UK, Ethiopia Sign Tax Treaty

June 13, 2011

It generally follows the Model Double Taxation Convention set by the Organization of Economic Cooperation and Development (OECD). It contains articles setting out rules governing residence, permanent establishment, immovable property, business profits, shipping and air transport, associated enterprises, capital gains and pensions. It also adheres to the latest OECD exchange of information standards.

Under the DTA, dividend withholding tax will be limited in most cases to 10%. However, in the case of dividends paid out of immovable property income by an investment vehicle, which distributes most of this income annually and when such income is exempt from tax, the rate is capped at 15%.

Interest withholding tax is to be charged at a maximum of 5%. Governments, along with their political subdivisions, administrations and local authorities, are to be exempt, as are the central banks of both countries.

Withholding tax will be levied on royalties at a capped rate of 7.5%.

The treaty will enter into force once each state has completed its relevant legal procedures.