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Double Tax Treaty between Cyprus and Ethiopia

Double Tax Treaty between Cyprus and Ethiopia

19 September 2016 Tax Law

On December 30th 2015, the Republic of Cyprus and the Federal Democratic Republic of Ethiopia signed a Double Tax Treaty (DTT). The treaty was published in the official Cyprus government Gazette on January 18th 2016 under the No. 4202. The new treaty shall enter into force upon ratification.

In the case of Cyprus, the provisions of the treaty will apply after the 1st of January following the date upon which the convention enters into force. In the case of Ethiopia, the provisions of the treaty will apply after the 8th of July following the date upon which the convention enters into force.

The treaty, as all of Cyprus’ new DTAs (Double Tax Agreements), follows the OECDs (Organization for Economic Cooperation and Development) Model tax convention framework.

The main provisions of the treaty are listed in the following paragraphs:

Permanent establishment:

The permanent establishment definition in the treaty follows the OECD provisions verbatim. In particular, any building site, construction or installation project or any supervisory activities in connection with such site or project constitutes a permanent establishment only if it lasts more than 6 months.

Dividends:

Dividend payments by Ethiopia will be subject to a maximum withholding tax of 5% provided that the recipient is the beneficial owner of the dividend.

Interest:

Interest payments by Ethiopia will be subject to a maximum withholding tax of 5% provided that the recipient is the beneficial owner of the Interest.

Royalties:

Royalty payments by Ethiopia will be subject to a maximum withholding tax of 5% provided that the recipient is the beneficial owner of the Royalty.

Capital gains:

Gains from disposal of immovable property are taxed in the country where the immovable property is situated. Gains from the disposal of shares are taxable in the country in which the seller is located.

It is reminded that under local legislation there is not Withholding Tax for payments of dividends, interests and royalties to non-residents of Cyprus.