Ethiopia | Tax Table Updates July 2025

On 17 July 2025, the Ethiopian House of People’s Representatives (HoPR) approved the amendments to Income Tax Proclamation No. 1395/2017, which have now been published. The amendments take effect from 01 July 2025.

The following key measures will impact payroll and individual tax compliance for the 2025 tax year:

• New Salary Tax Rates (Article 11)
  • The tax rules on salary income have been updated:
    • The tax-free threshold has increased from ETB 600.00 to ETB 2 000.00.
    • The 35% top marginal tax rate now applies to monthly salaries above ETB 14 000.00 (previously ETB 10 900.00).
    • The minimum tax rate has increased from 10% to 15%, adjusting the lower tax band.
• Cash Payment Limit Introduced (Article 81)
  • A new rule sets a limit of ETB 30 000.00 for cash payments. Any payment above this must be made through a bank transfer, cheque, or other method approved by the National Bank of Ethiopia.
  • This rule applies:
    • per person, per day;
    • per single transaction; or
    • for payments linked to one event or purpose.
  • Public bodies, banks, and microfinance institutions are exempt. However, other employers must comply. If salaries above ETB 30 000.00 are currently paid in cash, these must now be processed via one of the above-mentioned methods. Non-compliance may result in a penalty equal to twice the amount paid in cash.
• Employees with More Than One Income Must File Tax Returns (Article 8)
  • Employees who:
    • have more than one job, or
    • earn extra income (like rental income or consultancy services),
  • must now consolidate their income for tax purposes. This means:
    • PAYE deductions are no longer considered final, and
    • the employee is required to file an annual tax return.
  • For employees with only one employer and no other income, there is no change — standard PAYE procedures continue.
  • Employers are encouraged to inform employees with additional income of their new filing obligation.

Although the proclamation was formally approved on 17 July 2025, the Ministry of Revenues of Ethiopia has officially instructed employers to implement these changes with effect from 01 July 2025. Publication in the Federal Negarit Gazeta is still pending, but not a prerequisite for implementation based on current administrative guidance.

Click here to access the official government notice. 

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The Deel Local Payroll Team