The income tax treaty between Ethiopia and Portugal entered into force on 9 April 2017. The treaty, signed 25 May 2013, is the first of its kind between the two countries.
The treaty covers Ethiopian tax on income and profit imposed by the Income Tax Proclamation, and the tax on income from mining, petroleum and agricultural activities imposed by the respective proclamations. It covers Portuguese personal income tax, corporate income tax, and the surtaxes on corporate income.
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 for tax that would otherwise be payable but has been reduced or exempted under incentive provisions contained in the law of a Contracting State designed to promote economic development in relation to industrial, construction, manufacturing, or agricultural activities carried out within that State. Tax sparring credit limited to first seven years the treaty is effective, but may be extended.
The final protocol to the treaty provides that the benefits of the treaty will not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the property or right in respect of which the income is paid is to take advantage the benefits by means of such creation or assignment.
The final protocol also provides that the treaty does not prevent a Contracting State from applying anti-avoidance provisions in its domestic law, and that the benefits will only be granted to beneficial owners of income.
The treaty generally applies in Ethiopia from 8 July 2017 and in Portugal from 1 January 2018.
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