TAXATION OF INCOME FROM E-COMMERCE IN ETHIOPIA: A QUEST FOR INTEGRATING MODERN RULES OF TAXATION INTO ETHIOPIAN INCOME TAX SYSTEM.

Abstract

With the advancement of technology, the traditional commercial environment has been changed to E-Commerce. This change has posed serious challenges to the traditional taxation regimes. To legalize and promote E-Commerce, Ethiopia has adopted the “Electronic Transaction Proclamation” and “Digital Strategy for Inclusive Prosperity 2025” in 2020. This would inevitably pose a challenge to the Ethiopian income tax regime. This article examined the taxation of income from electronic commerce under Ethiopian income tax legislation along with its gaps and opportunities for regulation. To accomplish this, it employed a doctrinal legal research methodology to examine the relevant provision of income tax law and selected double taxation agreements in Ethiopia. Accordingly, the finding of the article shows that neither the domestic law nor the bilateral tax treaties signed by Ethiopia have incorporated a rule for taxation of income from E-Commerce. Besides, the concept of permanent establishment as envisaged under Ethiopian income tax law does not apply to the taxation of E-Commerce. Hence, it is recommended that Ethiopia should integrate the modern rules for the taxation of income from E-Commerce into its income tax law and double taxation agreements.