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How To Start A Business in Ethiopia

Doing business in Ethiopia

Below is a detailed summary of the bureaucratic and legal hurdles faced by entrepreneurs wishing to incorporate and register a new firm in Ethiopia. It examines the procedures, time and cost involved in launching a commercial or industrial firm with between 10 and 50 employees and start-up capital of 10 times the economy's per-capita gross national income.

This information was collected as part of the Doing Business project, which measures and compares regulations relevant to the life cycle of a small- to medium-sized domestic business in 189 economies. The most recent round of data collection was completed in June 2015.

 

Licensing and Registration Process in Ethiopia  

Ethiopia’s new Investment Permit Application process is simple and requires only a few steps:

process flowchart
Click to download full document.

These steps vary slightly depending on the business form under which investors plan to operate their business:

Sole Proprietorship
  • Step 1: Collect information from Ethiopian Investment Commission (EIC) Information and Investment Promotion Department about requirements, incentives, etc.
  • Step 2: Collect application form from Information Desk.
  • Step 3: Submit application with passport and visa to start new investment permit application in Licensing and Registration Department.
  • Step 4: Collect bank letter from Licensing and Registration Department to open an account at National Bank of Ethiopia.
  • Step 5: Transfer/deposit cash in an opened bank account.
  • Step 6: Collect confirmation letter from bank which states the bank account is already opened and money is transferred/deposited.
  • Step 7: Collect investment permit certificate from Licensing and Registration Department.
Private Limited Company (PLC)
  • Step 1: Collect information from Information and Investment Promotion Directorate about requirements, incentives, etc.
  • Step 2: Collect application form memorandum and article of association from Information Desk.
  • Step 3: Submit draft memorandum and article of association in Licensing and Registration Department   
  • Step 3: Check uniqueness of the company name from Ministry of Trade (MoT) database
  • Step 4: Collect letter of clearance for unique company name from Licensing and Registration Department
  • Step 5: Edit and authenticate memorandum and article of association in Licensing and Registration Department.
  • Step 6: Collect letter to the National Bank of Ethiopia from Licensing and Registration Department to open an account at the bank.
  • Step 7: Open an account in the bank and transfer/deposit money.
  • Step 8: Collect confirmation letter from the bank which states the bank account is already opened and money transferred, authenticated lease agreement from documentation and authentication office and TIN number from CUSTOM and Revenue office.
  • Step 9: Fill application form /profile/ available at EIC Information Desk.
  • Step 10: Collect investment permit certificate and principal registration from Licensing and Registration Department
Branch /Multinational Company
  • Step 1: Collect information from Information and Investment Promotion Directorate about requirements, incentives, etc
  • Step 2: Collect application form from EIC Information Desk
  • Step 3: Submit application, authenticated parent (mother) company document, new company general manager’s passport and visa in Licensing and Registration Department to start new investment permit
  • Step 4: Collect a letter to the National Bank of Ethiopia from Licensing and Registration Department of EIC to open an account in a bank
  • Step 5: Open an account at the bank and transfer/deposit cash  
  • Step 6: Collect confirmation letter from bank which states the bank account is already opened and money is transferred/deposited  
  • Step 7: Collect investment permit certificate from Licensing and Registration Department

 

 

No.ProcedureTime to CompleteAssociated Costs
 1Reserve a unique company name and trade name
Agency: Ministry of Trade and Industry

Checking whether the name of the Company fulfills the requirements of Article 24 of the Commercial Registration and Business Licensing Proclamation No. 686/2010 is mandatory. The search is conducted at the Ministry of Trade and Industry. The entrepreneur completes a simple form, proposing 5 different company names, and submits it to the agent at window No. 1. The service is partially computerized and the search is quick. A Letter of Recommendation (LR) will be given by the agent and must be attached to the Memorandum and Articles of Association for authentication. The company also simultaneously reserves a trade name.
1 day ETB 27
 2Authentication of the company documents and the lease agreement at the Documents Authentication and Registration Office (DARO)
Agency: Documents Authentication and Registration Office (DARO)

Article 11 (1) (e) of Commercial Registration and Business Licensing Proclamation No. 686/2010, the Memorandum and Articles of Associations must be authenticated. The entrepreneur deposits the documents at DARO and will be given an appointment for the next day. The Documents Authentication and Registration Office verifies the in-kind contribution stated in the Memorandum. The partners appear in person at the appointed date, with an original copy of their letter of appointment (power of attorney) and a valid identity card. The officer checks the validity of the documents, the authenticity of the signatures, and the genuineness of the identity cards. All partners sign the documents before the notary public and pay a stamp duty flat fee of ETB 350, as well as a service charge of ETB 10 per copy for 4 copies of the Memorandum of Association. Payment is done in the same office where the documents are being registered in the books.
2 days ETB 390
 3Obtain a tax identification number (TIN)
Agency: Ethiopian Revenue and Customs Authority

Before incorporation, the company must obtain a tax identification number by completing and submitting an application form together with its memorandum and articles of association. A letter will then be issued to the company for submission at the sub-city along with its application for incorporation.
1 day no charge
 4Submit documents and obtain a letter from the Trade Bureau at the Sub-city level to open a bank account
Agency: Commercial Register at the Ministry of Trade

The applicant presents the Memorandum and Articles of Association, TIN number, relevant IDs and power of attorney (if done through one) in order to obtain a letter from the Trade Bureau at the Sub-city level addressed to a chosen commercial bank so that an account may be opened under the new company name.
1 day no charge
 5Open a bank account
Agency: Bank

A bank account has to be opened and the minimum capital requirement has to be deposited. Upon presentation of the letter from the Commercial Registry, the applicant opens a bank account under the new company name and deposits the capital. The bank provides the applicant with a confirmation letter stating that the deposit has been affected.
1 day no charge
 6Register and obtain the Commercial registration certificate
Agency: Commercial Register

Evidence of capital deposit is required for private limited companies. This requirement is imposed by the Article 11 (3) of the Commercial Registration and Business licensing Proclamation No. 686/2010, issued in 2010 and entered into force immediately after publication. Under this Article, the applicant needs to submit a bank statement that the capital of the business organization to be contributed in cash has been deposited and all appropriate documents relating to contribution in kind.
Once the applicant submits the proof of deposit, a Commercial Registration Certificate (also commonly referred to as the ‘Principal Registration’) is issued to the applicant. The applicant registers the Memorandum and Articles of Association. After reviewing the documents, including the lease agreement, the Commercial register delivers a registration certificate and the appropriate license. Payment is done at the same time.
1 day ETB 102
 7Make a company seal
Agency: Seal maker

While the law does not specifically require a company to have a seal, it is required and commonly used in practice.
1-3 days ETB 100
 8Register with Ethiopian Revenue and Customs Authority for VAT
Agency: Ethiopian Revenue and Customs Authority

A newly established firm must register for VAT if its turnover is at least ETB 500,000 on the basis of VAT Proclamation No. 285/2002, Article 16. Once registered, the VAT certificate is obtained.
1 day no charge
 9Obtain a Certificate of Competence
Agency: Ministry of Trade and Industry

The Certificate of Competence is issued by the relevant government agency which has regulatory power over the particular commercial activity for which a business license is issued. The documents required vary depending on the type of business undertaken. The company must show its Certificate of Competence in order to retrieve its business license.
1 day no cost
 10Obtain a business license
Agency: Commercial Register

The applicant presents Principal Registration, proof of the new Tax Identification Number obtained, a certificate of competence in the field of commercial activity in which the applicant is seeking a business license (indicated under Article 32 Sub-article 8 of the Commercial Registration and Business Licensing Proclamation No. 686/2010), and pays the relevant fees. The Business License is usually issued on the same day these documents are submitted.
1 day ETB 102
 11Install a cash registration machine
Agency: Ethiopian Revenue and Customs Authority, Point of sales software providers, and Cash register machine hardware providers

Pursuant to the Council of Ministers Regulations No. 139/2007 ‘To Provide for the Obligatory Use of Sales Register Machines’, all businesses must purchase and install a sales register machine in order to comply with VAT tax obligations. The machines are available at certified supplier locations around Addis Ababa. Once the machine is brought to the company offices, it must be properly installed and set up so that it is linked to the Tax Administration system.
7 days on average ETB 5,000-10,000