In Ethiopia, individuals are taxed on income that is sourced from Ethiopia, wherever paid. An individual is either taxed as a resident or a non-resident.
Ethiopian resident individuals are taxed on their worldwide income. Non-residents are taxed on their Ethiopian-sourced income. The same rates of tax are applicable to both residents and non-residents.
The taxable income of a person for any year is the total of that person’s income for the year less the total amount of deductions allowed to that person. Taxable income comprises the following: employment income, business profits, and investment income.
Summary of monthly employment income tax brackets
| Salary (ETB*) | Income tax payable (%) | Deductible fee** (ETB) | |
| From | To | ||
| 0 | 600 | Exempt threshold | 0 |
| 601 | 1,650 | 10 | 60 |
| 1,651 | 3,200 | 15 | 142.50 |
| 3,201 | 5,250 | 20 | 302.50 |
| 5,251 | 7,800 | 25 | 565.00 |
| 7,801 | 10,900 | 30 | 955.00 |
| Over 10,900 | 35 | 1,500.00 | |
* Ethiopian birr.
** The deductible fee is a tax relief applied to the Pay-As-You-Earn (PAYE) system, and the amount depends on the salary bands.