The Ethiopian Revenues & Customs Authority (ERCA) has increased the taxable levels for transport allowance and per diem saying that the cost of living is higher than it used to be.
A letter signed three four ago by Beker Shale, the director general of the Authority, amended two of the seven articles of the previous directive, raising minimum taxable Per Diem to 225 Br and transport allowance to 2,200 Br, an increase of 50pc and 120pc, respectively.
“The main reason to amend the allowance range for tax exemption is the increase in the cost of living in the country,’’ says Beker.
Employees are eligible for Per Diem when they travel beyond 25Km from their place of work, but Per Diems cannot exceed 25pc of the employee’s salary. According to the 2008 directive, Per Diems beyond 150 Br were taxable.
The previous directive also stated that the exemption for transportation allowance to the employee shall be not more than 1,000 Birr monthly. In addition, the transportation allowance paid to the employee should be not more than a quarter of the employee’s salary. The amended directive increased the rate of the transport allowance which is exempted from income tax to 2,200 Br with the same rate of not to be exceed one fourth of the employee’s salary.
In addition to the two article amendments, the directive also states Per Diems paid to government officials and civil servants are exempted form income tax.
“The highest rate of Per Diem for government officials and civil servants is 225 Br, that is why the directive will not be applicable for government officials,’’ said Tesfaye Mergiya, tax advisor to the director general.
Last year, the Authority had already submitted an amendment on income tax by raising the minimum salaries for both minimum and maximum tax rates.
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