The double tax treaty (DTT) between Cyprus and Ethiopia signed in December 2015 entered into force on 18 October 2017 as per recent update of the Cyprus Ministry of Finance. Based on the provisions of the DTT, in the case of Cyprus, the DTT will take effect as from 1 January 2018 and in the case of Ethiopia as from 8 July 2018.
The DTT’s related withholding tax rates with respect to dividends, interest and royalties are as follows:
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 payments by Ethiopia will be subject to a maximum withholding tax of 5% provided that the recipient is the beneficial owner of the interest.
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.
With respect to the capital gains tax the treaty provides that gains derived by a Cyprus company from the alienation of property located in Ethiopia shall be taxable only in Ethiopia.
Gains from the sale of ships or aircraft operated in international traffic or other movable property pertaining to the operation of such ships or aircraft by a Cyprus company shall be taxable only in Cyprus being the country of the effective management and control of the company.
Gains from the sale of movable property forming part of the business property of a permanent establishment, including shares and other comparable interests in a company, which a Cyprus company has in Ethiopia may be taxed in Ethiopia.
“Permanent Establishment” according to the DTT is a fixed place of a business through which the business of an enterprise is wholly or partly carried on. Any building site or construction or installation project constitutes a permanent establishment only if it lasts more than 6 months.
We are at your disposal should you require further information on the new DTT, its uses and benefits.