COMPANY FORMATION IN ETHIOPIA

Ethiopia, the gateway to the Horn of Africa, offers compelling opportunities for foreign investors with its rapid economic growth, strategic market access, and ongoing investment reforms. This guide provides a precise, step-by-step overview of the company formation process, legal requirements, and essential information every new investor needs to know.

STEP 1: CHOOSE YOUR BUSINESS STRUCTURE

Selecting the appropriate legal structure is your first strategic decision. The most common options for foreign investors include:

STEP 2: UNDERSTAND MINIMUM CAPITAL REQUIREMENTS

The Ethiopian Investment Commission (EIC) mandates specific minimum capital thresholds for foreign investors:

Important: These funds must be deposited in a local bank account and remain company assets—they are not consumed as fees.

STEP 3: VERIFY INVESTMENT ELIGIBILITY

Ethiopia follows a negative list approach—investments are permitted in most sectors except those explicitly restricted.

Sectors Restricted for Foreign Investment:

• Banking and insurance (with recent partial liberalization—foreign banks may now acquire stakes in domestic banks subject to NBE approval)

• Media and broadcasting services

• Air transport services (under 50 seats capacity)

• Travel agency and forwarding services

• Retail trade and brokerage (with exceptions under recent reforms)

Sectors Requiring Joint Venture with Government:

• Manufacturing of weapons, ammunition, and explosives

Recent Liberalization (2024-2025): The government has opened banking, retail and wholesale trade, and import/export trade to greater foreign participation.

STEP 4: PREPARE CORE DOCUMENTS (CRITICAL!)

Document preparation is the most common source of delays. All documents must be properly prepared, translated (if required), and processed through notarization and authentication.

Required Documents Checklist:

Pro Tip: Include your country of origin in the company name to facilitate future incentive applications.

STEP 5: NAME RESERVATION

Submit three candidate names (format: Parent Company Name + Ethiopia + PLC) to the Ethiopian Investment Commission or Commercial Registry for clearance.

• Check availability via: https://www.investethiopia.gov.et ,Avoid sensitive words like "Government," "National," or "Bank" (unless licensed)

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STEP 6: INVESTMENT PERMIT APPLICATION

Submit your application to the Ethiopian Investment Commission (EIC)—the primary gateway for foreign investors.

Required for submission:

• Completed application form

• Project proposal/business plan

• Notarized and authenticated parent company documents

• Proof of minimum capital (bank confirmation)

• Passport copies of shareholders/directors

STEP 7: BUSINESS REGISTRATION

After obtaining the Investment Permit, register your company with the Ministry of Trade and Regional Integration (MoT) or the appropriate regional bureau.

You will receive:

• Commercial Registration Certificate

• Business License

Documents needed: Investment Permit, authenticated Articles of Association, proof of registered address, shareholder details.

STEP 8: OPEN LOCAL BANK ACCOUNT

Open a corporate bank account with an authorized Ethiopian bank. Required documents include:

• Commercial Registration Certificate

• Business License

• Investment Permit

• TIN (see Step 9)

• Board resolution authorizing account opening

• Identification documents for signatories

Foreign currency accounts: Available for businesses receiving foreign currency; recent reforms allow indefinite retention of export proceeds.

STEP 9: TAX REGISTRATION (TIN)

Register with the Ethiopian Revenue and Customs Authority (ERCA) to obtain:

• Tax Identification Number (TIN) — mandatory for all business operations

• VAT registration (if annual turnover exceeds applicable threshold)

STEP 10: REGISTER INVESTMENT CAPITAL

This crucial step protects your investment and enables profit repatriation:

1. Register all foreign capital contributions with the EIC and National Bank of Ethiopia (NBE)

2. Submit bank certificates proving funds transfer

3. Obtain capital registration certificate

Why it matters: Without capital registration, you cannot repatriate profits, dividends, or proceeds from future sale of the business.

ADDITIONAL LICENSES (SECTOR-SPECIFIC)

Depending on your industry, you may need additional approvals:

CRITICAL COMPLIANCE REQUIREMENTS

1. Local Director Requirement

Some business structures require at least one local director. Confirm requirements for your specific structure.

2. Registered Physical Address

You must have a physical office address in Ethiopia. Virtual offices are not permitted.

3. Debt-Equity Ratio

Maintain debt-equity ratio as per NBE directives (typically 60:40 for foreign investments).

4. Reporting Obligations

• Annual report submission to EIC

• Tax filings (monthly/yearly depending on turnover)

• Audited financial statements (mandatory for foreign-owned companies)

• SPECIAL ECONOMIC ZONES (SEZs)

Investors in SEZs enjoy additional benefits under Proclamation No. 1322/2024:

• Customs duty exemptions on imports

• Zero VAT on intra-zonal transactions

• Dividend tax holidays

• Fast-track licensing procedures

• NEW FOR 2026: STARTUP DESIGNATION

Innovation-driven businesses should consider applying for Startup Designation under Proclamation No. 1396/2025.

Benefits for Designated Startups:

• Income tax exemption during designation period

• Duty-free import of capital goods (up to 4 years)

• Loss carry-forward provisions

• Access to National Credit Guarantee Scheme

• Exemption from minimum capital requirements for foreign startups

Eligibility Criteria:

• Less than 5 years from establishment

• Innovation-driven business model

• Scalable with growth potential

• Founders hold minimum 25% equity

• Registered in Ethiopia

Interim Registration: Ministry of Innovation and Technology (MInT) is currently accepting interim startup registrations to prepare for full implementation.

• KEY SUCCESS FACTORS

Do's:

✅ Engage local legal counsel familiar with Ethiopian procedures

✅ Ensure all documents are properly notarized and authenticated BEFORE submission

✅ Maintain clear communication with EIC and your designated bank

✅ Register capital promptly after funds transfer

Don'ts:

❌ Don't underestimate document preparation time

❌ Don't assume all sectors are open verify eligibility FIRST

❌ Don't commence operations without all required licenses

❌ Don't neglect ongoing compliance and reporting obligations

REGULATORY AUTHORITIES AT A GLANCE

•   USEFUL CONTACTS

• Ethiopian Investment Commission: https://www.investethiopia.gov.et

• Ministry of Trade: https://www.motri.gov.et

• Ethiopian Revenue and Customs Authority: https://www.erca.gov.et

• National Bank of Ethiopia: https://www.nbe.gov.et

• Ministry of Innovation and Technology: http://www.mint.gov.et

✅ FINAL CHECKLIST FOR INVESTORS

• Confirm sector eligibility

• Prepare minimum capital (USD 200,000 / 150,000 / 100,000 / 50,000 as applicable)

• Notarize and authenticate all parent company documents

• Reserve company name

• Submit investment permit application to EIC

• Register company with Ministry of Trade

• Obtain TIN from ERCA

• Open local bank account

• Deposit minimum capital and obtain bank certificate

• Register capital with EIC/NBE

• Apply for sector-specific licenses (if applicable)

• Consider Startup Designation (if eligible)