Stamp Duty on Employment Contracts

By Mahlet Mesganaw, Partner


Stamp Duty Proclamation No 110/1998 provides by whom, when and how much stamp duty is paid on employment contracts. Stamp duty is paid by  the Employer and not the Employee. Stamp Duty should be paid before or at the time of signature of the employment contract. Customarily paying stamp duty at the end of probation period is not the acceptable legal way. The amount is 1%(One Percent) of the one month salary.

In addition to this the payment of a stamp duty under Birr 50 shall be effected by affixing stamp of appropriate value to the instrument. When the stamp duty exceeds Birr 50 or where the type and nature of instrument so requires, the Federal Government Revenues Board may by directive provide that stamp duty be paid by means other than affixing stamp. And whoever executes or receives an instrument bearing an adhesive stamp shall at the time of execution cancel the same, so that it cannot be used again.

Thus, stamp duty is a legal requirement for employers to implement when hiring employees. This will avoid confrontation with the regulatory body and possible penalties.