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July 13, 2007

Ethiopian flower exporters unhappy over late tax refunds

Representatives of over twenty flower producing and exporting companies operating in Ethiopia have complained over unsettled reimbursement of value-added tax (VAT). They said their companies were unable to get paid VAT refunds in due time and in the full amounts from the government's revenue authority (FIRA) in accordance with regulations.

The regulation treats transactions destined for export at a zero rate VAT system, hence entitling exporters to a right to claim for a VAT refund upon presentation of the appropriate documents. Transactions for which exporters initially pay VAT and later claim for a refund should, however, be goods and services that directly serve as inputs for the goods or services to be exported, according to the regulation.

In order to apply for a VAT refund, an exporter has to be registered for a VAT, present a document assuring the goods or services claimed for a VAT reimbursement are exported, submit a VAT invoice paid for different expenses, and declare their monthly performance, among others.

Exporters who met the preconditions to claim for a VAT refund and apply for a reimbursement will, according to the regulation, get a response within two months. However, most of the representatives of the flower producers and exporters said FIRA had failed to reimburse their claims more than two months after the companies submitted applications for VAT refunds.

The representatives of the flower companies also said that the amount of VAT reimbursement the companies were refunded after "undue delay" was usually short of the sum their respective firms claimed for.

Responding to the complaints, FIRA's deputy general manager, Getachew Eshete, said some of the problems associated with VAT refund had to do with lack of awareness about the preconditions put in place for a claim to be eligible. He said there were two major reasons exporters may not be refunded on time. He said there were exporters who apply for a VAT reimbursement while they were not registered for VAT. He also noted that there are exporters who submit the refund application without declaring their monthly performance. Getachew, however, did not deny that his authority may have some limitations in serving customers and said the authority will to address them.

Ethiopian Reporter

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