Employement income Tax

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Personal Income Tax (Income from Employment)

Every person deriving income from employment in any government or other private organization or non Governmental organization/Such as NGOS/  and if his/her is on due to pay tax. His/her income from employment include any payments or gain in cash or in kind which he/she  received from employment.

 

According Proclamation 286/2002 Personal Income tax Rate is described on Schedule 'A'.

  1. Schedule A - Pay as you earn (Income Tax Withheld by Employers)
  2. Schedule A - Personal Income Tax (Income Tax Paid by the Employee himself)

 

 Schedule 'A'

  No Employment Income /Per-months/ Tax Rate Deduction In Birr
    Over Birr To Birr    
  1 0 600 exempt threshold
  2 601 1650 10% 60
  3 1651 3200 15% 142.50
  4 3201 5250 20% 302.50
  5 5251 7800 25% 565
  6 7801 10,900 30 955
  7 Over 10,900
  35 1500

        Example 1. Salary 700 x  10%  - 60 = 10

                                           700-10 = 690 Birr

 For exempt personal income tax see proclamation 165/2017 part-2  Article 11 and regulation 78/02 Article 3/ A-H/.

Exempted Tax of employee transportation allowance

According to proclamation 286/2002 and regulation 78/2002 Article /H/ a power is given for /FIRA/ to directive guide for employee with maximum exempt from transportation allowance for /FIRA/ therefore.Transportation allowance of an employee person is exempted when employee and employer have an agreement between them, which their agreement is clearly defined on the contract agreement that the allowance is applied only for transporting purpose.

The exempt transportation allowance from tax doesn't include if the employer arrange or give a vehicle to employee when a person use the vehicle from house to work and from work to house.

 

The maximum Transportation allowance exempted from tax

Tax exempted for transportation allowance to the employee shall be not more than 800 birr. Also the transportation allowance paid to the employee should be not more than ¼ of his /her salary.

 

Waiver of Penalty 

It is decreed on the Income Tax Proclamation No.286/2002, article 106, that administrative penalties imposed on the taxpayer may be waivered partially or fully in accordance with the directives issued by the Ministry of Revenue.

Therefore, according to article 86 of the Proclamation, it is important to decide how the penalty for late filing or non-filing could be waived.

Hence, a taxpayer who is liable for penalty because of late filing or non-filing, waiver of penalty is determined in accordance to the following table.

 

If the % of penalty in comparison with the  % of tax to be paid is:

then the % of penalty to be waivered will be

Above 100%

80%

76-100%

60%

51-75%

40%

26-50%

30%

UP to 25%

10%

 

 

However, if tax payers failure to file a timely income declaration is because of convincing reason that the tax collecting Authority believes, in addition to waiver penalty, the rest of the penalty could be partially or fully waivered in accordance with the direction of the waiver of penalty which have been worked. 

          Therefore, though there is a direction on how the penalties put on the Income Tax Proclamation are waivered, penalty imposed on the taxpayer because of failing to file a timely tax declaration must be taken care on the basis of the above schedule.

 

 

 

 

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