Ethiopia Exempts Electric Vehicles from Taxes to Drive Down Prices, Encourage Local Assembly

ADDIS ABABA – Ethiopia’s Ministry of Finance has introduced a revised tax regulation that exempts Electric Vehicles (EVs) from taxes.

The move, the Ministry of Finance said, aims at encouraging local vehicle assemblers and making electric vehicles affordable to users.

The revised regulation has exempted both imported or locally assembled EVs from Value Added Tax, excise tax, and surtax.

The ministry has also reduced the Customs tariffs imposed on EVs based on their assembly status.

Paying Huge Sums

Ethiopia’s tax system is often criticized for making cars unaffordable for regular citizens who have to pay twice as much as Kenyans living just across the border.

Apart from Customs duty, car importers pay five different forms of tax.

These taxes include Value Added Tax of 15%; excise tax from 5%-500% (depending on engine size, age, and type); 10% surtax; withholding tax of 3%; and income tax.

Together with a vehicle’s import price makes imported cars too expensive to be afforded by the average person.

The locally assembled cars are equally unaffordable for many as the tax levied on local assemblers is only 5% less than for commercial importers, according to a report.

Shifting to EVs

The taxes imposed on non-Electric vehicles has not changed as officials plan to replace the growing fuel-consuming transportation service options with environmentally friendly electric vehicles.

Authorities, however, expect EVs to be affordable with the revised taxes increasing local assembly and driving down the prices.

The latest tax revision has taken issues related to safety and the environment into consideration as part of a vision to create a carbon emission-free transport system, the Ministry of Finance said.

The newly revised regulation would incentivize the growing local electric auto assembly sector and EV importers while reducing the cost of EV users, the Ministry said.

The regulation targets a range of electric vehicles including private, public, and freight EVs.

Both imported and locally assembled electric vehicles will be fully exempted from value-added tax, excise tax, and surtax, as per the Finance Ministry.

It also says EVs entirely assembled in Ethiopia will totally be exempted from customs duty while those partially assembled EVs will be subjected to a 5% Customs duty. EVs manufactured abroad will, however, be subjected to 15% duty tariffs.

The latest tax revision comes almost a little over two years after the first locally assembled EV was introduced to the Ethiopian car market by Marathon Motors Engineering Plc.

A few others have since joined the electronic car assembly sector while several other companies also engaged in importing EVs.

The government plans to introduce 4,800 electric buses and 148,000 electric automobiles in its ten years strategic plan.

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