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Draft bill takes aim at key provisions of VAT proclamation

Draft bill takes aim at key provisions of VAT proclamation

Enforced for the past 17 years, and in recent times becoming a tiresome affair to conduct business, a new draft bill has offered an improvement to key provisions of the VAT proclamation, vying for a more friendly business atmosphere than the one created by the existing law.

The latest draft, which would partially amend the existing VAT proclamation dubbed ‘The Value Added Tax Proclamation No. 285/2002’, was tabled before the House of People’s Representatives (HPR) on Thursday.

The bill mainly focuses on the revision of provisions including Accounting Periods, the Vat Paid on Capital Goods as well as Refunding Withheld Vat.

Considering the length of the accounting period, the procedure has brought challenges on both the taxpayer and the authority. This system especially has brought more burdens to the mid-level and low-level taxpayers who visit the authority every month to report their transactions.

According to the existing bill, anyone registered under the VAT payers’ category is expected to report every month, no matter how much the amount of his turnover is, or even if the business is showing nil (no transactions).

Aimed at solving this burden, the draft bill offers taxpayers under the mid-level and low-level categories, with a business activity turnover of 70,000,000 birr in a 12 month period, to report to the authority every month. And those taxpayers whose turnover in 12 months is less than 70,000,000 birr will have their reporting period extended to every three months, according to the draft provisions.

Furthermore, it designates how tax shall be withheld or paid to the authority by the buyers in accordance with the directives to be issued by the Ministry of Finance.

Moreover, in accordance with the provision, the tax withheld shall be 50 percent of tax payable by the buyer and the balance shall be paid to the seller.

In the same session, the Houses conducted firsthand discussions on a new draft bill which was tabled to amend the existing Compensation law that shall be paid for holders who are evicted for projects deemed to be for public benefits.

After a short deliberation on the three draft bills, the House referred them to the relevant Standing Committee for further revisions.

The House, in addition to the bills presented, has also discussed three other separate bills concerning the bilateral agreements, the Ethiopian government has signed with the Israeli government. The three bills tackle mutual cooperation between the two, wanting to boost cooperation in custom services, education, agriculture and business and in trade areas. After a short deliberation, the House has referred them to the relevant Standing Committee for further revisions.