Ethiopia Tax Brackets & Rates (2026)
Comprehensive statutory tax rates, withholding thresholds, social contributions, and deduction rules governed by Ministry of Revenues (MOR) / POESSA.
📜 Statutory Authority & Legal Framework
In Ethiopia, personal income taxation is administered by the Ministry of Revenues (MOR) / POESSA under the authority of Federal Income Tax (Amendment) Proclamation No. 1395/2025 Schedule "A" & Pension Proclamation 1268/2022.
Employment tax in Ethiopia is calculated progressively on monthly earnings under Proclamation No. 1395/2025. The first 2,000 ETB is 100% tax-free, with brackets from 15% to 35% and a mandatory 7% employee pension contribution deducted for social security (POESSA/PSPF).
📊 2026 Progressive Marginal Tax Brackets
ISO: ETB| Income Bracket (ETB) | Marginal Tax Rate | Bracket Type |
|---|---|---|
| 0 – 2,000 ETB (Exempt 0%) | 0.0% | Tax-Free Allowance |
| 2,001 – 4,000 ETB (15%) | 15.0% | Tier 2 |
| 4,001 – 7,000 ETB (20%) | 20.0% | Tier 3 |
| 7,001 – 10,000 ETB (25%) | 25.0% | Tier 4 |
| 10,001 – 14,000 ETB (30%) | 30.0% | Tier 5 |
| Over 14,000 ETB (35%) | 35.0% | Tier 6 |
🛡️ Mandatory Social Security & Pension Contributions
POESSA Employee Pension Fund
Frequently Asked Questions: Ethiopia Taxation
How is employment income tax calculated in Ethiopia under Proclamation 1395/2025? ↓
In Ethiopia, employment income tax is calculated progressively on monthly taxable income under Schedule A of Income Tax (Amendment) Proclamation No. 1395/2025. The first 2,000 ETB is exempt (0%), followed by tax brackets of 15% (2,001–4,000 ETB), 20% (4,001–7,000 ETB), 25% (7,001–10,000 ETB), 30% (10,001–14,000 ETB), and a top marginal rate of 35% on income exceeding 14,000 ETB per month.
What is the mandatory employee pension deduction in Ethiopia? ↓
Under Pension Proclamation No. 715/2011 (amended by Proclamation No. 1268/2022), employees contribute 7% of their gross basic salary, while employers contribute 11% to the Private Organization Employees Social Security Agency (POESSA) or Public Service Pension Fund (PSPF).
Are employee pension contributions tax-deductible in Ethiopia? ↓
Yes. The 7% employee pension contribution is deducted from the gross basic salary before calculating the taxable income base for employment income tax.
What was changed in Ethiopia under Proclamation No. 1395/2025? ↓
Proclamation No. 1395/2025 raised the tax-free basic allowance from 600 ETB to 2,000 ETB per month, eliminated the previous 10% rate tier, and widened the upper income brackets to mitigate inflation for salaried workers.