On 5 June 2018, Malta published Legal Notice 182 of 2018 in the Official Gazette, which provides for the ratification of the pending income tax treaty with Ethiopia. The treaty, signed 12 April 2018, is the first of its kind between the two countries.
The treaty covers Ethiopian tax on income and profit, and tax on income from mining, petroleum, and agricultural activities. It covers Malta income tax.
The following capital gains derived by a resident of one Contracting State may be taxed by the other State:
Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.
Both countries apply the credit method for the elimination of double taxation. A provision is also included for a tax sparing credit, where Malta will provide a credit for tax that has been exempted or reduced in Ethiopia for a limited period of time in accordance with the laws and regulations of Ethiopia aimed at promoting economic development. The sparing credit provisions will apply for the first ten years the treaty is effective, which may be extended further.
The treaty will enter into force 30 days after the ratification instruments are exchanged and will apply in Ethiopia from 8 July next following the date of its entry into force and in Malta from 1 January of the year following its entry into force.
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