AmendmentInvestment

Establishment and Operation of Foreign Currency Account for Non-Resident Ethiopians and Non-Resident Ethiopian Origin (As Amended) Directive No. 610/2021

National Bank Of Ethiopia610/2021

Summary

This directive establishes and outlines the procedures for opening and operating foreign currency accounts for non-resident Ethiopians and non-resident Ethiopian-origin individuals and businesses. It details eligibility criteria, account types, permitted currencies, crediting and usage rules, closure procedures, interest rates, and incentives, while also specifying prohibited actions and penalties for violations. It replaces Directive No. FXD/55/2018.

Who's affected

Non-resident Ethiopians, non-resident foreign nationals of Ethiopian origin, and business entities owned by them.

Action required

Non-resident Ethiopians and foreign nationals of Ethiopian origin should review the eligibility criteria and documentation requirements to open a foreign currency account.

Key points

8
  • Allows non-resident Ethiopians and foreign nationals of Ethiopian origin to open foreign currency accounts.
  • Defines eligibility, account types (fixed, current, non-repatriable Birr), and permitted currencies (USD, GBP, EUR).
  • Specifies minimum deposit requirements for current (USD 100) and fixed (USD 5,000) accounts.
    • Show 5 more
    • Outlines rules for crediting, using, and repatriating funds from these accounts.
    • Provides incentives including tax exemption on interest for fixed deposits and use as collateral for local currency loans.
    • Prohibits certain transactions and sets penalties for violations by banks and account holders.
    • Replaces Directive No. FXD/55/2018.
    • Effective date is September 2, 2019.

Requirements

15
  • Individuals/enterprises must meet eligibility criteria (non-resident Ethiopian or non-resident foreign national of Ethiopian origin).
  • Submission of properly filled application forms.
  • For Non-Resident Ethiopians: resident permit/certification authenticated and registered by pertinent authority, or authenticated valid resident/work permit by Ethiopian Embassies for those in neighboring and Middle East countries.
    • Show 12 more
    • For individuals: valid passport and/or identification card of foreign nationals of Ethiopian origin.
    • For businesses: certificate of ownership entitlement and/or authenticated articles of association.
    • Applicants not physically present can use Ethiopian Embassies, correspondent banks, or remittance service providers to prove identity.
    • Minimum initial deposit for a current foreign currency account: USD 100.
    • Minimum initial deposit for a fixed deposit foreign currency account: USD 5,000.
    • Accounts can be opened in USD, Pound Sterling, or Euro; other convertible currencies will be converted.
    • Crediting the account requires specific documentation for various sources (account holder, spouse, employer, business entity, etc.).
    • Cash deposits exceeding USD 3,000 require a signed and sealed foreign currency declaration form from the Ethiopian Revenue and Custom Authority.
    • Residents in neighboring and Middle East countries require the declaration form for cash deposits of USD 3,000 or less.
    • Opening banks must maintain confidentiality, report monthly to NBE directorates, and adhere to open foreign currency position limits.
    • Fixed deposit accounts require a minimum maturity period of three months.
    • Interest on fixed deposits is payable only if kept for a minimum of three months.

Rights and permissions

11
  • Account holders can transfer funds abroad and/or use funds locally without a permit.
  • Account holders can withdraw funds for travel allowance.
  • Account holders can convert funds to a Birr account at the prevailing exchange rate.
    • Show 8 more
    • Accounts can serve as collateral or guarantee for loans or bids.
    • Deposits in fixed or current accounts can be repatriated abroad upon request.
    • Interest income on non-resident foreign currency fixed deposit accounts is free from income tax.
    • Account holders can receive monthly statements.
    • Account holders can order withdrawals and/or local payments via a Test-Key.
    • Interest can be credited to accounts at least on a quarterly basis.
    • Account holders can set up standing authorizations for permanent payments.
    • Account holders can be informed of correspondent banks or agents overseas.

Restrictions

6
  • Power of attorney holders are not allowed to open foreign currency accounts or credit them on behalf of non-residents, but can withdraw if explicitly empowered.
  • Overdrawing of the account is prohibited.
  • Withdrawal of funds from a fixed deposit account prior to maturity is subject to interest penalty.
    • Show 3 more
    • Foreign exchange acquired from forex bureaus or local sources cannot be used to credit or open a foreign currency account.
    • Opening banks shall not honor cheques drawn or endorsed by a non-resident account holder in favor of a resident who does not hold a similar account.
    • For fixed deposits, if an account holder returns to Ethiopia permanently before maturity, the deposit must be converted to a resident Birr account upon maturity.

Penalties

4
  • Any bank violating provisions is subject to penalties according to Licensing and Supervision of Banking Business Directives No. SBB/27/2001.
  • Banks failing to comply with reporting requirements face a penalty of Birr 1000 per day of delay, deducted from their NBE account.
  • If an account holder violates provisions, the opening bank may suspend the account and report to NBE.
    • Show 1 more
    • Any person failing to comply with the directive shall be punished according to Article 26 of the National Bank of Ethiopia Establishment (as Amended) Proclamation No. 591/2008.

Objectives

5
  • To create incentives for Ethiopians in the diaspora to maintain foreign currency accounts in Ethiopia.
  • To encourage domestic investment by non-resident Ethiopians.
  • To support the international foreign exchange reserve.
    • Show 2 more
    • To ease the balance of payments problem of the country.
    • To encourage foreign direct investment.

Organizations

6
  • National Bank of Ethiopia
  • Ethiopian Revenue and Custom Authority
  • Commercial banks licensed by the National Bank of Ethiopia
    • Show 3 more
    • Ethiopian Embassies
    • Diaspora International Remittance Service Providers
    • Ethiopian Postal Service

Legal references

4
  • Article 20(2) and Article 27(2) of the National Bank of Ethiopia Establishment Proclamation No. 591/2008
  • Proclamation No. 270/2002
  • Licensing and Supervision of Banking Business Directives No. SBB/27/2001
    • Show 1 more
    • Foreign Currency Account for Non-Resident Ethiopians and Non-Resident Ethiopian Origin Directive No. FXD/55/2018 (Repealed)
Original sourcehttps://justice.gov.et/en/directives/establishment-and-operation-of-foreign-currency-account-for-non-resident-ethiopians-and-non-resident-ethiopian-origin-as-amended-directive-no-610-2021/
View source