How are expenses managed in Ethiopia?

At Horizons, we are committed to maintaining a clear and efficient expense reimbursement process for our team members. Understanding the nuances of local tax laws and compliance requirements is crucial for both the company and its employees. 

Categories of Expenses in Ethiopia

In Ethiopia, expenses are processed based on their direct relation to business activities and compliance with local tax laws:

• Reimbursable Expenses: These expenses are directly related to business activities and are necessary for the performance of an employee's duties. They must be meticulously documented to ensure they meet the criteria for tax-deductible expenses.
• Non-deductible Expenses: Under Ethiopian tax law, payments for food and drink are considered 'entertainment expenses' and are not deductible. These expenses, along with any other personal benefits, may not be reimbursed as they do not directly relate to business activities.

Documentation Requirements

Proper documentation is essential for managing expenses effectively. To comply with Ethiopian tax regulations, Horizons requires:

• Original Supporting Documents: All receipts and invoices must be original and issued in the name of "Horizons HROM Plc."
• Purchase Voucher: For miscellaneous payments where an official supplier invoice is not available, a company-authorized 'purchase voucher' must be used. This voucher is recognized by the tax office.
• Withholding Taxes: Payments exceeding Ethiopian Birr 10,000 for goods and Birr 3,000 for services are subject to withholding tax. The rates are:
  • 2% if the supplier has a business license and tax identification certificate.
  • 30% if the supplier does not have these credentials.
    

Special Considerations for Travel and Miscellaneous Expenses

• Staff Travel: For business-related travel, Horizons HROM Plc allows for the payment of a daily allowance. This does not require a supplier invoice upon settlement, simplifying the reimbursement process for travel expenses.
• Detailed Documentation: Each document must clearly indicate:
  • Date of Transaction: The exact date when the expense was incurred must be noted.
  • Detailed Description: A clear and detailed description of the goods or services purchased to verify that the expense is business-related.
  • Amount and Currency: The total amount spent and the currency used must be recorded.
  • Supplier Details: Information about the supplier including their name and contact details should be included.
  • Tax Information: If applicable, VAT amounts and the supplier’s VAT registration number are essential for maintaining compliance and facilitating potential VAT credit claims.

Conclusion

Horizons is dedicated to ensuring that all team members in Ethiopia are equipped with the knowledge and tools necessary to manage their expenses efficiently and in accordance with local tax laws. By adhering to these guidelines, we can maintain transparency and ease in our expense reimbursement process, ensuring that all business-related expenditures are handled smoothly and effectively.