Foreign providers liable to register and collect VAT on B2C electronic services
The East African state of Federal Democratic Republic of Ethiopia extended VAT collection obligations to non-resident providers of digital services in August 2024. This was provided under the VAT Proclamation 1341/2024. This includes marketplaces and similar digital platforms becoming the deemed supplier where they facilitate the sale of electronic services to local consumers.
Implementing regulations are to follow soon.
A VAT registration threshold of ETB 2 million has been set, approximately US $16,800, per annum. Beyond this level, providers or marketplaces must register with the Ministry of Revenues and Customs Authority. They are then required to charge 15% Ethiopian VAT, and submit returns with remittances each month.
Determining Ethiopia as place of supply
The draft regulations available include the following determinates for defining if the place of supply is Ethiopia:
- Payment (e.g. bank) details
- Use of fixed line
- Country code for mobile phone use
- IP address
Check our global VAT on digital services tracker. There are now over 120 countries imposing VAT obligations on non-resident providers of digital services.
Asia Pacific VAT on digital services
| Comments (click for details) | Rate | Date | Threshold | Comments |
| Australia | 10% | Jul 2017 | AUD $75,000 | |
| Azerbaijan | 12% | Jan 2017 | – | |
| Armenia | 20% | Jan 2022 | AMD 115million | |
| Bangladesh | 5% - 15% | Jul 2019 | – | B2B and B2C |
| Bhutan | 7% | Jul 2021 | Nu 5million | |
| Cambodia | 10% | Mar 2022 | KHR 250m | |
| China | 6%-13% | N/a | Nil | Withholding VAT; B2B and B2C |
| Cook Island | 15% | 2019 | NZ$ 40,000 | |
| Fiji | 9% | TBC | FJD 300,000 | |
| India | 18% | Jul 2017 | - | |
| Indonesia | 11% | Aug 2020 | IDR600m or 12k customers | |
| Japan | 10% | Oct 2015 | JPY 10 million | |
| Kazakhstan | 12% | Jan 2022 | Nil | |
| Kiribati | 12.5% | 2017 | AU$ 100,000 | |
| Kyrgyzstan | 12% | Jan 2022 | Nil | |
| Laos | 10% | Feb 2022 | LAK 400m | |
| Malaysia | 8% | Jan 2020 | RM500,000 | |
| Nepal | 13% | Jul 2022 | Rupees 2m | Also 2% DST |
| New Caledonia | 11% | 2020 | XPF 7.5 million | |
| New Zealand | 15% | Oct 2016 | NZD 60,000 | |
| Pakistan | 2% | Sep 2021 | Nil | Marketplace Withholding VAT |
| Palau | 10% | Jan 2023 | $300,000 | |
| Philippines | 12% | May 2025 | P 3million | |
| Singapore | 9% | Jan 2020 | S$ 100,000 | |
| South Korea | 10% | Jul 2015 | Nil | |
| Sri Lanka | 18% | 2025? | LKR 60m | Proposals only |
| Taiwan | 5% | May 2017 | NTD 480,000 | |
| Tajikistan | 14% | Jan 2021 | ||
| Thailand | 7% | Sep 2021 | 1.8m Baht | |
| Uzbekistan | 12% | Jan 2020 | Nil | |
| Vietnam | 10% | Dec 2020 | – |
VAT in Ethiopia
In Ethiopia, VAT operates under the VAT Proclamation No. 285/2002, which governs its administration. VAT is a consumption-based tax levied on the value added at each stage of the production and distribution chain, ultimately borne by the final consumer. The standard VAT rate is 15%, imposed on the supply of goods and services in Ethiopia, as well as on imports.
Taxable Transactions:
VAT applies to both goods and services supplied by registered businesses, including importation. A business must register for VAT if its annual turnover exceeds ETB 1,000,000 (approx. US $ 40,000). Voluntary registration is also allowed for smaller businesses that do not meet this threshold.
Input VAT Deduction:
VAT registered businesses can deduct the VAT paid on their purchases (input VAT) from the VAT they collect on their sales (output VAT). This mechanism avoids the cascading effect of tax-on-tax. If the input VAT exceeds the output VAT, the excess can be carried forward or refunded, subject to certain conditions.
Zero-rated Supplies:
Exports and certain services rendered outside Ethiopia are zero-rated. This means the VAT rate is 0%, but suppliers can still claim input VAT credits on related purchases, facilitating competitive international trade.
Exempt Supplies:
Some goods and services are exempt from VAT. These include basic foodstuffs, educational services, medical services, financial services, and certain agricultural products. Exempt supplies do not attract VAT, and businesses dealing solely in exempt supplies cannot claim input VAT.
Tax Administration:
VAT returns must be filed monthly by the 21st day of the following month. The Ethiopian Revenues and Customs Authority (ERCA) administers VAT collection, ensuring compliance and enforcing penalties for non-compliance or underpayment of VAT.
