Carryover Problems and Emerging Concerns: A Review on Value Added Tax Legal Reforms of Ethiopia

Abstract

This article critically examines Ethiopia’s newly introduced Value Added Tax (VAT) legal reforms. VAT Proclamation No. 1341/2024 and its accompanying VAT Regulation No. 570/2025 have introduced significant changes to the tax regime, along with unresolved issues, controversies and ambiguities. Through a doctrinal analysis of this legal reform, supplemented by interviews with experts from banks and insurance companies, this article critically highlights the unresolved issues and ambiguities in the legal reforms. Expanding the scope of taxable activities, particularly in the financial services sector, has sparked considerable debate among businesses. The continuation of taxing foreclosures also poses problems to the banks, as valuations of properties have been done without accounting for the VAT that would be levied if the debtor defaults and the property is foreclosed. Moreover, the ambiguities related to VAT-inclusive pricing may persist due to the unclear provisions of the legal reform, implicating limited stakeholder engagement in the tax reform process. Therefore, this article highlights the need for greater clarity and fairness in the VAT laws of Ethiopia.

Keywords: Value Added Tax, Financial Services, Exemptions, VAT-inclusive, Foreclosure