Legal Update

Foreign Bank Entry into Ethiopia: Regulatory Overview and Licensing Procedures

For decades, Ethiopia’s banking sector remained closed to foreign investment. This policy shifted under the Homegrown Economic Reform Program (HERP), leading to the enactment of Banking Business Proclamation No. 1360/2025 and National Bank of Ethiopia (NBE) Directive No. SBB/94/2025, which formally opened the sector to foreign participation. The Proclamation allows entry via subsidiaries, branches, representative offices, or share acquisitions, while the Directive provides the operational framework for licensing, capital requirements, supervision, and fees. This legal update summarizes the key regulatory provisions governing foreign bank entry and operation.

Legal Update

Brief Note on Ethiopia’s Asset Recovery Proclamation No. 1364/2025

The Ethiopian Parliament approved the Asset Recovery Proclamation No. 1364/2025 on January 9, 2025, and it entered into force upon its publication in the Negarit Gazeta on May 2, 2025. This legislation was introduced to fill a long-standing legal gap in addressing the recovery of assets obtained through unlawful means or whose origins cannot be justified. Before its enactment, the Ethiopian legal framework lacked comprehensive provisions for civil-based asset recovery and the tracing of illicit wealth, making it difficult to address unexplained accumulation of property and financial assets. The proclamation is designed to combat corruption, economic crimes, and illicit financial flows, while strengthening Ethiopia’s economic integrity, particularly in tax administration, foreign exchange management, and investor confidence.

Legal Update

Significant Tax Reforms Under Proclamation No. 1393/2025: What Taxpayers Need to Know

After almost a decade, the Ethiopian Parliament has enacted the new Income Tax Proclamation No. 1395/2025, repealing most provisions of Proclamation No. 979/2016. This reform introduces key changes such as restructuring tax categories, introducing a Minimum Alternative Tax (MAT), revising tax rates, adopting aggregate income taxation, and removing turnover tax. It also updates the non-residency threshold, restriction on payment method, introduces advance tax payments, exempts LLPs and Collective Investment Scheme (CIS) from corporate income tax, and incorporates provisions addressing digital developments. This legal update summarizes these and other major changes under the new income tax proclamation.

Labor and Employment Law

Work and Residence Permit Process for Expatriates in Ethiopia

Foreign nationals employed by either domestic or foreign companies in Ethiopia are required to obtain a work permit before engaging in any employment activities. The Ministry of Labor and Skills (MoLS) issues work permits for expatriates working for domestic companies, whereas the Ethiopian Investment Commission (EIC) is responsible for processing work permits for expatriates employed by foreign companies. Once the work permit is issued, the expatriate must apply for a temporary residence permit at the Ethiopian Immigration and Citizenship Services.
While the process may appear straightforward, administrative bureaucracies, document verification requirements, and system inefficiencies warrants the involvement of legal professionals to facilitate and expedite the issuance of permits.

Real Estate and Construction

Key Highlights on Ethiopia’s New Real Estate Proclamation

Ethiopia has enacted the long-awaited Real Estate Proclamation No. 1357/2024, establishing a comprehensive legal framework for real estate development, marketing, and valuation. The primary objective of the proclamation is to regulate the sector while safeguarding the interests of third parties, particularly buyers. Its scope of application extends to all real estate development activities, as well as the marketing and valuation of real property within Ethiopia. The law is anchored on key principles such as transparency, accountability, predictability, efficiency, and adherence to the rule of law.

Technology

Key Insights on Ethiopia’s Personal Data Protection Proclamation

In today’s digital age, data is at the core of our interconnected world. The sharing of data enhances convenience, efficiency, and connectivity in both personal and professional spheres. Ethiopia is no exception to this global trend, making the establishment of a comprehensive data protection framework essential. Recognizing this necessity, Ethiopia has enacted the Personal Data Protection Proclamation No. 1321/2024 to safeguard the rights, fundamental freedoms, and privacy of individuals regarding the automatic processing of personal data. Furthermore, the proclamation aims to foster a robust digital economy by building trust in data protection.

Commercial Law

Liability of Company Managers under Ethiopian Law

Managers play a crucial role in the corporate world, entrusted with wide-ranging powers and responsibilities. However, when these powers are misused or exceeded, resulting in harm to the company, shareholders, or third parties, managers may be held personally liable. Ethiopian law provides a legal framework for such liability, deriving from commercial, agency, labor, tort, and criminal laws. The extent of liability varies depending on the business structure and the specific circumstances of each case.

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