The Ministry of Revenues has officially issued the Value Added Tax (VAT) Refund Directive No. 1132/2026, introducing a landmark rule where the government must pay interest to taxpayers if refunds are delayed. Approved by the Ministry of Justice, the directive enforces a legally binding accountability mechanism, requiring the tax authority to calculate delayed payments based on the highest commercial bank lending rates.
Enacted following the proclamation of Decree No. 1341/2024, the directive aims to streamline the tax refund process through transparency and accountability. To minimize administrative hurdles and bureaucratic delays for businesses, the ministry is introducing a system that categorizes taxpayers into three distinct risk-assessment levels.
Under the new framework, low-risk taxpayers and export-oriented manufacturers will benefit from an expedited process, receiving their VAT refunds within just seven days. Standard refund requests submitted by regular businesses will be evaluated and finalized within a maximum period of 45 days.
However, the directive also introduces strict compliance measures for businesses seeking these refunds. Starting July 7, 2025 (Hamle 1, 2017 E.C.), any business transaction exceeding 50,000 Ethiopian Birr (ETB) must be processed through commercial banks to be eligible for a VAT refund.
This strategic reform marks a significant shift in Ethiopia’s tax administration, balancing tight financial regulations with strong incentives for timely government payouts. By penalizing its own delays with high interest rates, the Ministry of Revenues intends to foster a more reliable, business-friendly economic environment.