Ethiopia income tax rates 2026: the new salary tax table with worked examples

The salary tax table in force now

This is the new Article 11 of the Federal Income Tax Proclamation, as replaced by Proclamation 1395/2025. It was published in the Federal Negarit Gazette on 1 September 2025 and applies to income from 8 July 2025, which is Hamle 1, 2017 EC. The last column is our own sum: it's the total tax you've paid by the time your pay reaches the top of that band.

0 to 2,000 Birr: 0%, total tax 0
2,001 to 4,000 Birr: 15%, total tax 300
4,001 to 7,000 Birr: 20%, total tax 900
7,001 to 10,000 Birr: 25%, total tax 1,650
10,001 to 14,000 Birr: 30%, total tax 2,850
Over 14,000 Birr: 35%

Only the part of your pay inside a band is taxed at that band's rate. Moving into a higher band never leaves you with less money than before.

How to work out your tax, step by step

Take a monthly salary of 20,000 Birr, all of it basic pay.

First 2,000 at 0% = 0
Next 2,000 at 15% = 300
Next 3,000 at 20% = 600
Next 3,000 at 25% = 750
Next 4,000 at 30% = 1,200
Last 6,000 at 35% = 2,100
Tax = 4,950
Pension 7% of 20,000 = 1,400
You keep = 13,650

The quick formula

There's a faster way. The Ministry of Revenues works its tables as the rate times your pay, minus a fixed deduction. These deductions are our own sums for the new bands, since the law doesn't print them, and they give the same answer as the long way.

• 2,001 to 4,000 Birr: pay x 15% minus 300
• 4,001 to 7,000 Birr: pay x 20% minus 500
• 7,001 to 10,000 Birr: pay x 25% minus 850
• 10,001 to 14,000 Birr: pay x 30% minus 1,350
• Over 14,000 Birr: pay x 35% minus 2,050

What you keep on common salaries

Each line treats the whole sum as basic pay, with 7% pension. We worked each one by hand. For your own figure, the salary calculator does it in a second.

3,000: tax 150, pension 210, net 2,640
5,000: tax 500, pension 350, net 4,150
8,000: tax 1,150, pension 560, net 6,290
12,000: tax 2,250, pension 840, net 8,910
18,000: tax 4,250, pension 1,260, net 12,490
25,000: tax 6,700, pension 1,750, net 16,550
40,000: tax 11,950, pension 2,800, net 25,250

Is the old table still valid?

No. The table with 0 to 600, 601 to 1,650 and so on up to 10,900 was replaced. You'll still find it on many web pages, and a Ministry of Revenues brochure still printed it when we looked on 2 November 2026. But the Ministry's own list of laws shows Proclamation 1395 as in force. If your payslip since July 2025 still looks like the old table, ask your payroll office about it.

Does pension come off before tax?

No, and this catches a lot of people. Article 10(2) of Proclamation 979/2016 taxes the total monthly income you receive, and Article 10(3) says you can't deduct your costs of earning it. So tax is worked on your full pay, then the 7% comes off after. If you take pension off first on 20,000 Birr, you get 4,460 in tax, which is 490 Birr too low.

Your employer's 11% is different. It's on top of your pay, and it isn't taxed as your income as long as the employer's contribution stays within 15% of your monthly salary.

Which pay is taxed, and what's tax free?

Article 12 counts salary, wages, allowances, bonus, commission and gifts for good performance as employment income. Money you receive on redundancy or when a contract ends counts too. So most of what your employer pays you goes into the table. If your employer pays your tax for you, that counts as extra income as well.

The Ministry of Revenues gives two limits for allowances. Per diem is tax free up to 500 Birr a day or 4% of your salary, whichever is higher. Travel allowance is tax free up to a quarter of your monthly salary, and never above 2,200 Birr. Say your basic is 10,000 with a taxable allowance of 2,000: tax is on 12,000, which is 2,250, pension is 700 on the basic only, and you keep 9,050. We couldn't confirm if an ordinary monthly commuting allowance counts as that travel allowance, so ask your payroll office.

The Nehase and Pagume rule, and other special cases

• Nehase and Pagume: pay for these two months is added together and taxed as one month's salary, under Article 10(4). So if you get 20,000 for Nehase and 3,000 for Pagume, tax is on 23,000, which is 6,000.
• Two jobs: an employer who knows you have other jobs, and knows the others don't tax the total, has to add them up and tax the total. You also have to file a declaration within 30 days of the end of the year if you've had more than one employer.
• No TIN: on payments for services, the payer withholds 30% if you have no taxpayer number. You get a TIN at a revenue branch office, and one number works across the whole country.
• Bonus and severance: both are taxable income. We couldn't open an official method for spreading them over months, so ask your payroll office how it works them out.

What we read, and what to check yourself

These are the federal laws, read on 2 November 2026. The Ministry of Justice's list of proclamations shows no newer change to the rates, and we didn't read the June 2026 budget speech in full. If a regional body pays you, ask its payroll office to confirm which table it uses. This page is an explanation, not tax advice.

• Work out your own net pay with the salary calculator
• Pension contribution in Ethiopia: 7% and 11%
• Finance and accounting jobs in Ethiopia

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