How to Calculate Excise Tax in Ethiopia (2025 Guide)
Excise tax in Ethiopia is a special consumption tax levied on specific goods and services considered non-essential, harmful, or luxury in nature. These include products such as alcohol, tobacco, soft drinks, vehicles, and cosmetics. This tax is designed to generate revenue and discourage the excessive use of harmful goods.
📌 What is Excise Tax?
Excise tax is a tax imposed on specific goods and services either at the point of production or import. It is regulated in Ethiopia under the Excise Tax Proclamation No. 1186/2020 and its amendments.
📋 Who Pays Excise Tax?
Excise tax is paid by:
- Producers and manufacturers of excisable goods
- Importers of excisable products
- Occasionally service providers (e.g., telecom companies)
💡 Excise Tax Calculation Formula
Excise tax in Ethiopia is generally calculated as a percentage of either:
- The **ex-factory selling price** (for local producers)
- The **CIF value** (Cost, Insurance, and Freight) for imported goods
Excise Tax = Base Value × Excise Tax Rate (%)
After excise tax is calculated, VAT (15%) is applied on top of the total (price + excise tax).
📊 Common Excise Tax Rates in Ethiopia (2025)
| Product/Service | Excise Tax Rate |
|---|---|
| Beer | 35% |
| Cigarettes | 30% + 8 Ethiopian birr per pack |
| Soft drinks (excluding bottled water) | 15% |
| Passenger vehicles (1600-3000cc) | 60% |
| Perfumes and cosmetics | 100% |
| Telecom services | 5% |
🧾 Example Calculations
Example 1: Locally Manufactured Beer
A brewery sells a case of beer with an ex-factory price of ETB 500.
Total Before VAT = 500 + 175 = ETB 675
VAT = 675 × 15% = ETB 101.25
Total Price = 776.25
Example 2: Importing a Car
An importer brings in a vehicle (2,000cc engine). CIF value = ETB 1,000,000.
Total Before VAT = 1,600,000
VAT = 1,600,000 × 15% = ETB 240,000
Total Taxed Cost = ETB 1,840,000
Example 3: Telecom Service
A telecom company charges ETB 100 for mobile data.
Total Before VAT = 105
VAT = 105 × 15% = 15.75
Total = ETB 120.75
📝 List of Excisable Goods & Services in Ethiopia
- Alcoholic beverages
- Tobacco and tobacco products
- Luxury vehicles and SUVs
- Perfumes and cosmetics
- Video games and gambling machines
- Mobile phone and telecom services
- Plastic bags and single-use products
- Soft drinks and energy drinks
📚 Legal Reference
Excise tax in Ethiopia is governed by:
- Proclamation No. 1186/2020 – Excise Tax Proclamation
- Regulations by Ministry of Revenue (mor.gov.et)
- Excise tax schedules issued annually in the national budget
🔍 Purpose of Excise Tax
- Discourage consumption of harmful products (alcohol, tobacco)
- Generate revenue for public spending
- Promote responsible manufacturing/importing
- Align consumer habits with public health goals
✅ Benefits of Knowing How to Calculate Excise Tax
- Helps businesses price products accurately
- Improves tax compliance
- Avoids penalties for underpayment
- Gives transparency to customers
❓ Frequently Asked Questions (FAQs)
What is the current excise tax rate on soft drinks in Ethiopia?
As of 2025, soft drinks are taxed at 15%, excluding bottled water.
Is VAT applied after excise tax?
Yes, VAT is calculated on the sum of base price + excise tax.
Can excise tax be deducted like VAT?
No, excise tax is non-recoverable and must be treated as a cost.
Are there any goods exempt from excise tax?
Basic goods like bread, water, and medicine are not subject to excise tax.
Where can I find official excise tax rates?
Visit the Ethiopian Ministry of Revenue: mor.gov.et
📘 Conclusion
Excise tax in Ethiopia plays a crucial role in managing public consumption behavior and raising revenue. Understanding how to calculate it—whether for locally produced goods or imports—is essential for businesses and tax professionals. Always check the latest rate schedules and consult the Ethiopian Ministry of Revenue for updates.
Whether you’re pricing beer, cosmetics, or vehicles, correctly applying excise tax is key to compliance and transparency.