In Ethiopia, most of the successions are intestate. When the deceased leaves no will at all or a court for various reasons invalidates the will made by him, it is said that the succession is intestate. In such a case, the distribution of the estate will be in accordance with the operation of the law rather than the volition of the deceased. In the intestate succession, the law follows “the presumed will of the deceased.” This type of succession is older and more historic than succession by will. (Read Articles 842 — 848 of the Civil Code)

Devolution according to the degree of relativity

The provisions of intestate succession are based on the idea that — had the deceased made a will he/she would have distributed his/her estate by following the degree of relationship. That is, he/she would give his/her estate to his/her closest relatives in the first place. In the second place, relatives who are situated at a relatively distant position when compared with the relatives of the first degree shall succeed the deceased. Accordingly, the law considers the children of a person are his/her closest relatives.

Children or other descendants are number one candidates to succeed a person (See Art. 842(1)). All children of the person who died intestate have equal rights in the succession irrespective of their age, sex, etc. differences. If one of the children of the deceased is a predeceased child, that is, if he/she died before the death of the deceased, he/she would lose his/her capacity to succeed, as discussed above. The reason is he did not fulfill one important requirement, which is surviving the deceased. Although a predeceased heir lost his/her capacity to succeed the deceased, his/her own descendants will represent him. Therefore, representation could be taken as an exception to the rule of survivorship.

A person who claims to have a right in a succession is expected to be alive at the time of death of the deceased. This is the requirement of survivorship. The idea is that an heir who did not survive the deceased should lose his/her right in the succession. That is, a predeceased heir has lost his/her capacity. However, his/her descendants, with the exclusion of all other heirs, shall represent a predeceased heir. As a rule a predeceased heir has no capacity to succeed the deceased. But his/her descendants can represent him/her. This situation makes representation an exceptional circumstance to the general rule.

If the deceased is not survived by his/her children or other descendants, the father and the mother of the deceased will be called to his/her succession. In the case where his/her descendants survive him/her, all other heirs of the deceased will be excluded from the succession according to the rules of the interstate succession. His/her father and his/her mother are in the second order in the queue of the relatives of the deceased. The father and mother of the deceased will take equal share of the whole estate of the deceased.

In the case where one of the parents has died before the deceased, such parent shall be represented by his/her children (or other descendants). Note that the children (first degree descendants) of the parents of the deceased are his/her brothers and sisters, of full or of half blood.

In the case where both parents have survived the deceased, half of the hereditary estate of the deceased goes to the father and the other half goes to the mother. This is based on the principle that heirs of the paternal line the maternal line shall have equal shares in the inheritance of the deceased, so long as they are at equal distance from the deceased. In the paternal line, we find the father of the deceased and his (the father’s) descendants. In the maternal line, we get the mother of the deceased and her descendants.

In a situation where the father predeceased the deceased and where descendants do not survive him, there is nobody to take the estate of the deceased in the paternal line at that level. In this case, the heirs of the maternal line take the whole estate of the deceased.

A person has four grandparents, two on the paternal line and two on the maternal line. If the deceased is survived by all of the four grandparents, half of the hereditary estate shall be devolved on the paternal grandparents and the rest half will go to the maternal grandparents. Each of them shall be entitled to one-fourth of the hereditary estate. If one of them predeceased the deceased and is survived by descendants, he/she will be represented by such descendants.

If a predeceased grandparent is not survived by descendants, his/her portion shall devolve upon the other grandparent of the same line. For instance, if the paternal grandfather predeceased the deceased and if he is not survived by descendants, the property that was destined to him or to his representatives will now be transferred to the paternal grandmother. In this circumstance, the maternal grandmother, instead of taking only one-fourth of the hereditary estate, she is entitled to receive half of the hereditary estate (if she is alive). If this paternal grandmother also predeceased the deceased, her own descendants will represent her. If her descendants do not survive her, there is nobody to receive the property on the paternal line of third relationship. Therefore, the whole hereditary estate will devolve upon the maternal grandparents. There are two maternal grandparents and each of them will be entitled to receive half of the hereditary estate.

A person has eight great-grandparents, four on the paternal line and the other four on the maternal line. The distribution of the estate follows the same pattern as that of the case of parents and grandparents.

Paterna paternis-materna maternis

Articles 842 to 848 describe the rule in which intestate succession is governed.  That is, the closest relative of the deceased would succeed him/her. This rule has an exception. The exception is — although there are closer relatives of the deceased, a certain property may devolve upon far distant relatives. The law calls this exception as paterna paternis materna maternis.

The exceptional rule of paterna paternis materna maternis is designed to allocate an immovable property that is obtained by the deceased from one of the lines by way of donation or succession to the heirs of the line from which the property is obtained. For a better understanding, study the following example.

You might have understood from the reading of Art. 850, that the heir who is the closer relative of the deceased and should have succeeded the deceased, but lost his right as a result of paterna paternis materna maternis, will have a usufruct right on the immovable. A usufruct right is a right to use a property or to derive a fruit from that property. For instance, if the property is a house, a person with a usufruct right can either live in the house (a use right) or he/she can rent the house and collect the rental money (deriving fruit of the house). Hence, a person with a usufruct right cannot sell the house nor can he transfer it by donation. Therefore, Wro Haymi will have a usufruct right and she is not obliged to pay any compensation to heirs of the paternal line from which the immovable (house) is obtained (See Art. 850 (2)).

According to Art 851, to apply the rule paterna paternis materna maternis, there has to be an heir in the line from which the immovable property is obtained, if the immovable property is obtained. If the immovable property is acquired from the paternal line, there has to be an heir in that line.  In case of absence of any heir in the paternal line, the immovable property shall devolve upon the maternal line. The converse is also true.

To apply the rule paterna paternis materna maternis, the following five conditions must all exist together. If one of them is missing, it cannot be applicable. The five conditions are:

$11.                  The deceased must die intestate. (The exceptional rule cannot be applied if there is a will)

$12.                  His/her own descendants must not survive the deceased. (If there are descendants, Art. 842 shall apply)

$13.                  The property must be an immovable one. (Art. 849 (1) & (2))

$14.                  The property must be acquired by the deceased from either paternal or maternal lines by way of succession or donation. (Art. 849 (1) & (2))

$15.                  There must be an heir in the line from which the property has originated. (Art. 851)

Escheat

When there are no heirs of the deceased up to the 4th relationship, the property shall devolve on the State. This condition is usually said to be Escheat. Escheat is reversion of property to the state in the absence of legal heirs or claimants. The State takes the property of the deceased not by way of succession, but because such property has no one to claim it. Property which is bona vacantia (ownerless or vacant property) belongs to the State and it is via this principle that the Government is taking the property of the deceased that has no heir up to the 4th relationship. (See Article 852)

Representation and renunciation

It can be said that there two modes of succession, succeeding directly and succeeding through representation. Heirs who are closest to the deceased are called to succeed directly and personally. However, the persons who are to be called to succeed directly and personally might have died before the opening of the succession, by leaving descendants behind them. In such a case, the law allows such descendants to be called to the succession. Representation is an exception to the requirement of surviving the deceased. As a rule, the heir must survive the deceased. But this rule is excepted by representation. According to this exceptional rule of representation, the descendants of a predeceased heir can take part in the succession by taking the foot of the predeceased heir. When representation is effected it is per stripes, not per capita. That is, the descendants of the predeceased heir shall take what would be taken by the predeceased heir, had he/she been alive.

B.  Renunciation

An heir who is a successor may not necessarily be willing to participate in the succession. In such a case, he could renounce the succession. Renunciation is a refusal to accept the succession. A person may renounce the succession for various reasons. If he/she is relatively in a better economic position, he may renounce the succession to the benefit of his co-heirs. The heir who has renounced the succession shall never be seen as the heir of the deceased. He/she has forfeited his/her right in the succession and hence he/she will not be represented by his/her descendants. The reason is the one who has no right in the succession shall not transfer to his/her descendants what he/she does not have. However, as it is prescribed in Art. 854(2), the person whose succession has been renounced may be represented.  For better understanding of this provision, read the example below.

With the same logic as renunciation, the heir who is declared unworthy cannot be represented by his/her descendants, as such heir has already lost his/her right to succeed the deceased, he/she has nothing to transfer to his/her descendants. To succeed the deceased through representation, there has to be bond of legal relationship between the deceased and the one who claims to succeed the deceased. (See Arts 855 & 856) For instance, assume that Ato Omod adopts a child by name Neguse. Omod’s father Ujulu opposed the adoption made by his son. Negusu cannot succeed Ujulu by representing his adoptive father, Omod. 

The law requires someone who alleges to have a right in the succession of the deceased to fulfill some requirements. One is expected to have capacity to succeed. This is one of the most important requirements to succeed the deceased. The capacity to succeed depends mainly on two conditions. The first one is; the heir and/or legatee must survive the deceased person. The second requirement is such heir and/or legatee must not be unworthy.  The first condition is an objective condition and the heir and/or legatee shall lose his right to succeed the deceased for reasons outside his volition.  The second condition is a subjective condition which occurs with a willful act of the heir and/or legatee.  (Read Articles 830 & 831 of the Civil Code)

A.   The Condition of Survivorship

This condition requires the heir to be alive at the time of the death of the deceased. To survive the deceased means, to be alive at the time of the death of the deceased.  That is, when the deceased is dead, the heir and/or the legatee of the deceased must be a living person. If the heir lives even for a very short time after the death of the deceased, we believe that he/she has survived the deceased. (See Article 830)

If two or more persons who have a reciprocal right to succeed each other die together, say in an accident, how do we conduct the succession of these persons? That is, which person has survived the other?

B.   Commorients 

This Latin word signifies those who die at the same time, as, for example, by shipwreck. When several persons die by the same accident, and there is no evidence as to who survived, the presumption of law is, they all died at the same time. Consider that “Frewoyni” is a mother and “Senait” is her daughter.  If “Frewoyini” and “Senait” die together, we may face some difficulties in conducting the successions of these persons.

After an accident, death may not occur immediately and some persons die before others. Death is usually considered as a process that may take longer time than we expect. When persons who have reciprocal rights to succeed each other (such as Frewoyni and Senait) die together, we could know by a post–mortem examination who survived whom.  However, this examination is not always successful. It could be impossible to determine who died first and who died second by a post–mortem examination. As research works in the field of forensic science reveal, determining the time of death through post mortem examination is one of the serious problems of the discipline. The law had to devise a mechanism for resolving the legal problems attached with commorients. That is, the law assumes that such persons have died simultaneously (at the same time) and hence no one has survived the other. 

Art. 832. — Persons dying simultaneously

Where two or more persons are dead and it is not possible to prove which of such persons survived the other, the succession of each one of such persons shall be regulated as if he had been the last survivor without, however, receiving anything from the succession of the other persons.

According to Art. 832 of the Civil Code, if two or more persons with reciprocal rights to succeed each other die together and if it is not possible to determine the exact time of death of such persons, the law has devised an ingenious method to deal with the problem. That is, when the succession of each of these persons is considered, he/she will be seen as the last survivor. Assume that A & B (persons who have the reciprocal right to succeed each other) died in an accident and it was impossible to identify which of them died next to the other. Let’s now consider the succession of A.  In this case, A shall be seen as the last survivor. That is, B has died before A. Because B died before A, he did not survive A and has no capacity to succeed A. Let’s again consider the succession of B now. At this time, B will be considered as the last survivor. This means, A died before B. Therefore, A has no capacity to succeed B. As the final analysis, the effect of the assumption made by law is — these persons have not survived one another and they cannot succeed each other.

This assumption is made by the Ethiopian law and in some other countries there are different assumptions. For instance, according to Australian law, the elder person is presumed to have died before the younger one. The same is true with England and Wales laws.

C.   Death of Heir

If the heir is alive at the time of the death of the deceased (i.e., at the time of opening of his succession), then such an heir is said to have survived the deceased.  If the heir survives the deceased, he/she fulfills the requirment of survivorship. Therefore, an heir who dies even after a short period from the death of the deceased will not lose his capacity to succeed.  However, a problem arises if the heir himself/herself dies.  What will happen to his/her share  from the sucession of the deceased? According to Art. 833, all the rights of the heir in the succession of the deceased shall pass to the heirs of the heir. You can see the relevance of the time of opening of the succession clearly in this circumstance. Even if an heir dies sometime after death of the deceased, the heir is said to have died after getting the right to succeed the deceased.

$1D.   Unworthiness

The second condition to succeed the deceased is related with unworthiness.  That is, inorder to succeed the deceased, the heir and/or the legatee must not be an unworthy person. An heir and/or a legatee can become unworthy because of his criminal actions. The rationale behind this rule is that a person may not profit from his/her own crime. As you might have understood from your reading of Arts. 838 – 840, there are several factors that can make an heir  and/or a legatee unworthy.

$1·         The first crime that could make an heir unworthy is his intentional murder of:

$1o   The deceased himself,

$1o   The deceased’s descendant, 

$1o   The deceased’s ascendant or

$1o   The deceased’s spouse. 

You must rememeber that the heir and/or the legatee must be sentenced for his crime before he is considered unworthy.  Moreover, the murder must be made intentionally, not by negligence. 

The second reason that makes a person unworthy is, his/her attempt to kill the persons enumerated under Article 838 (a).  An attempt to kill a person is committing an act with the desire to kill a person but fail to do so because of an external cause. That is, the killing was prevented not by the wish of the one who has planned to kill a person, but by an external factor, such as shooting with a gun which is not loaded, or he/she missed the target because he/she did not aim straight, etc.

The third reason that makes an heir or legatee unworthy is a false accusation against the persons enumerated under Art 838(a). To make the heir or legatee unworthy, the false accusation must entail the condemnation of any of such persons to capital punishment or rigorous imprisonment for more than ten years.

Ato Bisrat died of liver disease. Ato Bisrat and Ato Zewdie were good friends.  Ato Zewdie’s son, Tariku, and his wife, Wude (stepmother of Tariku), do not like each other.  Tariku wanted to attribute the death of Bisrat to Wro Wude.  Thus he instituted an accusation against Wro Wude saying that she murdered Bisrat. But Tariku was sentenced to a two year imprisonment for falsely accusing Wro Wude.

Tariku is guilty of a false accusation against his stepmother, who is a spouse of his father. His false accusation could result in the condemnation of his stepmother for more than 10 years of rigorous imprisonment. Therefore, he committed a crime that would render him unworthy.

The fourth reason that could make an heir or a legatee unworthy is perjury.  Someone commits perjury when he/she stands as a false witness against somebody.  As the result of the false testimony of an heir or legatee, if one of the persons enumerated under Art 838 (a) of the Civil Code is condemned to a capital punishment or rigorous imprisonment for more than ten years, the heir or the legatee will become unworthy to succeed the deceased.

The fifth reason relates to the interference with the right or power of the testator in making a will.  The heir or the legatee in this case, by taking advantage of the physical state of the deceased, has prevented him from making, modifying or revoking a will.  Such heir or legatee shall be condemned as unworthy. This latter crime made by the heir/legatee is a crime that affects the rights of the freedom of the testator as far as making, modifying and revoking his/her will is concerned. Infringing upon a legally recognized right of the testator would the heir/legatee to a condition of unworthiness.

This could relate with his/her physical strength.  The deceased might have been sick for a long time and very weak physically.  The heir or legatee may take the advantage of this weak condition of the deceased to prevent him/her from making, modifying or revoking a will.

It must noted here that, in order to be condemned as unworthy, the heir or legatee must have committed this latter offence only within three months before death of the deceased.  If the offence is committed before this time, the law will not condemn the heir or the legatee as unworthy.  The law considers three months as sufficient time for the testator to think about the offence committed against his rights relating to making, or modifying or revoking a will and to act against the acts of the offender. If the testator keeps quiet for three months after the offence is committed, the law takes that as if the testator has ratified the acts of the offender.

If an heir or a legatee commits any of the offences which are listed under Art. 838 after the death of the deceased (which means after opening of the succession), he/she will not be deprived of his/her rights to succeed the deceased.  Because the heir has committed the crime after he/she is called to and got a right over the succession. It is said here that the crime has no connection with the succession.

It is the law that imposes a liability of unworthiness upon an offensive heir.  The imposition of unworthiness has an exception. Although the heir has committed the offences prescribed under Arts. 838 and 840, he/she would not lose his/her capacity as unworthy, if the deceased had given such heir an amnesty, or if he had forgiven him/her.  The pardon may be either an expressed or an implied one. A very common way of pardoning an heir is expressing the pardon in a will.  If the deceased made a will after the offence was committed, he/she could express his/her forgiveness in the will, to make the heir beneficiary of the will. If the had given a legacy to the offender after the occurrence of the offence with full knowledge of the commission of the offence, that would taken as another way of pardoning the offender.

E.   Unborn child

As it is indicated in Article 1 of the Civil Code, the human person is the subject of rights from its birth to its death.  From this, it may appear to you that a merely conceived child has no right to succeed.  However, this rule has an exception in that a merely conceived child could be considered born whenever his interest so requires. To attribute personality to a merely conceived child, it must be born alive and show its vigor for survival by its viability. “A child shall be deemed to be viable where he lives for forty-eight hours after his birth…”  (Article 4(1) of the Civil Code)

When the father of a merely conceived child dies, the law considers that the interest of the child requires his consideration as a person. Such a child shall not be treated as a non–existent being.  In such a case, his/her interest requires that he/she is a person subject to rights.  Hence, although he/she is an unborn child, the law allows him/her to participate in the succession.  However, his rights in the succession shall be realized after his/her viability is proved.

F.   Children born in marriage, outside marriage and adopted children

The Ethiopian law of succession makes no distinction based on the status of a child whether such child is born in marriage, outside a wedlock marriage or he/she is an adopted child.  Nevertheless, you should note here that the establishment of the paternity of an illegitimate child is duly obligatory before he claims to succeed the deceased, if the deceased is putative father. 

An adopted child, for all intents and purposes, is assimilated to a natural child.  The only exception for this rule is, as prescribed under Art. 182 of the Revised Family Law of 2000, (or the corresponding provisions in the Regional Revised Family Codes) adoption cannot be effective against the ascendants and collaterals of the adopter who opposed the adoption. Therefore, the Ethiopian law does not make any distinction among children of the deceased based on the fact that they are legitimate or otherwise.

G.  Sex, age and nationality of heir

In most of the customs in Ethiopia, male children are favored to succeed their parents.  In some nationalities, female children are totally precluded from succeeding their parents.  Particularly this was true as far as succeeding land was concerned. The FDRE Constitution has recognized the property rights of women. Art 35(7) of the FDRE Constitution provides as follows:

“Women have the right to acquire, administer, control, use and transfer property. In particular, they have equal rights with men with respect to use, transfer, administration and control of land. They shall also enjoy equal treatment in the inheritance of property.”

Moreover, both the Federal and Regional land use and administration Proclamations have specifically addressed the constitutionally guaranteed rights of women on land. Irrespective of these legal efforts, women’s rights on land are not respected satisfactorily. There are still deep rooted beliefs in the many societies that women should not inherit land. However, there are encouraging reports in realizing these rights of women in almost all Regional States.

The Federal Rural Land  Administration and Land Use Proclamation № 456 of 2005 has some provisions which recognize the rights of women on land. For instance, Art 5 (1)(c) prescribes that—“Women who want to engage in agriculture shall have the right to get and use rural land.” Also Art 6(4) of the same Proclamation provides that—“Where land is jointly held by husband and wife or by other persons, the holding certificate shall be prepared in the name of all joint holders.”

Similar rules have been adopted by the Regional States’ land laws. For instance, the Southern Nations, Nationalities and Peoples Regional State’s Rural Land Administration and Utilization Proclamation № 110 of 2007 in its preamble stated that:

WHEREAS, it is believed that ensuring women’s land holding right is necessary for agricultural production and productivity and …”      

There are other important provisions which ensure the land rights of women in the Proclamation. From these efforts, it can be seen that there are some improvements in the recognition of land rights of women.

With respect to age, it cannot be a ground to discriminate heirs.  As long as there is no valid will left by the deceased that discriminates the heirs based on their ages, the rights of the heirs to inherit the deceased cannot be affected by their age.  For example, if the deceased has a 50 year old son and a 5 year old daughter, both of them have the right to succeed him. Moreover, there is no primogeniture right under the Ethiopian law. That is, the eldest child has no special privilege in the succession of parents. The same is true with respect to nationality of the heir. But this rule is subject to the provisions of the Civil Code which restrict ownership of immovable property by foreigners. (See Articles 390 — 393)

The literal meaning of patrimony is the estate that descended from the father to his descendants.  However, this does not exclude the estate that descends from the mother to her descendants and/or from other ancestors in the paternal as well as in the maternal line. 

In the law of property, patrimony may have a different meaning.  As it is discussed in Marcel Planiol, a person’s rights and obligations appreciable in money looked upon as a whole are called his/her patrimony.  There is a link between a person and patrimony.  This link can be expressed in the following four ways:

A)   Only persons have patrimony with the exclusion of other beings. Persons are beings that are capable of having rights or owing obligations.

B)  Every person necessarily has a patrimony, irrespective of the fact that the person has no property at all.  Patrimony is linked to the personality of the person.

C)    Patrimony is a unit.  All the property and all the charges of a person form a single mass.  However, this principle of unity of patrimony is subject to exceptions.  One example of the exceptions is — an heir seems to have two patrimonies.

D)       Patrimony is inseparable from the person.  Therefore, there can’t be a total transfer of property of the person while he/she is still alive.  A person can dispose only part of the constituent elements of his/her patrimony, one after the other.  His/her patrimony, considered as universality, is the consequence of his/her own personality and necessarily remains attached to his/her personality.  Transmission of patrimony in its totality takes place only after the person’s death.  At that moment, the deceased’s patrimony is attributed to his/her successors.

Many legal experts argued, based on these principles of patrimony, that a person should not have the right to regulate his/her estate after his/her death, as death has brought a complete separation of the person and patrimony.  (See Wills below for details of discussion on this point)

Opening of Succession

As it is expressed in Article 826 of the Civil Code, the succession of the person opens at the place he/she had his/her principal residence at the time of his/her death. (For detailed consideration of the concept of residence, refer your Law of Persons material.)  According to Article 174 of the 1960 Civil Code, the residence of the person is the place where he normally resides. The normality of residence will show that the person’s socio-economic life in the society. When a person has many residences, one of such residences may be considered as a principal residence of such person. For the purpose of opening of the succession of the deceased, it is appropriate to consider the principal residence of the deceased the place where he/she has most of his/her inheritable property.  

The succession of the deceased shall open just at the time of his/her death. Assume that Ato Markos, in the above example, died on August 29th just at 3:00 O’clock in the afternoon; Ato Markos’s succession has opened at the moment when his death occurred. That is, his succession has opened just at 3:00 O’clock. The deceased may have his/her societal ties at his/her principal residence.

According to Article 1 of the Civil Code, the human person is subject of rights (and also duties) from its birth to its death. This means a dead person has no rights or duties. But there are certain rights and obligations of the deceased person that pass to the heirs and/or legatees of the deceased.  There are also rights and obligations of the deceased that terminate with his/her death. Most of the rights and obligations that are associated with the person of the deceased shall extinguish with the death of the deceased. However, many of the rights or obligations that are related with the property and/or money of the deceased shall pass onto his/her heirs and/or legatees.

Some obligations of the deceased could also pass to his heirs and/or legatees.  For instance, if the deceased is a debtor, his heirs and/or legatees are bound to pay back his debts. As you will learn in the future, the heirs and/or legatees of the deceased will not be bound to pay the debts of the deceased from their own personal property.  They are only bound to pay such debts from the property of the inheritance, according to the rules of the Ethiopian law of successions.

Things making up a Succession

Generally speaking, what transfer from the deceased to his/her heirs and legatees are those rights and duties of the deceased which arise from various relations which the deceased had with third parties during his/her lifetime. It is possible to indicate some of the principal relations between the deceased and third parties which can serve as source of rights and duties of the deceased like: contractual relations the deceased had with third parties; contract of insurance between the deceased; rights which arise from court proceedings between the deceased and third parties; and those rights generally referred to as property rights – those rights we create and exercise against things, corporeal (movable or immovable) or incorporeal.

Under this sub-section, discussions will be made on the features of inheritable property of the deceased. As a matter of principle, all of the property which were owned or possessed by the deceased on the day of his/her death shall constitute his/her inheritance. All the inheritable property left by the deceased at the time of his/her death are called the hereditary estate.  The hereditary estates are not limited to corporeal (tangible) things.  They also include incorporeal (intangible) things such as the works of the mind or literary rights.

Sometimes it may be difficult to clearly identify the property of the deceased that constitute the inheritance.

Life insurance

As prescribed in Article 827 of the Civil Code, life insurance could or could not constitute a hereditary estate.

Art. 827. — Things making up inheritance. — Life insurance

$1(1)               Monies due in performance of a contract of life insurance to which the deceased was a party, shall form part of the inheritance where the deceased has not determined the beneficiary or the insurance is made to the benefit of the heirs of the deceased without any other indication.

(2)               In other cases, they shall not form part of the inheritance.

Read also the following provision, which is taken from the Commercial Code of 1960.

Art 691. — Definition

A life insurance is a contract whereby the insurer undertakes against the p ayment of one or more premiums to pay to the subscriber or to the beneficiary a specified sum on certain conditions dependent upon the life or death of the subscriber or third party insured.

From the definition of life insurance it can be seen that:

A)    Life insurance is a contract.

B)    The contract is made between the insurer (insurance company e.g. the Ethiopian Insurance Corporation) and the subscriber (a person who buys the life insurance policy and makes a periodical payment of premiums to the insurer).

C) The insurer undertakes or commits itself to pay the agreed amount of money to the beneficiary upon death of the subscriber.

How life insurance would make up inheritance is an important question that deserves discussion. Read the following example carefully.

Only under the above two conditions that the money to be collected from the insurer upon death of the subscriber forms part of the inheritance.  If the subscriber, Wro.  Genet, designates her spouse or only one of her children, or any other person, the money to be collected upon death of the subscriber of the life shall not form part of the inheritance of the subscriber. In this case, the money will be available only to the designated beneficiaries. 

There is no unanimity in decisions of courts of various levels regarding the rule under Art. 701(2) is concerned. Some courts make this provision applicable to all cases. For instance, if Ato Kassa buys a life insurance policy to the benefit of his brother Gobena, some courts make his wife Wro. Chaltu and his children Meron and Abdissa beneficiary of the life insurance.  These courts mainly base their arguments on the expression of the law that says the subscriber’s spouse is beneficiary even if the marriage is concluded after the policy was entered and also the subscriber’s children are beneficiaries even if they are not mentioned by name. Other courts do not accept this argument. The Federal Supreme Court usually rejects decisions on such arguments. According to the latter courts, it is only the person who is indicated as beneficiary who is going to collect the money. The spouse shall be beneficiary only when the subscriber makes her/him beneficiary, even the insurance is entered before the conclusion of the marriage. The subscriber must indicate that his wife or her husband shall be beneficiary of the life insurance. Likewise, he/she must indicate that the insurance is made to the benefit of his/her children without indicating their name. If a spouse or the children are not indicated in this manner and if another person is appointed as beneficiary, they have no chance of becoming beneficiaries.

Which line of argument do you favor?  

For detailed information on this issue, read Journal of Ethiopian Law, Vol. 16, pp 67—80 and Ethiopian Bar Review, Vol. 1 № 1, pp 35—94

Pensions and Indemnities

In Ethiopia, pension is regulated by ‘Public Servants’ Pensions Proclamation № 345/2003 and the amendment Proclamation № 424/2004. The main purpose of pension scheme in Ethiopia is to support the person who was a public servan during the time when he/she is unable to work. In addition to this, the pension scheme has the purpose of supporting those persons who were maintained by the pensioner during his/her life time. Pension is money payable to the spouse, children or parents of the deceased person based on conditions specified under Proclamation № 345/2003.  The mechanism of payment is regualted by Articles 34 — 39 of this Proclamation.  According to Art 35(1) of this Proclamation, if a person who is a government employee dies, the widow or the widower would be entitled to receive 50% of the pension to which the deceased was or would have been entitled.  The Proclamation also prescribes the amount of orphan's pension and parent's pension.  Accordingly, each of the deceased's children would receive 20% of the pension to which the deceased was or would have been entitled.  Orphans are entitled to receive this amount so long as they are less than 18 years of age.  The money collected from pension allowance can be given to the persons who were supported by the pensioner. Pension money is not the estate left by the deceased at the time of his death. The purpose of pension is, as indicated above, to support the pensioner when he/she is unable to earn his/her livelihood through his/her work or to support those who were dependent on the pensioner (only spouse and very close relatives) upon his/her pension allowance. The spouse or the relative of the pensioner has no right to pass the pension allowance to which he/she is entitled to his/her heirs when he/she (the spouse or the relative) dies. Therefore, pension allowance does not constitute the hereditary estate of the deceased.

Indemnity is money to be paid to the spouse or relatives of the deceased person.  Assume that a car hits Dawit and killed him. The driver or the owner of the car may be obliged to pay compensation to the spouse or relatives of Dawit.  These persons sustained injury because of the death of Dawit.  The one who caused the death of the person may pay compensation or indemnity to these persons.  However, such money cannot form part of the inheritance of the deceased. For instance, if the person who is entitled to receive the indemnity payment dies, the money cannot go to his heirs.

A person’s succession may be conducted in one of the two types of successions. As it is prescribed in Art. 829, succession could be either testate or intestate. It could also be the combination of the two types. Testate succession is a succession in which the estate of the deceased person shall pass to his heirs and/or legatees according to the order of the deceased in the will he/she made.  If the deceased made a valid will, his/her succession would be conducted in accordance with the will. A person who left a will is called a testator.  The testator shall regulate as to what should happen to his property after his death. If the testator had no will at all, or his/her will is not valid, the succession of such person shall be conducted by the operation of the law.  That is, in the case where there is no will, or where the will is invalid, the law shall distribute his estate among his heirs.

Sometimes it may happen that the succession is a combination of both intestate and testate. Many circumstances could lead to such a situation. For instance, property which was not included in the will may be discovered later; the will may be partially invalidated; the testator may appoint a universal legatee who is not a legal heir to take only some portion of the hereditary estate and with respect to the rest of the estate he/she may keep silent; etc

The history of taxes reveals that their coercive nature is of comparatively recent development. The original idea of a tax was that payment was not obligatory upon the subject, but consisted rather as a voluntary contribution toward the expenses of government, as appears from the Medieval Latin term donum, and the English "benevolence." This conception of the relation between the subject and government was gradually transformed; payment becoming more and more obligatory, until finally coercive taxation resulted. At the present time payment of taxes is obligatory in all civilized nations; where the rate or imposition is at all dependent upon the taxpayer, the tax takes the form of a fee or payment for contractual services.

Resources were allocated among the various sectors of the economy differently in the imperial and revolutionary periods. Under the emperor, the government dedicated about 36 percent of the annual budget to national defense and maintenance of internal order. Toward the end of the imperial period, the budgets of the various ministries increased steadily while tax yields stagnated. With a majority of the population living at a subsistence level, there was limited opportunity to increase taxes on personal or agricultural income. Consequently, the imperial government relied on indirect taxes (customs, excise, and sales) to generate revenues. For instance, in the early l970s taxes on foreign trade accounted for close to two fifths of the tax revenues and about one-third of all government revenues, excluding foreign grants. At the same time, direct taxes accounted for less than one-third of tax revenues.

The revolutionary government changed the tax structure in 1976, replacing taxes on agricultural income and rural land with a rural land-use fee and a new tax on income from agricultural activities. The government partially alleviated the tax collection problem that existed during the imperial period by delegating the responsibility for collecting the fee and tax on agriculture to peasant associations, which received a small percentage of revenues as payment. Whereas total revenue increased significantly, to about 24 percent of GDP in l988/89, tax revenues remained stagnant at around l5 percent of GDP. In l974/75, total revenue and tax revenue had been l3 and 11 percent of GDP, respectively. Despite the 1976 changes in the tax structure, the government believed that the agricultural income tax was being underpaid, largely because of under assessments by peasant associations.

The government levied taxes on exports and imports. In 1987 Addis Ababa taxed all exports at 2 percent and levied an additional export duty and a sur-tax on coffee. Import taxes included customs duties and a 19 percent general import transaction tax. Because of a policy of encouraging new capital investment, the government exempted capital goods from all import taxes. Among imports, intermediate goods were taxed on a scale ranging from 0 to 35 percent, consumer goods on a scale of 0 to l00 percent, and luxuries at a flat rate of 200 percent. High taxes on certain consumer goods and luxury items contributed to a flourishing underground economy in which the smuggling of some imports, particularly liquor and electronic goods, played an important part.

Although tax collection procedures proved somewhat ineffective, the government maintained close control of current and capital expenditures. The Ministry of Finance oversaw procurements and audited ministries to ensure that expenditures conformed to budget authorizations.

Current expenditures as a proportion of GDP grew from l3.2 percent in l974/75 to 26.1 percent in l987/88. This growth was largely the result of the increase in expenditures for defense and general services following the 1974 revolution. During the l977-78 Ogaden War, for example, when the Somali counteroffensive was under way, defense took close to 60 percent of the budget. That percentage declined after l979, although it remained relatively higher than the figure for the pre-revolutionary period. Between l974 and l988, about 40 to 50 percent of the budget was dedicated to defense and government services.

Economic and social services received less than 30 percent of government funds until l972/73, when a rise in educational outlays pushed them to around 40 percent. Under the Dergue regime, economic and social service expenditures remained at pre-revolutionary levels: agriculture's share was 2 percent, while education and health received an average of l4 and 4 percent, respectively.

The Ethiopian Tax Reform of 2002

Since 1992/93, the Government of Ethiopia has made a major economic policy shift from Central Planning to market oriented economic system. In line with this change, a series of tariff and tax reform measures have been taken. The reasons to these were: outdated tariff and tax laws; weak customs and tax administration; failure of the tariff and tax regime to attract investment, to facilitate trade and to generate adequate revenue to cover current and capital expenditure, and hence finance development and poverty reducing projects. 

The series of tariff and tax reform programs have helped to increase both Federal Government and national revenue. As per the reports of the Ministry of Revenue, the Federal Revenue has increased to Birr 6.7 billion in 2002/2003 from Birr 2.54 billion in 1993/94 as the result of which federal revenue as percentage of the GDP increased from 8.97% in 1993/94 to 11.87% in 2002/03. The increase in revenue mainly attributes to the modest increase in both direct and indirect taxes, mainly the foreign trade taxes. As well, National tax revenue as percentage of GDP has increased to 15.1% in 2002/03 from 10.9 in 1993/94. Despite, the series of reforms and increase in revenue, the overall budget deficit with and without grant has been increasing. For example, the overall budget deficit without grants as percent of GDP has increased from -5.2% in 1996/97 to -14.5% in 2002/03. This shows that performance of revenue collection in Ethiopia has been low compared to the rest of Sub-Saharan African countries which is over 23% of the GDP. 

Hence, coupled by a series of reduction in the import tariff, excise tax and income tax and widening of the budgetary deficit, introducing a neutral and efficient tax, i.e. the VAT with broad tax base was considered. Value Added Tax (VAT) has become a major tax instrument worldwide.  The global trend to introduce VAT in more countries is continuing.  VAT has also become an indispensable component of tax reforms in developing countries.  Ethiopia's tax reform program has introduced VAT since January, 2003. 

VAT revenue performance and its neutrality and efficiency are also the reasons for superiority of this tax in contrast to other common tax instruments such as the turnover tax.  The emerging conventional wisdom, based largely on practice and numerous country case studies, suggests that a single rate VAT (with the rate between 10 and 20%), with very few exemptions and, therefore, a broad base is superior to a VAT with multiple rates and many exemptions which reduce its base and complicate administrations.  Ethiopia's standard VAT rate of 15% and 10% equalization for services and 2% for goods have to be studied in the medium term whether or not they could broaden the tax base and register high revenue performance. The three major taxes and their respective Tax Reforms are explained below:

1. Taxes on Income and Profits

Tax on employment income used to be guided by Income Tax Proclamation No. 173/1961. In the 1990s, this proclamation was amended with modifications to the legislation regulating income tax on employment: rural land and agricultural income tax; rental income tax; taxes on business and other profits; tax on income form mining activities; capital gains tax, and taxes on other sources of income such as chance wining (which carries a tax rate of 15 per cent), royalties (with a tax rate of 5 per cent) and tax on non-resident persons offering services in Ethiopia (which carries a tax rate of 10 per cent).

This reform resulted in a schedule for marginal tax rate which is currently being applied to income exceeding Birr 150, the assumed minimum wage rate. Compared to the marginal tax rate of 89 per cent during the military (Dergue) period; the current reform which reduced the maximum marginal tax rate to 35 per cent was quite radical. The 1978 income tax for rural land and agricultural activities was also amended in 1995 and 1997. For land use, farmers are now taxed Birr 10 for the first hectare and Birr 7.5 for each additional half hectare. Moreover, annual income exceeding Birr 1,200 is subject to a progressive tax rate (as outlined in Appendix Table 1). The land use fee for state farms is Birr 15 per hectare. A novel aspect of the latest tax policy concerning the agricultural sector is the fact that an agricultural investor is exempted from income tax for two consecutive five-year periods. A progressive marginal tax rate schedule was also enacted in 2002 for income derived from the rent of houses (including manufacturing plants).

2. Taxes on Goods and Services

The reform in this category refers to Excise Tax Proclamation (No. 68/193, 77/1997, and No. 149/1999), and the applicable tax rate ranges from a low of 10 per cent on textiles and television sets to 100 per cent for alcohol, perfumes and automobiles. Sales tax on goods constitutes the second category and these ranges from 5 per cent (mainly for agricultural goods) to 15 per cent. Many basic goods are exempt from taxation. The reform also introduced a 5 per cent tax rate for work contracts and financial services, while a 15 per cent rate is applied to the sale of other services. Valued-added tax (VAT) was introduced in January 2003 and may mean a shift from Ethiopia’s dependence on foreign to domestic trade, but it is too early to evaluate its impact. It is not, however, difficult to see that its implementation is a challenge, owing to the predominance of small and informal operators in the country, its history of tax evasion and corruption, lack of standard recordkeeping systems as well as the lack of knowledge about VAT and a tax-base for its computation.

3. Taxes on International Trade

The reform of taxes on international trade relates to levies on imports (customs duty, import excise tax, import sales tax) and tax on exports. The custom tariff reform that took place between 1993 and 2002 grouped imports into 97 categories based on the Harmonized System of Tariffs Classification Code. An ad valorem rate ranging from 0 to 35 per cent was introduced. The same rates were applied for import excise and sales taxes as those established for goods and services (see section above). An important development in the export sector was the abolition of all export taxes, with the exception of coffee. Similarly, to encourage exports, schemes for duty drawback and duty free imports were implemented (see Appendix Table 1 for details).

Other miscellaneous tax-related reforms have been carried out in the last decade. These include the amendment of stamp duties (Proclamation No. 110/1998); the introduction of a 3 per cent withholding tax (Proclamation No. 227/2001), a 2 per cent withholding tax on income (Proclamation No. 227/2001), as well as a 5 per cent withholding tax on interest income (Proclamation No. 227/2001).

Major Types of Taxes in Ethiopia

The major types of taxes that exist in Ethiopia, their meaning, rates and conditions, as provided by the Federal Inland Revenue Authority, are presented as follows:

1.   Value Added Tax (VAT)

This is a sales tax based on the increase in value or price of product at each stage in its manufacture and distribution. The cost of the tax is added to the final price and is eventually paid by the consumer.

The rate and impose of VAT:

1. The rate of VAT is 15% of the value for every taxable transaction by a registered person, all imported goods other than an exempt import and an import of services;
2. The export of taxable goods or services to the extent provided in regulations for zero tax rate are:
3. The export of goods or services to the extent provided in the regulation;

• The rendering of transportation or other services directly connected with international transport of goods or passengers, as well as the supply of lubricants and other consumable technical supplies taken on board for consumption during international flights;
• The supply of gold to the National Bank of Ethiopia; and
• A supply by a registered person to another registered person in a single transaction of substantially all of the assets of a taxable activity or an independent functioning part of a taxable activity as a going concern, provided a notice in writing, signed by the transferor and transferee, is furnished to the authority within 21 days after the supply takes place and such notice includes the details of the supply.  

2.   Excise Tax

This is imposed and payable on selected goods, such as, luxury goods and basic goods which are demand inelastic. In addition, it is believed that imposing the tax on goods that are hazardous to health and which are cause to social problems will reduce the consumption thereof. Excise tax shall be paid on goods mentioned under the schedule of 'Excise Tax Proclamation No. 307/2002'(a) when imported and (b) when produced locally at the rate prescribed in the schedule. Computation of excise tax is applied (a) in the case of goods produced locally, production cost and (b) in the case of imported goods, cost, insurance and freight /C.I.F./. Payment of excise tax for locally produced goods is by the producer and for imported goods by the importer. Time of payment of excise tax for imported goods is at the time of clearing the goods from the customs area, and for locally produced goods it is not later than 30 days from the date of production.
 

3.   Turnover Tax

This is an equalisation tax imposed on persons not registered for value-added tax to fulfil their obligations and also to enhance fairness in commercial relations and to complete the coverage of the tax system. Administrative feasibility considerations limit the registration of persons under the value-added tax to those with annual transactions to the total value exceeding 500,000 Birr.

Rate of turnover tax is 2% on goods sold locally and 10% on others; as provided by the 'Excise Tax Proclamation No. 307/2002'

 4.   Income Tax

Income taxable under the Ethiopian 'Income Tax Proclamation No. 286/2002' shall include, but not be limited to:

• Income from employment;
• Income from business activities;
• Income derived by an entertainer, musician, or sports person from his personal activities;
• Income from entrepreneurial activities carried  out by a non-resident through a permanent establishment in Ethiopia;
• Income from movable property attributable to a permanent establishment in Ethiopia;
• Income from immovable property and appurtenances thereto, income from livestock and inventory in agriculture and forestry, and income from usufruct and other rights deriving from immovable property that is situated in Ethiopia;
• Income from the alienation of property referred to in (e);
• Dividends distributed by a resident company;
• Profit shares paid by a resident registered partnership;
• Interest paid by the national, a regional or local Government or a resident of Ethiopia, or paid by a non-resident through a permanent establishment that he maintains in Ethiopia;
• License fees including lease payments, and royalties paid by a resident or paid by a non-resident through a permanent establishment that he maintains in Ethiopia.  

5.   Business profit tax

Taxable business income of bodies is taxable at the rate of 30%

Taxable business income of other taxpayers shall be taxed in accordance
with the following expenses:

Sources of Ethiopian Tax Laws

Tax laws basically emanate from three sources; legislative, administrative and judicial sources. The major sources of Ethiopian tax laws are legislative sources. There are a number of laws that have been adopted by the legislature of the country to deal with the different types of taxes in the country and their administration. The first law that can be taken as a source is the FDRE Constitution which has numerous provisions dealing with the administration of taxes. Then after, there are a number of proclamations and regulations dealing with taxes in the country, the most prominent of which include Income Tax Proclamation No. 286/2002 (amended by (Pro.No. 608/2008) and (Pro.No. 693/2010)); Council of Ministers Income Tax Regulation No. 78/2002 (amended by (Reg. No. 164/2008)); Value Added Tax Proclamation No. 285/2002 (amended by (Pro.No. 609/2008)); Council of Ministers Value Added Tax Regulation No. 79/2002; Turnover Tax Proclamation No. 308/2002 (amended by (Pro.No. 611/2008)); and Excise Tax Proclamation No. 307/2002 (amended by (Pro.No. 570/2008) and (Pro.No. 610/2008)).