VAT-inclusive or VAT-exclusive: getting 15% right on a shelf price

The arithmetic, in both directions

The standard rate is 15%. The question that causes trouble is whether the number on your shelf label already contains it.

Both routes land in the same place, which is the point. The error is mixing them: applying 15% to a price that already includes it. On the inclusive label above, 230.00 × 0.15 gives 34.50 — an overstatement of 4.50 per unit, which is 15% of the VAT itself.

Whether you are registered at all

VAT Proclamation No. 1341/2024, which repealed Proclamation No. 285/2002, raised the registration threshold to ETB 2,000,000 of taxable supplies. The threshold is tested over 12 calendar months, and the authority may combine the taxable supplies of related persons when testing it — so splitting a business across related entities does not split the threshold.

There is a readable SME-facing walk-through of the new regime here if you are working out where you sit.

The clause that catches multi-shop operators

This is the single most consequential line in the proclamation for a growing retailer, and it is easy to miss: a person operating at multiple business locations must obtain a separate VAT registration certificate for each location.

If you run a warehouse and three shops, that is not one registration with three addresses. It shapes how you number invoices, how each location reports, and — once electronic invoicing is switched on — how each till registers what it issues.

Two deadlines to diarise

• 30 days to notify the authority of a change to the business.
• 7 days to notify it that you have ceased making taxable supplies.

The proclamation also requires your VAT registration details to be shown on your website, your social media and any electronic platform you sell through — a requirement that did not exist when most Ethiopian businesses set their pages up.

Where this touches the stock record

Two places, both of which go wrong quietly. First, stock has to be valued at cost net of recoverable VAT — if input VAT is claimable, it is not part of what the goods cost you, and leaving it in overstates both your inventory and your cost of sales. Second, a margin calculated against a VAT-inclusive selling price is not a margin; it is a margin minus about 13 percentage points of someone else's tax.