Elite School in 129m Br Tax Crosshairs

Jul 26 , 2025. By NAHOM AYELE ( FORTUNE STAFF WRITER )

A simmering tax dispute between federal tax authorities and Sandford International School (SIS) is threatening to escalate into a courtroom confrontation, putting the status of nonprofit education under legal scrutiny.

The School, one of the oldest elite institutions in Addis Abeba, is implicated in operating like a for-profit entity despite its charitable registration.

The Ministry of Revenues demanded more than 129 million Br in profit tax from the School, covering the five years beginning in July 2018. The sum includes substantial penalties and interest charges.

The tax claim has surprised and shaken the School's community, raising broader questions about the classification of nonprofit educational institutions under the tax law.

Sandford International School, established in 1947 during Emperor Haile Selassie's era, began as a modest community school. Over its 78-year existence, the institution has expanded, now educating over 1,000 students from nursery through year 13. Its students include both international students paying tuition in dollars and national students who pay in Birr.

In 2013, the School underwent a restructuring, officially registering as Sandford International Endowment School, a charitable organisation regulated by the Authority for Civil Society Organisations. The School operates under a governance board comprising representatives from the ministries of Education and Foreign Affairs, as well as public figures and parents.

Despite this charitable status, in April 2025, the Medium Taxpayers Office formally assessed the School, asserting it should pay income tax due to the "significant fees collected from parents." A tax notice issued on April 30, signed by Bedasa Tekesa of the Tax Calculation Team, detailed the liabilities, including over 2.5 million Br for 2018, approximately 4.8 million Br in 2019, more than 56 million Br in 2020, nearly 29 million Br in 2021, and around 37 million Br in 2022.

Federal tax officials claimed that their assessments were based on audited financial statements and expense reports, arguing that the School’s revenue constitutes taxable income.

School administrators strongly oppose the claim.

"We've never been asked to pay income tax in the School's history," said Mamaru Gislaw, head of Internal Control & Audit at Sandford School. "This demand contradicts our status and mission."

The School submitted a formal complaint to the Tax Appeal Office, insisting that it operates as a nonprofit entity, reinvesting all its revenues in school operations, salaries, educational resources, and infrastructure improvements, rather than distributing profits.

"The School was established as a charitable organisation serving the public and third parties," the complaint reads. "It isn't a commercial entity with shareholders. Therefore, this income should not be subject to income tax."

However, the Appeal Office rejected the School’s appeal. In a ruling, it stated that although Sandford is officially registered as a charitable organisation, its operations are akin to those of a profit-driven business.

"Sandford is registered as an international school and collects tuition fees for its services," reads the ruling signed by Alem Tadesse, the head of the Office. "It doesn't serve the public or third parties in the charitable sense. It must be taxed similarly to other private international schools."

Displeased with the outcome, Sandford administrators are now preparing to escalate their appeal to the Federal Tax Appeal Commission and potentially pursue the matter in court.

"Even if our appeal is denied at the commission level, we will go to court to seek justice," Mamaru told Fortune, disclosing the School’s determination to challenge the government's position.

Legal experts remain divided over the legitimacy of the tax claims.

Natae Eba, a tax specialist and legal director at Mehreatab & Getu Advocates LLP, believes the Ministry's demands are justified.

"Sandford collects substantial income from tuition fees and doesn't allocate the majority of these funds directly to charitable activities," he said. "Providing limited scholarships or educational support, while commendable, does not set it apart from other private schools that also offer such benefits and still pay profit tax."

Natae argued that Sandford essentially operates similarly to profit-making educational institutions and thus should not receive preferential tax treatment. However, he also criticised the government's delayed action.

"If the school has been operating under a charitable status for years without being flagged, the government's oversight is equally at fault," he said.

While Natae believes the principal tax should be paid, imposing penalties under these circumstances could be unfair.

"It's enough if the School pays the tax," he told Fortune. "Imposing penalties under such circumstances is unjust."

Not all legal experts agree on the dispute. Yared Siyum, principal attorney at Yared Siyum & Associates Law Office, views the tax authorities' approach as contradictory and legally problematic.

"The Ministry is essentially accusing Sandford of engaging in commercial activity without a business license," Yared stated. "If that is the case, this is more than just a tax matter; it potentially involves criminal violations."

Yared challenged the legitimacy of retroactive taxation without prior legal reclassification.

"You can't simply claim an entity has been operating as a business, demand taxes, and ignore the regulatory gap," he argued. "That is not how the law works."

According to Yared, the need for proper legal procedures requires Sandford first to be reclassified with a commercial license before tax liabilities can be lawfully assessed.

"Only then can tax liabilities be assessed in a legally consistent way," he said. "The Ministry should transparently demonstrate the thoroughness of its audit and establish that the income taxed is genuinely derived from business activities."

The Ministry denied giving  a comment citing that the case is pending.

PUBLISHED ON Jul 26,2025 [ VOL 26 , NO 1317]