Employers in Eritrea have a number of tax responsibilities, including making contributions to the social security system and potentially paying a Skills Development Tax.

Social Security Contributions

Employers are required to contribute 8% of the employee's gross salary to the social security system. This contribution covers various benefits provided by the system.

Other Potential Contributions

Employers may also be subject to a Skills Development Tax. The rate for this tax may vary.

Important Considerations

Employers must register with the relevant authorities, withhold employee contributions, add their own contributions, and remit payments on a regular basis, usually monthly.

Eritrea operates a progressive income tax system for employee salaries, meaning the tax rate increases as the employee's income rises.

Income Tax

Income tax in Eritrea is levied on the gross salary of employees, encompassing salaries, allowances, pension contributions, and other benefits provided by the employer. The tax rate is progressive, ranging from 2% for the lowest income bracket to 48% for the highest.

Rehabilitation Tax

In addition to income tax, all Eritrean residents, including employees, are subject to a 2% rehabilitation tax on their monthly income. This tax is separate from income tax and is used to fund national development projects.

Municipal Tax

Municipal tax is another deduction that employees in Eritrea need to be aware of. Although this tax is paid by the employer, it is calculated as 4% of the employee's salary and goes to the local authorities where the employee resides.

In Eritrea, services provided within the country are not subject to VAT. However, it's important to keep in mind that Eritrea might implement a VAT system in the future. Therefore, it's essential for businesses and individuals to stay updated on changes to Eritrean tax legislation.

Potential Future Introduction

Eritrea may introduce a VAT system in the future. Staying informed about changes in tax legislation is crucial for businesses and individuals.

Sales Taxes

Eritrea may apply sales taxes to certain goods and services. It's important to be aware of these potential costs.

Imports and Exports

Customs duties and other taxes might be applicable for imported and exported services. It's essential to understand these potential costs when conducting international business.

Guidance for Businesses

Businesses should always consult with a tax professional or relevant authorities in Eritrea for the most updated information on any tax implications for services. This will ensure compliance with other relevant taxes that may apply.

Eritrea offers several potential areas for tax incentives aimed at attracting foreign investment. These provisions might include tax benefits for businesses in selected sectors such as manufacturing, export industries, and agriculture.

Investment Promotion

Eritrea's Investment Proclamation is designed to attract foreign investment. Provisions within this proclamation might include tax incentives for businesses in selected sectors.

Manufacturing and Export Industries

Tax benefits may be available for businesses engaged in manufacturing or export-oriented activities.

Agriculture

Incentives might exist to encourage investment and development within the agricultural sector.

However, it's important to note that finding comprehensive and up-to-date information on specific tax incentives in Eritrea through online sources can be challenging.

Limited Online Information

Comprehensive and up-to-date information on specific tax incentives in Eritrea can be challenging to find through online sources.

Direct Consultation

For reliable and specific information, it's highly recommended to consult with tax professionals within Eritrea, the Eritrean Investment Centre, or the Ministry of Finance of Eritrea.