Ethiopian Duty-Free Vehicles Directive No. 942-2023

I. Introduction and Purpose

The Ministry of Finance’s Directive No. 942/2023, issued in January 2023 and effective upon its publication on the Ministry’s website, establishes the comprehensive framework for the duty-free importation or domestic purchase of vehicles for various development projects and sectors within Ethiopia. This directive serves to streamline the process for investment sectors, public bodies, and civil society organizations, repealing previous directives to create a unified and clear guideline. Its core purpose is to define the types and quantities of vehicles eligible for duty-free status, thereby facilitating development initiatives across the country.

II. Legal Basis and Scope of Application

The authority for issuing Directive No. 942/2023 is vested in the Ministry of Finance by Article 129 of the Customs Proclamation No. 859/2014 (as amended) and Article 13 of the Council of Ministers Investment Incentives Regulation No. 517/2022. The directive applies to the duty-free importation of vehicles as stipulated by the Investment Incentives Council of Ministers Regulation, Mining Proclamation No. 678/2010 (as amended), Customs Proclamation No. 859/2014 (as amended), and Customs Regulations No. 89/1995.

Exclusion: It is crucial to note that double cabin and station wagon vehicles are explicitly excluded from the scope of this directive (Article 3).

The term “duty-free importation” is broadly interpreted to include the purchase of domestically produced vehicles free of taxes and duties (Article 2, Clause 22). If an investor or institution with duty-free privilege purchases a vehicle assembled or produced in Ethiopia, the taxes and duties paid on inputs used by the manufacturer to produce the vehicle shall be reimbursed.

III. Definitions of Key Terms

For clarity, the directive provides specific definitions for various terms:

• Vehicle: A broad term encompassing trucks (or similar special purpose vehicles for transporting dry goods, liquids, or waste, or those assembled with refrigerators), Buses, Minibuses, Midi-buses, Delivery Vans, and Motor Vehicles.
• Bus: A vehicle with a capacity of 30 or more passenger seats, excluding folding seats.
• Minibus: A vehicle with a capacity of not less than 10 and not more than 16 passenger seats, excluding folding seats.
• Midi-bus: A vehicle with a capacity of not less than 16 and not more than 29 passenger seats, excluding folding seats.
• Delivery Van: A vehicle with a loading capacity exceeding 2,500 kilograms.
• Truck: A vehicle with a loading capacity of more than 3,500 kilograms (including the trailer).
• Special Purpose Vehicle: Vehicles designed for use by sectors with a special character and do not include vehicles for ordinary transport purposes (Article 2, Clause 7). This category includes refrigerated vehicles, vehicles for transporting animals, liquid/waste trucks, and ambulances for emergency transport of employees.
• Motorcycle: A two-wheel vehicle irrespective of engine capacity.
• Duty: Refers to all taxes and duties payable on the importation and domestic manufacturing of vehicles.
• Other definitions include classifications for “Hotel,” “Lodge,” “Restaurant,” “Motel,” “Resort Hotel,” “Industry Park,” “Mining,” “Licensee,” “Public Body,” “Civil Society Organization,” “Proclamation,” and “Regulation” (Article 2).

IV. Eligible Investment Sectors and Project Types

The duty-free incentive is granted to investors who are establishing new projects or expanding and upgrading existing investments. The eligible sectors include (Article 4):

• Manufacturing Industry
• Industry Park Development
• Agriculture
• Logistics
• Construction Contractors
• Star-ranked Hotels (including Resorts), Motels, Restaurants, and Lodges
• Railway Infrastructure
• Information and Communication Technology (ICT)
• Tour Operators
• Electric Power Generation, Transmission, and Distribution
• Technical Inspection and Analysis Services and Commercial Works
• Education and Health Services
• Architecture and Engineering Works
• Mining (Section Three, Article 16)
• Public Bodies and Civil Society Organizations (CSOs) for project execution.

V. General Conditions and Documentary Requirements

While specific requirements vary by sector, several common conditions and documents are generally required:

A. General Requirements

• Vehicle Purchase Documentation:
  • For imported vehicles: Bill of lading/airway bill/truck way bill and invoice.
  • For locally sourced vehicles: Purchase contract and supporting evidence.
• Proof of Funds:
  • If purchased via bank loan: Bank loan agreement.
  • If using own funds: Bank statement showing the amount in the bank account three months prior to the application date.

B. Sector-Specific Conditions and Evidences

• Manufacturing Industry (Article 5): Evidence of land acquisition/lease, project commencement (land preparation, infrastructure), or commencement of machinery erection (for leased buildings). For vehicles other than motorcycles, evidence of starting test production is required.
• Agricultural Investment (Article 6): Evidence of land acquisition/lease, project commencement, and a crucial obligation to submit evidence within one month of production commencement that the project size (e.g., developed land, livestock, beehives, pond volume) meets Schedule Two requirements. Failure to do so incurs liability for taxes and duties on imported vehicles.
• Star-Rated Hotels/Motels/Restaurants/Lodges (Article 8): Confirmation by the appropriate agency that construction is completed or submission of a lease agreement.
• Tourism Service (Tour Operators) (Article 10): Must possess a tour operator license, provide evidence that vehicles are new from the manufacturer/supplier, and sign an undertaking with the Customs Commission to use vehicles only for tour operation. A mark prescribed by the Ministry of Tourism must be affixed to these vehicles for identification.
• Vehicles to Transport Workers (Article 14): Permitted for most sectors (except Tour Operators) based on employee numbers (Schedule Eight). Requires evidence of land/lease, project production/service rendering, and a three-month payroll with evidence of employment tax payment.
• Mining (Article 16-18): Eligibility depends on the type of mining license (exploration, small-scale, large-scale, or cooperative; reconnaissance and artisanal mining licenses are NOT eligible). Conditions include a copy of the license, evidence of project implementation (camp, infrastructure), and payroll for worker transport vehicles.
• Public Bodies and Civil Society Organisations (CSOs) (Article 19-21):
  • CSO Documentation: Requires an agreement with a Public Body approving the project, a project proposal with over six months remaining, a renewed registration certificate, vehicle documentation (bill of lading, invoice, etc.), local purchase contract (if applicable), donation certificate (if applicable), and a support letter from the relevant supervising public organ.
  • CSO Vehicle Transfer Restriction: A vehicle imported duty-free by a CSO may only be transferred to another entity as per Article 46 of Organizations of Civil Society Proclamation No. 1113/2019 and applicable customs law. The Authority for Civil Societies Organizations must report such transfers to the Ministry of Finance.
  • Public Body Documentation: Requires a letter of application, allocated budget, vehicle documentation (bill of lading, invoice, etc.), donation certificate (if applicable), and an approved project document.

VI. Quantity and Type of Vehicles Allowed

The directive explicitly links the quantity and type of vehicles eligible for duty-free importation to specific investment areas, project scales, and sometimes, administrative location (Addis Ababa/Oromia Special Zone vs. Other Areas). This is primarily detailed in eight comprehensive schedules (Schedule One to Schedule Nine), appended to the Directive.

• Schedule One: Manufacturing Industry: Details quantities of “Delivery Vans” and “Trucks” by sub-sector (e.g., Food Industry, Textile, Chemical, Basic Metals) and location.
• Schedule Two: Agriculture: Specifies “Motor Bicycles” and “Trucks” based on cultivated land area, livestock, beehive numbers, or pond volume.
• Schedule Three: Construction Contractor Industry: Lists specific construction vehicles such as “Trucks,” “Trucks fitted with water tanker,” “Grader,” “Excavator,” “Loader,” “Roller,” and specialized vehicles for Water Well Drilling and Mineral/Petroleum/Geothermal Exploration Drilling, varying by contractor level.
• Schedule Four: Star Level Hotels/Motels/Restaurants/Lodge Services: Specifies “Minibus” and “Midi-bus” quantities based on the hotel’s star level.
• Schedule Five: Electricity Generation, Transmission and Distribution: Specifies “Trucks” based on Megawatt capacity.
• Schedule Six: Logistics Investment: General “Trucks” for Cooling Warehouse, Silos Warehouse, and Dry Port Services.
• Schedule Seven: Education & Training, Health Services, Architectural & Engineering Works, Technical Testing & Analysis, Import Trade (LPG & Bitumen), Wholesale Trade (Petroleum Products): Specifies “Bus,” “Mid-bus,” “Minibus,” and “Truck.”
• Schedule Eight: Transportation of Workers: Based on permanent worker numbers, specifying “Minibus,” “Mid-bus,” or “Autobus.”
• Schedule Nine: Mining Investment: Specifies “Motor Bicycle” and “Truck” based on capital amount, license type, and mineral type.

A. Special Purpose Vehicles (Article 15)

The directive allows duty-free importation of:

• Refrigerated vehicles or vehicles to transport animals for logistics services or manufacturing/agricultural activities specified in Schedules One and Two.
• Liquid/waste trucks for any manufacturing industry.
• Ambulances for any investor in the sectors specified under Article 4, to transport employees in emergencies.

B. Expansion of Investments/Mining Activities (Article 23)

Investors expanding or upgrading existing enterprises may import one additional vehicle from the specified lists.

VII. Prohibitions and Penalties (Article 24)

A critical general condition is the prohibition against misuse of duty-free vehicles. A person or organization granted permission to import a vehicle duty-free shall not use such vehicles for purposes other than for which the exemption was granted. If found using the vehicle for unauthorized purposes, the person or organization shall be liable to penalties under the Customs laws in addition to paying the duties and taxes payable on such vehicles.

VIII. Repealed Directives and Transitory Provisions (Article 25 & 26)

Directive No. 942/2023 repeals Directive No. 4/2012 (Ethiopian Investment Board) and Directive No. 4/2009 (Ministry of Mines) on duty-free vehicle importation. Provisions on vehicles in Directive No. 79/2003 (Public Bodies/CSOs) are also no longer applicable.

Transitory Clause: For investors who obtained permits/licenses before this Directive’s issuance, the previous directives (No. 4/2012 and No. 4/2009) remain applicable, except for the importation of station wagons and pickups. Public Bodies, Higher Education Institutions, and CSOs granted privilege under Directive No. 79/2003 prior to this new directive’s issuance may still import such vehicles.

IX. Conclusion

The Ministry of Finance’s Duty-Free Vehicles Directive No. 942/2023 is a pivotal regulatory instrument designed to facilitate economic development across various sectors in Ethiopia. By clearly defining eligible beneficiaries, vehicle types, quantitative limits, and the necessary documentation, it aims to streamline the process of acquiring vehicles free from duties and taxes. The directive’s emphasis on sector-specific criteria and its detailed schedules ensure that the incentive is tailored to the unique needs of different industries and project scales. Crucially, the directive also imposes strict prohibitions against the misuse of duty-free privileges, underscoring the government’s commitment to accountability and preventing abuse. Understanding these provisions is essential for investors, public bodies, and civil society organizations seeking to leverage this incentive for their development projects in Ethiopia.