G/Mariam Abamecha, Mekonnen
The unprecedented pace of digitalization of the economy wreaked havoc on income tax rules designed for bricks-and-mortar economy. The source-residence and PE rules that are predicated upon fixed place requirements are getting obsolete in the face of virtual economic presence. As a result the OECD’s BEPS project has been a rallying point for the developed and developing countries alike. In view of this, it is important to look into the legal and administrative challenges of income taxation of the digital economy in Ethiopia. After critically assessing the legal and practical challenges in taxing the digital economy in Ethiopia, the research finds that the income tax rules are riddled with gaps and the tax administration has many challenges. The research in this regard mainly recommends that Ethiopia should join the BEPS project and modify its income tax rules and modernize its tax administration in the process.