Revenues Bureau Targets Landlords in Revenue Push

Jul 13 , 2025. By YITBAREK GETACHEW ( FORTUNE STAFF WRITER )

The Addis Abeba City Revenue Bureau has introduced a new directive set to reshape how half a million property owners report and pay taxes.

In a sweeping overhaul of its rental taxation regime, and city officials claiming to bring transparency to a largely informal housing market, the directive mandates landlords to register every lease, channel rent payments exclusively through formal banking or digital systems, and apply a 35pc flat deduction on gross rental income before taxes are assessed.

The authorities argue that their latest crackdown is a long-overdue response to chronic underreporting and cash-based transactions that have long undermined municipal revenue collection. They insist the reform is essential as the Tax Affairs Sector of the Bureau is moving to address widespread non-compliance among taxpayers who have failed to report, pay, and maintain proper records based on their accounting and financial statements.

A letter detailing recommendations for action against these taxpayers, signed by Deputy Head Worknesh Seboka, has been dispatched to all taxpayer branches.

The Bureau, targeting an ambitious revenue of 202 billion Br for the 2024/25 fiscal year, sees this clampdown on rental incomes as a vital pillar in its strategy to stabilise city finances without increasing blanket tax rates. According to Wendye Kassaye, director of Tax Declaration & Collection, the system is designed to be fair and consistent.

"This year, we've made a special effort to address rental housing," he said.

The directive classifies landlords under the broader structure of the income tax proclamation legislated in 2016, previously used for professions such as lawyers and insurance agents. Those with established bookkeeping practices will fall under categories "A" and" B" and are expected to submit audited financial statements.

However, the majority, those with less formal operations, will be assessed under Category "C", subjected to a presumptive tax regime, deducting a flat 35pc from their gross rental income to account for operational costs, with the remaining taxed according to progressive brackets.

Tax calculations will be based on Table "C." Income exceeding 130,000 Br would be subject to a tax rate of 35pc. For lower income brackets, those earning between 7,200 Br and 19,800 Br would pay a tax rate of 10pc, while individuals earning between 63,000 and 93,600 Br would pay a tax rate of 25pc. A landlord earning over 130,000 Br annually could face a tax rate of up to 35pc on that adjusted income.

"They're not required to keep an account or document," Wendye told Fortune. "We don't collect taxes on unrented houses unless there is proof."

He recalled that under housing administration, tax payments are made after registering as a landlord, and maintaining accounting records was previously mandatory. But the authorities determine the tax by studying the current market price in each location.

Landlords operating without a formal business license but holding professional licenses are also pulled into this net. The Bureau's approach signals a deliberate effort to plug the gaps in a sector that has long operated below the radar of fiscal authorities.

The directive empowers inspectors with sweeping investigatory powers. They can audit rental ledgers, extract lease agreements, and, if necessary, pursue judicial remedies against alleged tax defaulters.

Non-compliance carries severe financial consequences.

Even vacant properties are not exempt. If a property remains idle for more than a year without credible justification, owners face vacancy penalties. According to Residential Rent Control & Management Guidelines, under Addis Abeba Housing Administration, failure to register leases or channel payments through formal systems can trigger surcharges starting at five percent of monthly rents (for one to two years), escalating to 25pc for longer leases exceeding five years. False or misleading declarations add a further 10pc penalty on declared rental values. Authorities hope this will discourage speculative vacancies and bring more housing stock to the market.

"They'll pay until they prove otherwise," Wendye told Fortune, putting the onus on the property owner.

When assessing the taxable value, several factors will be considered, including local market conditions, construction materials, prevailing rental rates for comparable properties in the area, and the landlord-tenant lease agreement, if any existed previously.

Predictably, the reforms have triggered a backlash. Some landlords argue that the system imposes unrealistic compliance burdens, particularly in areas where banking infrastructure is thin. Others worry about retroactive penalties and the potential to displace tenants through increased rents or property withdrawals from the market.

Landlord advocacy groups are exploring legal challenges, especially over the Bureau's imposition of penalties for past conduct. Critics argue that such retroactivity violates principles of legal certainty and may unfairly penalise those who lacked clarity under previous regimes.

Exceptions carved out for certain professions in the directive's confidential memos have led to accusations of arbitrary application and the risk of loopholes for the well-advised.

The reform comes at a time when a city-wide housing crunch is evident. A study by the Ethiopian Real Estate Association finds that rents in Addis Abeba have surged by 40pc over the past three years, outpacing wage growth and intensifying affordability concerns. The study attributed speculative behaviour, encouraged by lax enforcement, as a contributing factor to steep rental inflation. The directive appears to double as a tool for market regulation.

However, the tension between enforcement and market stability is evident.

Biruk Nigussie, a tax expert formerly with the federal Ministry of Revenues, supports instalment-based taxation but calls for clearer implementation guidelines.

"Requiring instalments reduces the upfront cost," he told Fortune. "But, ambiguity in operational details could cause confusion and resentment."

Landlords like Tesfaye Amha embody the uncertainty. With three units in the Jemo 3 area generating over 150,000 Br annually, he paid about 38,000 Br in taxes last year.

"They keep telling us we can't increase the rent," he lamented, unsure how the new rules will affect his earnings. "And we pay what they ask."

With more than half a million landlords and tenants in the city's registry, enforcement will demand robust administrative capacity, digital infrastructure, and inter-agency coordination.

PUBLISHED ON Jul 13,2025 [ VOL 26 , NO 1315]