The Purpose of an Investment Permit
Once you’re done planning your project, you can go ahead and think about officially register your company in Ethiopia and apply for an investment permit.
In a previous article regarding document notarization, we had discussed the notarized documents you should bring with you when coming into the country. Subsequently, we will cover the purpose of an investment permit and how it will affect your investment in Ethiopia.
What is an investment permit and why do I need it?
To explain, an investment permit is a certificate that will allow your planned project to start implementation, as well as use the tax incentives you are entitled to.
This is so long as the sector you are investing in is eligible for fiscal incentives. If you are not sure about the eligibility of the specific project you have in mind or you just want to be sure, you’re welcome to visit the iPortal free incentives calculator.
Who should apply for an investment permit?
The purpose of an investment permit is to serve as both your ticket into investing in Ethiopia as well as your coupon for using the different tax incentives.
The Ethiopian Investment Commission (EIC) is the government body responsible for issuing this document. Applying for one is a necessity if you fall into one of these categories.
- Foreign investors
- Domestic and foreign investors investing in a partnership
- Domestic investors investing in areas eligible for incentives
- Foreign nationals, not Ethiopian by origin, but have been residing in Ethiopia for generations and are treated as domestic investors.
Conversely, if you are a domestic investor, you have the right to invest without applying for an investment permit. Although, if you are investing in sectors eligible for incentives you want to be a beneficiary of, then you have the choice to apply for one.
However, you will receive a permit from a regional investment authority found in the region of your investment.
There are exceptions where other authorities have been delegated by the EIC to issue permits for the respective sub-sectors under their jurisdictions. You will find them listed below.
- For transportation services, the body issuing the permit is the Ethiopian Civil Aviation Authority.
- For generation, transmission, or distribution of electric power, the Ethiopian Energy Authority will issue the permit
- Similarly, for provision of communications services, the Ethiopian Communications Authority
Business sectors that do not allow foreign investment
Ethiopia is currently in a time of economic transition where the government is slowly opening more and more sectors that were previously not open to foreign investors as well as domestic investors.
A major example of this is the logistics sector where foreign investment was previously not allowed. On the positive side, it is now open for foreign investors to invest jointly with domestic investors. However, the domestic investor has to own at least 51% of the venture as a requirement.
The council of ministers’ regulation 270/2012 on investment incentives and investment lists out business activities that foreigners can engage in.
Although this list is currently in effect, the investment proclamation on which the regulation stands was recently changed. The most recent proclamation abandons the positive listing approach while taking on a negative list.
This list catalogs a few sectors it reserves for joint investment with the government, those which it strictly reserves for domestic investors, and those that only allow foreigners on the condition that you are investing jointly with a domestic investor while leaving the rest open for everyone.
Until the new proclamation and regulation comes into effect; you can choose from the various business activities provided in the current regulation.
Don’t hesitate to contact us with any questions you may have at [email protected].