The income tax treaty between Ethiopia and Mozambique was signed on 15 February 2017. It is the first of its kind between the two countries.
The treaty covers Ethiopian tax on income and profit and tax on income from mining, petroleum, and agricultural activities. It covers Mozambique personal income tax and corporate income tax.
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.
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 on income that has been exempted or taxed at a reduced rate in a Contracting State for a limited period of time in accordance with the laws and regulations of that State aimed at promoting economic development.
Article 29 (Limitation of Benefits) provides that a resident of a Contracting State will not be entitled to the benefits of the treaty if its affairs were arranged in such a manner as if the primary purpose or one of the primary purposes was to take the benefits of the treaty. This includes legal entities without bona fide business activities.
The treaty will enter into force once the ratification instruments are exchanged and will generally apply from the beginning of the fiscal year next following its entry into force, which is 8 July for Ethiopia and 1 January for Mozambique.
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