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Ethiopia-Netherlands

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Protocol to the Tax Treaty between Ethiopia and the Netherlands Signed

According to recent reports, on 18 August 2014, a protocol to the 2012 income tax treaty between Ethiopia and the Netherlands was signed. The 2012 treaty is not yet in force.

The protocol clarifies the taxation of dividends (Article 10), and adds limitation on benefits provisions (Article 21A). Under the limitation on benefits provisions, residents of either Contracting State will only be eligible for the reduced withholding tax rates provided by the articles on dividends, interest, and royalties when they are resident "qualified persons". Qualified persons include:

  • An individual
  • A contracting state, or a political subdivision or local authority thereof
  • A pension fund
  • A company, subject to certain conditions, including:
    • The company's shares are regularly traded on a recognized stock exchange, or at least 50% of its shares are directly owned by one or more companies whose shares are traded on a recognized stock exchange (subject to additional conditions), or
    • The company is engaged in an active trade or business in its Contracting State of residence (other than making or managing investments for the company's own account, unless these activities are banking or insurance carried on by a bank or an insurance company),or
    • The company is a headquarters company for a multinational corporate group which provides a substantial portion of the overall supervision, financing or administration of the group and which has, and exercises, independent discretionary authority to carry out these functions (subject to additional conditions), or
    • The competent authority of the Contracting State granting the benefits is satisfied that the establishment, acquisition or maintenance of such company, or of its entitlements to such benefits or the conducts of its operations does not have as its main purpose or one of its main purposes to secure such benefits

If the benefits would be denied, the competent authority of the Contracting State denying the benefits should consult with the competent authority of the other State before doing so.

Entry into Force and Effect

The protocol will enter into force after the ratification instruments are exchanged and will apply from the date the 2012 income tax treaty applies. In the Netherlands, the treaty will apply 1 January of the year following the treaty's entry into force, and in Ethiopia, the treaty will apply 8 July following the treaty's entry into force.

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