The Addis Ababa City Council has ratified a new revenue-generating regulation tailored to the city’s rapidly expanding hospitality and tourism sector.
Under Regulation No. 204/2026, a 5 percent flat municipal tax has been imposed on all hotel and lodging establishments operating within the capital. Published in the Negarit Gazeta, the regulation introduces several new provisions designed to streamline operations between service providers and municipal authorities.
The city administration said the policy aims to strengthen Addis Ababa’s position as a leading African tourist destination and an international diplomatic and conference hub. Revenue generated from the municipal tax will be allocated to the development of urban infrastructure, the creation of new tourist attractions and the upgrading and expansion of public recreational spaces.
According to reports obtained by Capital, the tax directive will have broad implications for the city’s accommodation sector. It covers graded luxury hotels ranging from one to seven stars, as well as unrated local hotels, resorts, lodges, motels, pensions and guesthouses.
The 5 percent tax will be calculated solely on the baseline daily room tariff, excluding value-added tax (VAT). The regulation also states that auxiliary services such as food, beverages, spa treatments and other personal care amenities will be excluded from the tax base.
The Addis Ababa City Administration Revenues Bureau has been granted broad enforcement powers to ensure compliance and prevent tax evasion. As a result, all lodging establishments must register in person at their designated medium- or large-taxpayer branch offices.
Under the new compliance rules, establishments must maintain detailed physical or digital visitor registers.
Businesses required to keep standard books of accounts must also reconfigure their point-of-sale (POS) systems or manual receipts to include the line item “Lodging Municipal Tax.”
For smaller lodging operators that do not keep formal financial records, a simplified presumptive tax will apply. In such cases, the 5 percent tax rate will be levied on an assumed 70 percent of gross accommodation revenue.
Tax filing deadlines are structured according to the taxpayer’s category. Category A taxpayers must submit monthly reports and remit payments within 30 days of the end of each month, while Category B taxpayers will file returns on a quarterly basis.
Failure to submit tax reports on time will result in a 5 percent monthly penalty, capped at 50 percent of the total tax liability. Entities that delay remitting collected funds to the government will face an additional 15 percent penalty, indexed to the Commercial Bank of Ethiopia’s prevailing lending rates.
The regulation also states that any establishment found intentionally concealing revenue or submitting fraudulent declarations will face criminal prosecution under the country’s penal code.
