Capital: Addis Ababa

Population: (2023 est.) 106,359,000

Monetary Unit: Ethiopian birr

Official languages: Amharic, Oromo, Tigrinya, Somali, Afar

Ethiopia, officially known as the Federal Democratic Republic of Ethiopia, is a country in the Horn of Africa. Addis Ababa is the capital and the largest city of Ethiopia. Agriculture is the largest sector of Ethiopia, whereby it employs over 85% of its population.

The public holidays in Ethiopia are as follows;

Dates         Holidays

  • 7 Jan          Ethiopian Christmas
  • 19 Jan        Timket
  • 2 Mar         Adwa Victory Day
  • 14 Apr       Siklet
  • 16 Apr       Ethiopian Easter Sunday
  • 22 Apr       Eid al-Fitr
  • 1 May        Labour Day
  • 5 May        Patriots’ Victory Day
  • 28 May      Derg Downfall Day
  • 29 Jun        Eid al-Adha
  • 12 Sep        Ethiopian New Year
  • 27 Sep        Meskel
  • 27 Sep        Prophet Muhammad’s Birthday

A probation period cannot exceed 60 days

Workers are entitled to 16 working days of paid annual leave on completion of one year of service plus one working day for every additional year of service. For a worker with 5 years of service, the period of paid annual leave is 18 working days (one day extra for every two additional years of service).

: In accordance with the Constitution of Ethiopia and Labor Proclamation, female workers are entitled to fully paid maternity leave of 120 working days (30 days antenatal and 90 days postnatal) on the recommendation of a medical doctor.

There is no paternity leave

An employee is entitled to a maximum of 6 months of sick leave within 1 year of service.

The severance pay shall be 30 times the average daily wages of the last week of service for the first year of service; for the service of less than one year, severance pay shall be calculated in proportion to the period of service. In the case of a worker who has served for more than one year, payment shall be increased by one-third (1/3) of the said sum, provided that the total amount shall not exceed 12 month’s wage of the worker. Where a contract of employment is terminated in accordance with section 24(4) and 29 of the labor code, the worker shall be paid a sum equal to sixty multiplied by his average daily wage of the last week of service.

13th / 14th Month Pay: There is no statutory requirement to pay the 13th or the 14th month salary. Peculiarly Ethiopia does have a 13th month calendar as they follow a different calendar. It does not seem that it is customary for employees to receive any bonus payment around the festivities.

Some of the main visas available in Ethiopia are as follows: –

  • Tourist visa
  • Investment Visa
  • Foreign Business Firm Employment Visa – WV
  • Ethiopian Private Business Firm Work Visa – PE
  • Ethiopian Government Employment Visa – GV
  • Tourist Visa: – Tourist visa is an electronic single-entry visa issued by the Ethiopian Government for visitors who wish to travel to the country for tourism or other non-business-related purposes only. Copy of the following documents is mandatory;
    • Recent passport-size photo of the applicant.
    • Passport of the visa applicant which is valid for at least 6 months from the intended date of entry to Ethiopia.
    • Single entry tourist visa is valid up to 90 days starting from the intended date of arrival in Ethiopia.
  • Investment Visa: This is a visa issued to foreign Nationals who are engaged in investment activities. It can also be issued to potential investors who wish to come and invest in Ethiopia.
  • Foreign Business Firm Employment Visa – WV: Foreign Business Firm Employment Visa is issued to foreign nationals who are entering Ethiopia to be employed by business firms owned/operated by foreigners.
  • Ethiopian Private Business Firm Work Visa – PE : Private Business Firm Visa is issued to foreign nationals coming for employment or other short term assignments with Ethiopian private business firms.
  • Ethiopian Government Employment Visa – GV: Government employment visa issued to foreign nationals to be employed by different Ethiopian Government institutions/ministries.


The following are sufficient grounds for the termination of a contract of employment with notice:

  • The worker’s manifested loss of capacity to perform the work to which he has been assigned or his lack of skill to continue his work,
  • If the worker, for reasons of health or disability, permanently, is unable to carry out his obligations under the contract of employment,
  • The worker’s unwillingness to move to a locality to which the undertaking moves,
  • When the post of the worker is canceled for good cause and the worker cannot be transferred to another post.


The notice of termination by the employer shall be handed to the worker in person. Where it is not possible to find the worker or he refuses to receive the notice, it shall be affixed on the notice board in the work place of the worker for ten consecutive days

Statutory benefits are compulsory benefits, postulated by law. These include probationary period, annual leave, public holidays, sick leave, maternity leave, overtime pay, notice period, and severance pay. Statutory benefits also include social security benefits

A regular working day counts 8 hours and a regular working week counts 48 hours.

Overtime rate is as follows

  • 150% of normal hourly rate for overtime work between 06 a.m. to 10 p.m.
  • 175% of normal hourly rate for overtime work between 10 p.m. to 06 a.m.
  • 200% of the normal hourly rate for work on a weekly rest day; and
  • 250% of the normal hourly rate for work on a public holiday.

Notice period ranges from one to three months based on the period of service of the worker.

  • One month in the case of a worker who has completed his probation and has a period of service not exceeding one year,
  • Two months in the case of a worker who has a period of service a above one year to nine years,
  • Three months in the case of a worker who has a period of service of more than nine years,
  • To months in the case of a worker who completed his probation and whose contract of employment is terminated due to reduction of work force.

Ethiopia levies income tax based on location and source. Residents of Ethiopia must pay tax on their international income. Only income with an Ethiopian source is liable to taxation for non-residents. Unless expressly exempted, all income is subject to taxation. Income from a business and investments, as well as employment income (including fringe benefits), is taxed. Ethiopian citizens who rent out buildings are subject to up to 35% in taxes on their rental revenue.

Employers are required to make 7% of an employee’s base income in social security contributions on their behalf. The employee’s contribution is 11%.

Personal Deductions: The following income is exempt: 

  • Employment income up to ETB600 
  • Pension contributions to the extent exempt from tax under the Public Servants Pension Proclamation or the Private Organization Employees’ Pension Proclamation 
  • Employer contributions to retirement benefits up to a maximum of 15% of an individual’s monthly salary 
  • Amounts paid by employers to cover the actual costs of medical treatment, hardship and other allowances 
  • Transport allowances of up to the lower of ETB2 200or 25% of the basic salary per month 
  • Local per diem (daily subsistence allowance) for field work up to ETB500 or 4% of the basic salary per day, whichever is higher.

Business Deductions: Various deductions may be taken in determining taxable income, including: 

  • Expenditure necessarily incurred by the taxpayer during the year in deriving, securing and maintaining amounts included in business income 
  • Cost of trading stock disposed of by the taxpayer during the year 
  • Total amount by which the depreciable assets and business intangibles of the taxpayer have declined in value during the year from use in deriving business income using the method specified in the annual Income Tax Proclamation 
  • Losses incurred on the disposal of business assets (other than trading stock) disposed of by the taxpayer during the year 
  • Any other deductible amounts as specified in the annual Income Tax Proclamation.

VAT is assessed on imports as well as the provision of products and services in Ethiopia. Non-commercial organizations are not allowed to charge VAT on services, but they are not free from paying VAT on products or services they purchase, unless they are specifically exempted by a relevant bilateral agreement. There is a 15% VAT standard rate. Goods and services exported are not taxed.

The WHT rates on various types of payment are as follows:

Payment                             Residents         Non-residents

Dividends                          10%                 10%

Interest                               5%                   10%

Royalties                            5%                   5%

Technical Service Fees       2%                   15%/10%

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