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Value Added Tax Refund Determination Directive

Ministry of Revenues1132/2026

Summary

This directive outlines the conditions and procedures for Value Added Tax (VAT) refunds for registered persons, including specific provisions for zero-rated transactions, expedited refunds, and refunds for exempt entities. It also details the documentation required, the refund processing system based on risk assessment, and penalties for non-compliance.

Who's affected

Businesses registered for Value Added Tax (VAT) in Ethiopia, including exporters, manufacturers, and entities eligible for VAT exemptions.

Action required

Businesses should review the directive to understand the specific documentation and procedures required to claim VAT refunds, and ensure compliance with all outlined requirements.

Key points

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  • Establishes detailed conditions and documentation for various VAT refund scenarios.
  • Introduces a risk-based system for processing VAT refund requests.
  • Specifies timelines for refund processing and interest on delays.
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    • Repeals previous VAT Refund Implementation Directives (No. 148/2019 and No. 164/2021).
    • Defines terms related to VAT refunds, including 'Regular Value Added Tax Refund', 'Evidence Submitted for Tax Refund', and 'Risk Criteria'.

Requirements

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  • Submission of a completed refund request form prepared by the Tax Authority.
  • For zero-rated transactions: evidence of export, customs declarations, transport documents, bank authorization, proof of foreign currency receipt, VAT receipts, and sales contracts.
  • For expedited refunds: evidence from the Ministry of Industry authorizing participation in the system, and VAT receipts for domestic purchases.
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    • For additional VAT: certified production records, documentation of goods sold or stockpiled, and VAT invoices.
    • For construction or building expansion: VAT invoices for materials/services, contractor statements, and government certification.
    • For special rights enterprises: authenticated documents by the Ministry of Foreign Affairs, proof of transaction execution, and bank payment evidence.
    • Refund requests for construction work by special rights enterprises require a construction contract and proof of VAT payment to the contractor.
    • Payment of VAT on domestic taxable transactions by exempt persons processed through the refund system.
    • Refund requests must be submitted within specified timeframes (e.g., 6 months from decision date, 1 month from accounting period for construction).
    • For cash transactions exceeding 50,000 Ethiopian Birr, proper supporting documentation is required for VAT refund eligibility (effective July 1, 2017).
    • Taxpayers must fulfill all VAT reporting obligations before refunds are processed.
    • Only VAT properly recorded by suppliers and timely reported on invoices is eligible for refund.
    • Refund requests may be submitted electronically or via paper form.
    • Refundable amounts are limited to ten percent (10%) of the total additional VAT collected in the month as an advance.

Rights and permissions

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  • Right to claim VAT refund for eligible transactions (zero-rated, excess input tax, capital goods, construction, etc.).
  • Right to receive refunds within specified timeframes (e.g., one month, forty-five days).
  • Right to claim interest on delayed VAT refunds.
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    • Right to submit refund requests electronically or via paper form.

Restrictions

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  • Refund requests will not be granted for VAT paid on capital assets or VAT already offset against allowable deductions.
  • No refund shall be granted for VAT paid on a transaction executed after the suspension of a taxpayer's commercial license.
  • For construction works, refunds are limited to the completed portion recognized for revenue.
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    • Additional VAT paid on transactions prior to revenue recognition from completed construction cannot be offset against prior transactions.
    • No refund shall be processed if the additional VAT on a single invoice or document is less than one hundred (100) Ethiopian Birr (for special rights enterprises).
    • Refund requests submitted by special rights organizations must be within one month from the receipt date or six months based on evidence.
    • Taxpayers may have their refund withheld until all VAT reporting obligations are fulfilled.
    • Refundable amounts are limited to ten percent (10%) of the total additional VAT collected in the month.

Penalties

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  • Undue refunds taken will be recovered following an audit.
  • Failure to submit evidence for claiming interest on delayed refunds within six months results in forfeiture of the right to claim interest.

Objectives

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  • To provide risk-based tax refund services for VAT-registered persons.
  • To establish conditions for processing VAT refunds for entities with VAT exemptions.
  • To outline procedures for responding to refund requests arising from previous decisions.
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    • To implement a Value Added Tax refund directive based on the new VAT Proclamation.

Organizations

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  • Ministry of Revenues
  • Tax Authority
  • Ministry of Industry
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    • Ministry of Finance
    • Ministry of Justice
    • National Bank of Ethiopia
    • Ministry of Foreign Affairs
    • Commercial banks

Legal references

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  • Value Added Tax Proclamation No. 1341/2024, Articles 48 and 49
  • Value Added Tax Proclamation No. 1341/2024, Article 51
  • Export Trade Incentive Proclamation No. 768/2004
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    • Federal Tax Administration Proclamation No. 983/2008, Article 50(4)
    • Income Tax Proclamation No. 1395/2017
    • Proclamation No. 979/2008, Article 89(2)(c)
    • Ministry of Finance Directive No. 1063/2017, Article 13, Sub-Article 5(a) and (b)
    • Vienna Convention on Diplomatic Relations
    • Council of Ministers Investment Incentives Regulation
Original sourcehttps://justice.gov.et/en/directives/%e1%8b%a8%e1%89%b0%e1%8c%a8%e1%88%9b%e1%88%aa-%e1%8a%a5%e1%88%b4%e1%89%b5-%e1%89%b3%e1%8a%ad%e1%88%b5-%e1%89%b0%e1%88%98%e1%88%8b%e1%88%bd-%e1%8b%a8%e1%88%9a%e1%8b%b0%e1%88%a8%e1%8c%8d%e1%89%a0/
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