The income tax treaty between Ethiopia and South Korea entered into force on 31 October 2017. The treaty, signed 26 May 2016, 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. It covers Korean income tax, corporation tax, special tax for rural development, and local 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. In respect of dividends received by a Korean resident company that owns at least 10% of the voting shares or capital stock of the paying company, South Korea will also provide a credit for the Ethiopian tax payable on the profits out of which the dividends are paid.
A provision is also included for a tax sparing credit for tax that would otherwise be payable but has been reduced or exempted for a limited period of time in a Contracting State in accordance with the laws and regulations of that State aimed at promoting economic development. This provision applies for 10 years from the date the treaty is effective, and may be extended if agreed to.
Article 28 (Limitation on Benefits) provides that a resident of a Contracting State will not be entitled to the benefits of the treaty in respect of Articles 10 (Dividends), 11 (Interest), 12 (Royalties), 13 (Capital Gains), and 22 (Other Income), if:
The treaty applies in Ethiopia from 8 July 2018 and in South Korea from 1 January 2018. Article 27 (Assistance in the Collection of Taxes), however, will only apply when Ethiopia is capable of fulfilling the obligations of that Article and has informed South Korea.
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