On 31 July 2014, Portugal approved for ratification the pending income tax treaty with Ethiopia. The treaty was signed 25 May 2013, and is the first of its kind between the two countries.
The treaty covers Portuguese personal and corporate income taxes, and local surtax on corporate income tax. It 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.
The treaty includes provisions for withholding tax of up to 5% on technical fees, which include fees for any services of a technical, managerial, or consultancy nature.
Both countries apply the credit method for the elimination of double taxation.
A protocol to the treaty, signed the same day, includes a limitation on benefits provision.
The provision states that 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 treaty benefits.
The treaty will enter into force once the ratification instruments are exchanged, and will apply in Portugal from 1 January of the year following its entry into force, and in Ethiopia from 8 July next following its entry into force.
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