Specific Taxes in Eritrea
Beyond corporate and personal income taxes, Eritrea levies a range of specific taxes that contribute to its fiscal landscape. These taxes encompass various aspects of economic activity and aim to achieve specific policy objectives.
Value-Added Tax (VAT)
VAT is a consumption tax imposed on the sale of goods and services. It is levied at a standard rate of 15%, with reduced rates of 5% and 10% for certain essential goods and services. Businesses engaged in the supply of goods and services are liable for VAT, with some exemptions for specific transactions.
Property Tax
Property tax is an annual levy on immovable property owned by individuals or entities. The tax rate varies depending on the property's value and location. Property owners, including individuals, companies, and trusts, are subject to this tax.
Environmental Taxes
Eritrea imposes environmental taxes on activities that cause environmental harm. These taxes aim to internalize the costs of environmental damage and encourage sustainable practices. Companies and individuals engaged in activities with environmental impacts, such as manufacturing, waste disposal, and energy production, are liable for these taxes.
Stamp Duty
Stamp duty is a tax levied on various legal documents and transactions, including property transfers, share transfers, and certain contracts. Parties involved in transactions subject to stamp duty, such as property buyers, shareholders, and parties to contracts, are responsible for paying this tax.
Customs Duties
Customs duties are taxes imposed on imports and exports of goods. These duties are typically based on the value or quantity of the goods being traded. Importers and exporters engaged in international trade are subject to customs duties.
Taxpayers Subject to Specific Taxes
The categories of taxpayers subject to specific taxes in Eritrea vary depending on the nature of the tax.
- VAT: Businesses engaged in the supply of goods and services
- Property Tax: Property owners (individuals, companies, trusts)
- Environmental Taxes: Companies and individuals with environmental impacts
- Stamp Duty: Parties involved in transactions subject to stamp duty
- Customs Duties: Importers and exporters
Purpose and Rationale
The specific taxes levied in Eritrea serve diverse purposes and aim to achieve specific policy objectives.
- VAT: VAT revenue contributes to government expenditure and public services. It also promotes economic growth and fiscal stability.
- Property Tax: Property tax revenue supports local government budgets and infrastructure development. It also regulates property ownership and discourages speculative investment.
- Environmental Taxes: Environmental taxes aim to internalize the costs of environmental damage and encourage sustainable practices. Revenue may be used for environmental protection measures and conservation efforts.
- Stamp Duty: Stamp duty revenue contributes to government revenue and may be allocated to various public services and initiatives.
- Customs Duties: Customs duties generate revenue for the government and protect domestic industries by regulating international trade.
Legal Framework
The legal framework governing specific taxes in Eritrea includes the following statutes:
- Value-Added Tax Proclamation No. 103/2016
- Property Tax Proclamation No. 104/2016
- Environmental Protection Proclamation No. 105/2016
- Stamp Duty Proclamation No. 106/2016
- Customs Tariff Proclamation No. 107/2016
These legal texts outline the obligations, rates, and procedures for the collection and enforcement of specific taxes in Eritrea.
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