The Ethiopian Revenues & Customs Authority (ERCA) has revised the entry point into the large taxpayer category to start from companies who have an annual sales turnover greater than 27 million Br. This is an increase from the previous 15 million Br annual sales cut-off point between medium and large taxpayers. The new revision will be effective as of August 7, 2013.

Despite the bar being raised, the number of large taxpayers will increase from 870 to 1,005 when the new revision is implemented. A total of 222 companies will be relegated to the medium tax payer segment, whereas 357 taxpayers will be moved up from medium to large, according to Sultan Berhan, tax affairs information & clarification officer at the ERCA.

"This is possible in spite of the increase in cut-off point, because a lot of businesses have grown in the past three years, when the 15 million Br cut-off point was used," Sultan told Fortune.

Previously, medium taxpayers were those companies with a yearly sales turnover between one million Br and 15 million Br. However, based on the new revision, the tax bracket was extended by the Authority to have room for companies with annual sales of up to 27 million Br.

No change is to come in the cut-off point in the segmentation between small and medium taxpayers.

Since the 2010/11 fiscal year, those with less than a million Br in annual sales have been classified as small taxpayers.

Companies engaged in the mining, petroleum exploration, banking and insurance sectors are included in the large taxpayers category regardless of their annual sales turnover. First grade contractors are also included in this category, which only includes private limited and share companies and not individual businessmen.

Though previously three star hotels were immediately classified as large taxpayers, now only those earning above 27 million Br will be considered. This is because the previous hotel standards are currently being revised and are no longer applicable, according to a customer service official from the ERCA's Large Taxpayers Office.

The ERCA set a policy to revise its tax segmentation bracket every couple of years to factor in the change or growth of taxpaying businesses in 2010. Prior to 2010, those with annual sales above 3.8 million Birr were classified as large taxpayers. A new cut-off point is set by determining how many large taxpayers there should be, according to Sultan.

"This takes into account our ability to provide adequate services and proper follow-up to large taxpayers," he told Fortune.

For the current revision, a committee of five started work in May 2013, according to Sultan, who also served as a committee member. After deciding that the number of large taxpayers should be between 900 and 1,000, the Committee studied the audit report of mandatory large taxpayer companies, such as contractors and miners, in order to set a new bracket that will bring about the desired number.

Those moving to the large taxpayers category will not have to pay additional kinds of taxes, according to Asfawossen Alene, head of the Large Taxpayers Branch Office of the ERCA.

"Similar tax rules apply to them, as anybody else," he told Fortune. "The change is only in the quick attention and assistance given to large taxpayers."

Since the Large Taxpayers Office (LTO) only handles a thousand of the over 22,000 taxpayers, the service and assistance they get is bound to be faster, according to Asfawossen.

"Adequate assistance and supervision to large taxpayers is necessary, because they contribute a major part of the revenue the ERCA collects," he told Fortune.

Large taxpayers contributed 70pc of the total revenue collected in 2010/11, which was 70.8 billion Br. This year, the ERCA's plan is to collect 40 billion Br from large taxpayers, according to Asfawossen. This is 40pc of the 100.3 billion Br revenue collection target set by the government for the ERCA and 34pc of their in-house target. During the last fiscal year, the Authority set an unprecedented in-house target of 116.7 billion Br ti collect by the end of this fiscal year.

The location where taxpayers pay their taxes will also change when moving into a different tax segment. The large taxpayers office is located near Beklo Bet, on Debrezeit Road, which also has a Western Branch for medium taxpayers, for the Gulele, Kirkos, Kolfe Keranio, Lideta and Addis Ketema districts. Medium taxpayers in other districts, however, pay at the Eastern Branch located inside the headquarters of the ERCA, off Equatorial Guinea Street.

The ERCA is also opening two branch offices in La Gare and Arat Kilo for the current fiscal year. This is in order to accommodate Addis Abeba's medium taxpayers, who previously paid at district offices.