Nowadays, CGT. a direct tax imposed 012 capital gains realized over the disposal of certain capital assets, is pervasive i11 the world. Compared to other incomes {wages, profits. etc.), capital gains are taxed with many preferences. Ethiopia introduced CGT in 1994. Currently, Ethiopia imposes CGT on gains upon transfers of specified buildings and company shares. The tax treatment of these capital gains has many similarities with the international experience No doubt, appropriate legal and institutional frameworks are vital to effectively administer taxation. Moreover, state structures (federal or unitary) would affect the nature of the tax laws and institutions. In federations. division of powers of taxation requires serious attention as it is necessary to consider the interests of the constituents and of the whole federation. In Ethiopia, the FDRE Constitution allocates taxation powers as exclusive, concurrent and undesignated. It also authorizes the joint session ofthe two federal homes to allocate when undesignated source of taxation occurs. Based on the Constituiion. the federal and regional governments have issued their tax laws and established lax institutions. Tito ugh the power of taxation over capital gains has not yet been assigned to any level of the government, the Federal Government and ANRS practically administer CGT in ANRS. In addition to such constitutional issue, it is admitted that there are legal and practical problems in the actual administration of CG"/' in Ethiopia. 'l. his research particularly studies the practical and legal problems in the administration of CGT in RDCA. It also studies the constitutionality ofCGT administration in ANRS. The study was conducted based on a qualitative research approach by analyzing relevant laws. cases. documents and data. collected through interviews. Accordingly, the research discloses that there L~· no constitutional support for the actual administration of CGT in .ANRS. Additionally, the findings reveal that there are other legal and practical problems affecting the administration of CGT in BDCA. The problems affect both the revenue of the governments and the CGT payers. Essentially. they arisefrom the flaws in the Laws regarding computation of taxable gatns and collection of the tax and the lack of awareness about tire CGT system by the tax authorities, taxpayers and other relevant bodies. Based on these findings, the research recommends that certain laws should be repealed. It also recommends tile necessary amendments that should be made to the CGT laws applicable in BDCA. In addition, it recommends adherence of the tax authorities ro certain provisions of the CGT law. Last but not least, awareness creation activities to the tax authorities, other responsible bodies and the taxpayers on how the C( rT system should operate are recommended.