How is income tax calculated in Ethiopia?
Employment income tax is charged on monthly salary: the first ETB 2,000 a month is exempt, then 15%, 20%, 25% and 30%, and 35% above ETB 14,000 a month. The calculator uses the same bands multiplied by 12.
There are no personal allowances and employees cannot deduct expenses, so tax is worked out on gross salary.
Ethiopian citizens pay 7% of basic salary to the pension scheme. Foreign citizens with no Ethiopian origin are not allowed to contribute.
What is the income tax rate in Ethiopia?
| Taxable income | Rate |
|---|---|
| ETB 0 – ETB 24,000 | 0% |
| ETB 24,000 – ETB 48,000 | 15% |
| ETB 48,000 – ETB 84,000 | 20% |
| ETB 84,000 – ETB 120,000 | 25% |
| ETB 120,000 – ETB 168,000 | 30% |
| Over ETB 168,000 | 35% |
What mandatory salary deductions apply?
- Pension (employee): 7% of pay (citizens only).
Gross salary and take-home salary
Gross salary is what your contract says before anything is taken off. Take-home salary is what reaches your bank account after income tax and the compulsory employee contributions. Employer contributions are paid on top of your salary and are not taken from it.
Example: ETB 490,000.00 a month
An employee earning 490,000 a month, about US$3,000.
| Item | Monthly | Annual |
|---|---|---|
| Gross salary | ETB 490,000.00 | ETB 5,880,000.00 |
| Income tax | ETB 169,450.00 | ETB 2,033,400.00 |
| Compulsory contributions | ETB 34,300.00 | ETB 411,600.00 |
| Take-home pay | ETB 286,250.00 | ETB 3,435,000.00 |
Effective income tax rate 34.6%; all deductions 41.6%.
Frequently asked questions
How much salary is tax-free in Ethiopia?
Employment income up to ETB 2,000 a month is exempt.
Do expatriates pay Ethiopian pension?
No. It is mandatory for Ethiopian citizens and not allowed for foreign citizens with no Ethiopian origin.
Do non-residents pay different rates?
No. PwC says the same rates apply to residents and non-residents.
Official sources
- PwC Worldwide Tax Summaries (reviewed 15 July 2026): Ethiopia - Individual - Taxes on personal income. Read 5 November 2026.
- PwC Worldwide Tax Summaries (reviewed 15 July 2026): Ethiopia - Individual - Other taxes. Read 5 November 2026.
- PwC Worldwide Tax Summaries (reviewed 15 July 2026): Ethiopia - Individual - Deductions. Read 5 November 2026.
- PwC Worldwide Tax Summaries (reviewed 15 July 2026): Ethiopia - Individual - Tax administration. Read 5 November 2026.
Last reviewed 5 November 2026. An estimate for planning, not tax advice; your employer’s payroll and the tax authority decide what is actually withheld.
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