On 29 November 2017, President of the Slovak Republic, Andrej Kiska, ratified the pending income tax treaty with Ethiopia. The treaty, signed 30 November 2016, is the first of its kind between the two countries.
The treaty covers Ethiopian tax on income of individuals and legal persons and tax on income from mining, petroleum, and agricultural activities. It covers Slovak tax on income of individuals and tax on income of legal persons.
The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services through employees or other personnel in a Contracting State if the activities continue for the same or connected project for a period or periods aggregating more than 6 months within any 12-month period.
Article 7 (Business Profits) includes a limited force of attraction provision whereby taxing rights are granted to a Contracting State on profits attributable to the sale of goods or merchandise by a resident of the other State if the same or similar goods or merchandise are sold through a PE maintained by that resident in the first-mentioned Contracting State.
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.
Article 27 ( Miscellaneous Provisions) includes the provision that the competent authority of a Contracting State may, after consultation with the competent authority of the other Contracting state, deny the benefits of the treaty to any person, or with respect to any transaction, if in its opinion the granting of those benefits would constitute an abuse of the Agreement according to its purposes.
The treaty will enter into force 60 days after the ratification instruments are exchanged. It will apply in the Slovak Republic from 1 January of the year following its entry into force and will apply in Ethiopia in respect of withholding taxes from 1 January of the year following its entry into force and in respect of other taxes from 8 July of the year following its entry into force.
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