Procedures and conditions
Do you know the procedures and conditions for foreign capital registration in Ethiopia? According to Article 11.5 of the investment proclamation No 280/2002, all foreign investments recognized and registered by the National bank of Ethiopia at the initial stage of the investment, including investments made through a concessionary or a partnership agreement with the government or with all autonomous institution, and profits ploughed back capital gain on asset revaluation in to the business may be repatriated provided the requirements under the following articles are fulfilled.
Registration of foreign Capital
Foreign direct investment which is made in Ethiopia registered by the National bank of Ethiopia. There are also documents which are required for foreign capital investment registration. This are
- Valid foreign investment license
- Article and memorandum of association
- A copy of bank advice if the capital is transferred in cash.
- A copy invoice of goods, customs declaration, bank permit if the capital is invested in kind and other relevant documents where necessary.
Registration of profits capital gain on assets
Foreign investors who have the interest of re-invest their share of dividends or capital gain acquired in to the capital stocks of a company can do so on by submitting the following documents.
1. Profit plough Back
The required documents for a re-investment from the profits of a business are confirmation from the share holder/owner authorizing the increase in capital, minutes of the board of directors and audited financial statement
2. Registration of capital on Assets
To get registration of capital gain on assets, the person is expected to bring the required documents like letters of a request from the investment group/owner, minutes of the board of directors, audited asset evaluation report, and audited financial statement.
Loan and suppliers credit obtained by foreign Investors
Do you know the national bank of Ethiopia registers capital inflows received in the form of loan and suppliers credit by foreign investors, who in addition to Article 160 (1&2) are required to present the following documents.
If the loan is disbursed in cash form documents related to the loan agreement, bank transfer advice, and registration request letter by the applicant/investor is needed. For payments effected to suppliers; letter from the investment entity, invoice for the goods purchased and shipping documents, declaration proofing the entry of goods to the country and registration request letter by the applicant investor are required.
Goods Purchased on Suppliers credit basis
In case of goods purchased on Suppliers credit basis agreement made between the investor and supplier of the goods. It should include schedule of payment and the total amount of the credit clearly stating principal and interest involved, description of the goods , value and quantity arranged on supplier credit basis , Registration request letter by the applicant/investor , if the goods have been already received, copies of Shipping documents and customs declaration and if the foreign investor needs a consent letter prior to shipment of the items intended for purchase on installment payment basis needs to be fulfilled.
Allowable Remittances
Foreign investors can apply to transfer foreign currency abroad from recognized investments. when, if an investor earns profit or dividend from the capital put in operation (investment) , if an investor ceases operations and decides to close the firm, if an investor decides to sell its equity wholly or partially to a third party and if an investor wants to pay installments agreed on loan or supplies credit.
Transfers of profits and dividends
Foreign investors who earn profits or dividend from recognized investment shall be entitled to remit abroad by presenting the copy of the Minutes of the board of directors or an equivalent body declaring profit/dividend and a letter duly signed by the chairman or secretary of the board to authenticate the decision, copy of the financial statements dully audited by independent audit firm, photocopy of the NBE’s letter recognizing the foreign investment, photo-copies of tax receipts evidencing the payment of all taxes due to the government and any other document or evidence that the NBE may required.
Ceasing operation
The documents which are required to transfer the capital when an investor ceased operation or closes his business are liquidation report authenticated by the company or joint ventures, minutes of the decisions of owners. In case of sole proprietorship letter of declaration by the owner, accounting documents (balance sheet & income statement) duly audited, copies of letters issued by NBE recognizing investment stated, clearance from tax office and any other documents that may be required by the bank.
Partial or whole sale of equity
Foreign investors who transfer the equity holdings( shares partially or wholly to the Ethiopian National and /or foreign investors can apply for remittance of the shares value sold by presenting, the letter of transfer of share authenticated by independent entity(organization), if sold to a foreigner the corresponding value should be received in foreign currency and hence credit advice will be necessary, if sold to an Ethiopian, the investor will be entitled to transfer the values sold based on the original agreement and recognition letter issued by NBE.
Payment for loan or suppliers credit
A foreign investor who wants to pay installments on loan or suppliers credit registered loan capital by NBE is required to produce NBE letter of recognition and registration of the loan capital, Repayment Schedule, letter of request by the investment organization/ owner and any other document as may be required.
Capital remittance of foreign Residents (Immigrants)
Foreign businessmen who do not have recognized foreign investment and who have sold or liquidated their business or properties belonging to them may make foreign exchange remittance on final departures upon presenting a final and certifies balance sheet and profit and loss account for the preceding three years, or for a longer period if the NBE requires in case of establishment firm, Tax office clearance and other documents required by the bank in case of small traders and truck owners exempted from keeping books of account by tax laws, sales invoices of personal belongings such as vehicles, house hold goods utensils, etc. or legalizing the sales documents where an item is sold for birr 5,000 or above and any other relevant documents required by the bank.
Fikadu Asfaw practices law in Addis Ababa, Ethiopia and is a member of the LawGuru Attorney Network.