3.

Turnover Tax Accounting

 Unit Outlines:

Introduction to Turnover Tax

Basic legal provisions
Accounting for TOT
 Introduction to TOT
• TOT is a tax imposed on goods supplied and
services rendered locally by persons not
registered for VAT.
• It is a sales tax imposed on taxpayers not
registered for VAT.
• The tax base of TOT computation is the gross
receipts/selling price of goods and services.
• A reduced tax rate is applied for Turnover Tax as
compared to the VAT in most cases
 Filling and Payment of TOT

For Category “A” taxpayers who are not required to

get registered for VAT: within one-month after the end
of the month of transaction. (Accounting period = the
calendar month)
For Category “B” taxpayers: within one month after
the end of the Ethiopian quarter. (Acct period = a
quarter)
For Category “C” taxpayers: within one month after
the end of the Ethiopian fiscal year. (Acct period = A
year)
 Legal Provisions on Turnover Tax
According to Proclamation No. 308/2002
Rate of Turnover Tax (Article 4)
2% (two percent) on Goods Sold Locally
For Services Rendered Locally;
2 % (Two percent) on Contractors, Grain mills,
Tractors and Combine-Harvesters.
10% (Ten percent) on others; these include services
such as Consultancy, Training, Legal advice, Auditing,
etc
All items exempted from VAT are also exempted
from TOT. The taxpayer of TOT are sellers
 TOT Examples
Example 7.1: Addis Pharmacy Sold drugs for Birr
300,000 during June, 2006. what is the Turnover Tax
Liability on this transaction?

Example 7.2 NICE Enterprise rendered grinding service

(that converts grains into flour) and charged customers
Birr 25,908 during the quarter ended on Sene 30, 2003.
Determine the Turnover Tax Payable on this Transaction
assuming that the price includes the TOT amount.
 Examples- cont’d
Example 3 A Category “B” Taxpayer Named NUFTANA
Furniture PLC made the following transactions during
Tikimt, Hidar and Tahisas 2006:
 Tikimt 2006: Birr 32,000 tables, chairs and beds
were sold
 Hidar 2006: Birr 27,000 Sofa, Computer Desk, And
Tables were sold
 Tihisas 2006: Birr 30,000 Office Furniture was sold
Instruction: Prepare entries for each of the above transactions
and the payment of the total TOT to the taxing authority.
End of the Unit