rate of 35%;
- Ethiopia being a landlocked country, local companies suffer higher costs and prolonged timelines when trading across borders. For instance it takes at least 9 weeks and US$2,380 to export a container as compared to an average of 6 weeks and US$2,200 for other Sub-Saharan African countries;
- One of the leading hindrances to doing business in Ethiopia is the high level of corruption in the Ethiopian Peoples’ Revolutionary Democratic Front (EPRDF) dominated government institutions enjoying preferential treatment and access to vital sectors of the economy and offering no level playing field;
- Ethiopia labor force lacks the necessary skilled manpower as a higher percentage of the nation’s 45 million work force depending on unskilled labor. This has resulted in some business operating below full capacity due to shortages of skilled manpower;
- Ethiopia is a generally underdeveloped country with poor infrastructure including i) very poor road networks, ii) lack of proper drainage systems with rampant flood episodes iii) inadequate or complete lack of electric power in most part of the country.
Best uses for Ethiopia company
- Entrepreneurs keen to invest in leather and leather products will find Ethiopia and opportune destination to invest in. Ethiopia is home to some of the world’s best leather and a leading exporter of leather and leather products in the world. Some of the globally renowned brands like Calvin Klein and Guess receive their supplies from local Ethiopian companies.
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- Time to incorporate: Five weeks
- Cost to set up: US$16,800
- Minimum capital: US$750
- Physical office required: No
- Shareholders: 2
- Directors: 1
- Company secretary: No
- Resident director: No
- Corporate tax rate: 30%
- Corporate tax base: Worldwide
- Shelf companies: Unavailable
- Main company type: LLC