As we approach the end of the Ethiopian month of Hamle (June), the legal community gears up for a crucial period – a time dedicated to fulfilling their tax duties. This month holds immense significance for attorneys falling under tax category C, with an annual gross income of less than 500,000 birr. The declaration and payment of their annual taxes typically take place during the Ethiopian month of Hamle, precisely from 7th July to 6th August.
In this exclusive blog post, we’ll delve into the essential tax obligations that Ethiopian lawyers must comply with during this period. From the turnover tax and income tax to license renewal and necessary documentation, understanding these tax responsibilities is crucial to ensure financial compliance and pave the way for a successful legal practice.
Your Tax Declaration Journey
Your annual tax is declared and paid at the wereda administration office’s income bureau, the same office that provided you with your Tax Identification Number (TIN) when you began your legal practice. Don’t forget to bring your TIN registration certificate when going to the wereda for payment.
Legal Service Agreements and Written Declaration
As a category C taxpayer, you usually pay your taxes based on your own declaration. However, different weredas (local administrative units) may have varying requirements for tax compliance. Some may require attorneys to present legal service agreements, while others may ask for written declarations of their income and expenses. It’s worth noting that certain bureaus set 23,000 birr as the minimum annual income that an attorney can declare.
Annual Turnover Tax (10%)
Category C Ethiopian attorneys are required to pay an annual turnover tax of 10%. This tax is calculated from the total annual revenue generated from legal services provided.
In addition to the turnover tax, attorneys are also subject to income tax. The income tax rate will depend on their total taxable income, including legal service fees received.
Additional Costs for Licence Renewal and Sanitation Services
Keep in mind that the Ministry of Justice requires attorneys to pay 300 ETB for licence renewal. If this payment is made at the wereda, ensure it is clearly indicated to avoid any duplicate charges at the ministry.
Tax Payment and Clearance Certificate
After declaring your taxes, revenue authorities at the wereda will inform you of the amount you need to pay. Payments can be made through banks or services like Telebirr. Once the payment is confirmed, make sure to request an invoice and tax clearance certificate, as these will be needed later during the renewal of your licence.
Renewal of Licence
Unlike tax declaration, renewal of the advocacy licence does not occur at the same time for every attorney. Instead, the advocacy licence should be renewed annually within a month of its last validity date. To avoid any disruptions, it’s advisable to apply for renewal 20 to 10 days before the licence expires.
The Licence Renewal Process
Renewal of the advocacy licence is done at the Ministry of Justice’s main office, specifically at the Advocates Licensing and Administration Department. When going for renewal, ensure you take your advocacy licence, copy of the tax payment invoice, and the original clearance certificate addressed to the Ministry of Justice. The ministry may also require proof of compliance in providing probono services during the year and other documents as provided under Article 20 of the Federal Advocacy Service Licensing and Administration Proclamation 1249/2021.
A Renewed Licence: Not the End of the Road
After satisfying the ministry’s requirements, your licence will be renewed for one more year, and a stamp indicating its renewal will be placed on the licence. However, the process doesn’t end there. Take the renewed licence, along with a copy, to the Document Authentication and Registration Authority main office. This final step is crucial to register your licence in the system. Without this, you might face challenges when clients try to give you power of attorneys, as the system won’t recognize whether your licence is renewed or not.
Prepare yourself for this essential period of tax compliance and licence renewal. By understanding and fulfilling your obligations, you’ll ensure a seamless legal practice and elevate your career to new heights! 💼💡🚀