Foreign tax relief
In Ethiopia, relief on foreign taxes is provided for in the domestic legislation. In addition, where there is a double tax treaty (DTT) between Ethiopia and another country, there are other tax incentives provided.
According to the Federal Income Tax, where a resident employee derives foreign income and has paid foreign income tax, the employee is allowed a tax credit for an amount equal to the lesser of:
- the foreign income tax paid, or
- the employment income tax payable in respect of the foreign employment income calculated by applying the average rate of employment income tax applicable to the resident employee to the foreign employment income of the employee for the month.
Ethiopia has DTTs with the following countries: Cyprus, Egypt, France, Great Britain and North Ireland, India, Ireland, Israel, Italy, Netherlands, Poland, Portugal, Romania, Singapore, South Africa, South Korea, and Turkey.