The double tax treaty (DTT) between Cyprus and Ethiopia signed in December 2015 entered into force on 18 October 2017 as per recent update of the Cyprus Ministry of Finance. Based on the provisions of the DTT, in the case of Cyprus the DTT will take effect as from 1 January 2018 and in the case of Ethiopia as from 8 July 2018.
Main Provisions
Dividends
In the cases where the recipient is the beneficial owner of the dividends in question, then the withholding tax shall not exceed 5% of the gross amount of the dividends.
Interest
In the cases where the recipient is the beneficial owner of the interest in question, then the withholding tax shall not exceed 5% of the gross amount of the interest.
Royalties
In the case where the recipient is the beneficial owner of the royalties in question, then the withholding tax shall not exceed 5% of the gross amount of the royalties.
Capital Gains
With respect to the capital gains tax the treaty provides that gains derived by a Cyprus company from the alienation of property located in Ethiopia shall be taxable only in Ethiopia.
Shipping and Air Transport
Gains from the sale of ships or aircraft operated in international traffic or other movable property pertaining to the operation of such ships or aircraft by a Cyprus company shall be taxable only in Cyprus being the country of the effective management and control of the company.
Permanent Establishment
The permanent establishment definition included in the treaty is in line with the definition provided in the OECD model tax convention. In particular, any building site or construction or installation project constitutes a permanent establishment only if it lasts more than six months.
Contact
Tax Advisor
Andreas Avgousti
Andreas.Avgousti@aretilaw.com