1 week Ago By Staff Reporter
The Ministry of Finance has clarified its stance on contradictory value added tax (VAT) policies for infant formula, which have been a source of confusion for importers as well as customs officers over the last several months. The Ministry has decided that baby formula is a ‘ready-made food item containing milk’ and cannot count as milk on its own and therefore is subject to VAT. The clarification follows requests from the Customs Commission, whose officers were unsure whether formula fell under the VAT directive introduced by the Ministry last year, which placed milk in the tax-free category.
However, another article in the same directive instructs that ‘ready-made foods containing milk ingredients’ are subject to VAT. Some argued the suspension of duty-free provisions for infant formula violates the terms of laws guaranteeing access to basic foods, according to correspondence between the Commission and the Ministry. “Importers have been requesting us to clarify for them confusion over VAT on children’s milk.
Different circulars issued by the Ministry of Finance provided varying provisions regarding children’s milk. The Ministry’s 2024 VAT directive states milk is VAT-free but other circulars state that children’s formula milk is included. At the same time, the Ministry warned in another letter to the Customs Commission that the it should not provide duty-free privileges for any import items.
However, since basic food items like children’s milk must be imported duty free, we need clarification,” reads a letter addressed to the Ministry from the Addis Ababa Customs branch office. Finance officials have instructed that formula does not qualify for the provisions. Last week, the Commission issued notices to all of its branch offices, communicating the decision.
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