Abstract:
The purpose of this study is to assess the challenges of implementing the Transfer Pricing
Regulation under the Ethiopian Tax Law Regime. Hence, due consideration has been given to
the new Transfer Pricing rule in comparison to other tax law regimes of the country, specifically,
explicit through Customs and VAT Proclamations, investment incentives of the Country. To this
end, the study has applied a doctrinal legal research methodology that is qualitative. Hence, by
referencing and deriving secondary data sources from official national legal documents and
international documents such as the OECD TPGs, the new OECD BEPS proposals of Pillar one
and Pillar two have been scrutinized. Thus, to substantiate the relevance and importance of the
concept the experiences of advanced and related developing Countries have been comparatively
expounded. The analysis found that, first, regardless the constitution and the tax laws of the
country recognized local transfer pricing the regulation has not enacted at the state level to deal
with regional transfer pricing issues. Secondly, with the globalized synergy of MNCs and legal
and economic differences between different jurisdictions, the ALP complications, the challenges
posed by lack of capacity and complex methods require special expertise, costly, tedious, and
scarcity of comparable data or non-availability and non-comparable of data and, with the
emerging digital economy, the ideological and economic differences of OECD manifested the
North-South pressure challenged the implementation of the OECD mirrored Ethiopian Transfer
Pricing Rule. Eventually, the paper recommended the need to use simplified rules, like safe
harbor rules, unitary taxation with formulaic apportionment approaches, and alternative
minimum tax rates. Second, the research recommended the need for urgent reduction for the
30% flat CIT rate in the Country and use CIT reduction in lieu of discriminatory investment
incentives and the need to practice interstate TP
