Work out employment income tax, the 7% employee pension, the employer's 11% pension and net pay for any monthly salary in Ethiopia, using the income tax brackets in force since July 2025 under Proclamation No. 1395/2025. Pension: 7% of the basic salary from the employee, and 11% of the basic salary plus taxable allowances from the employer.
Income tax brackets from July 2025
ETB 0 – 2,000 a month: 0%
ETB 2,001 – 4,000: 15%, deduct ETB 300
ETB 4,001 – 7,000: 20%, deduct ETB 500
ETB 7,001 – 10,000: 25%, deduct ETB 850
ETB 10,001 – 14,000: 30%, deduct ETB 1,350
Above ETB 14,000: 35%, deduct ETB 2,050
How the calculation works
Take the basic salary plus taxable allowances, and subtract the 7% employee pension: this is the taxable income
Find its bracket: income tax = taxable income × rate − deduction
Employee pension is 7% of the basic salary only; the employer pays 11% of the basic salary plus taxable allowances
Net pay = gross pay − income tax − employee pension
Worked examples
Basic salary ETB 10,000: taxable income ETB 9,300, income tax ETB 1,475, pension ETB 700, net pay ETB 7,825
Basic salary ETB 20,000: taxable income ETB 18,600, income tax ETB 4,460, pension ETB 1,400, net pay ETB 14,140
Please note
This calculator is for guidance and is not tax advice. Rates follow Proclamation No. 1395/2025 and private-sector pension follows Proclamation No. 1268/2022; confirm special cases with the Ministry of Revenue or your tax adviser.
How is income tax on salary calculated in Ethiopia?
Subtract the 7% employee pension from the taxable salary, find the bracket, multiply by the rate and subtract that bracket's deduction. For example, ETB 10,000: 10,000 − 700 = 9,300, in the 25% bracket: 9,300 × 25% − 850 = ETB 1,475.
Is the 7% pension deducted before income tax?
By default, yes: the calculator deducts the 7% employee pension before working out income tax, as most Ethiopian payroll calculators do. Proclamation No. 979/2016 does not list the employee's contribution as deductible, so some advisers tax the full salary instead; untick the option to see that result, and confirm with your tax adviser.
Which allowances are taxable?
Some allowances are exempt in whole or in part under the income tax regulations, and others are fully taxable. Enter them separately; if you are not sure, treat an allowance as taxable and check it with your tax adviser.
Can our payroll do this automatically?
Yes. ELIF's HR and payroll software applies these brackets and the 7% / 11% pension for every employee each month and produces payslips and declarations.