The Irish Revenue has announced that the Convention between Ireland and the Federal Democratic Republic of Ethiopia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, which was signed on November 3, 2014 (Hereafter the DTA), entered into force on August 12, 2016.
Based on Article 29, Paragraph 2 of the DTA (“ENTRY INTO FORCE”), the fact that the DTA entered into force on August 12, 2016 means that the provisions of the DTA shall have effect:
(a) In the case of Ethiopia:
(i) with regard to taxes withheld at source, in respect of amounts paid on or after July 8, 2017; and
(ii) with regard to other taxes, in respect of tax year beginning on or after July 8, 2017.
(b) In the case of Ireland:
(i) with regard to income tax, the universal social charge and capital gains tax, for any year of assessment beginning on or after January 1, 2017; and
(ii) with regard to corporation tax, for any financial year beginning on or after January 1, 2017.
Below we will discuss a selection of provisions included in the DTA of which we think they might interest our readers.
Taxes covered
Based on Article 2, Paragraph 3 of the DTA (“TAXES COVERED”), the existing taxes to which the DTA shall apply are in particular:
(a) in the case of Ethiopia:
(i) the tax on income and profit; and
(ii) the tax on income from mining, petroleum and agricultural activities; (hereinafter referred to as "Ethiopian tax");
(b) in the case of Ireland:
(i) the income tax;
(ii) the universal social charge;
(iii) the corporation tax; and
(iv) the capital gains tax;
Paragraph 4 of Article 2, subsequently arranges that the DTA shall apply also to any identical or substantially similar taxes that are imposed after the date of signature of this DTA in addition to, or in place of, the existing taxes.
Permanent establishment
Paragraph 3 of Article 5 of the DTA (“PERMANENT ESTABLISHMENT”) arranges that a building site or construction or installation project constitutes a permanent establishment only if it lasts more than six months.
Immovable property
Article 6, Paragraph 1 of the DTA (“INCOME FROM IMMOVABLE PROPERTY”) arranges that income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.
With respect to immovable property Article 13, Paragraph 1 of the DTA (“CAPITAL GAINS”) arranges that Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State.
Article 13, Paragraph 4 subsequently arranges that gains derived by a resident of a Contracting State from the alienation of:
(a) shares, other than shares quoted on a recognised stock exchange, deriving more than 50 per cent of their value directly or indirectly from immovable property situated in the other Contracting State; or
(b) an interest in a partnership or trust deriving more than 50 per cent of its value directly or indirectly from immovable property situated in the other Contracting State,
may be taxed in that other State.
Associated enterprises
Article 9, Paragraph 2 of the DTA (“ASSOCIATED ENTERPRISES”) contains a so-called appropriate adjustment clause.
Dividends
If the beneficial owner of the dividends is a resident of the other Contracting State, Article 10, Paragraph 2 of the DTA (“DIVIDENDS”) maximizes the withholding tax a Source State is allowed to withhold over dividend distributions to 5 per cent of the gross amount of the dividends.
Interest
If the beneficial owner of the dividends is a resident of the other Contracting State, Article 11, Paragraph 2 of the DTA (“INTEREST”) maximizes the withholding tax a Source State is allowed to withhold over interest payments to 5 per cent of the gross amount of the interest.
Royalties
Article 12, Paragraph 2 of the DTA (“ROYALTIES”) maximizes the withholding tax that a Source State is a allowed to withhold over royalties to 5 per cent of the gross amount of the royalties if the beneficial owner of the royalties is a resident of the other Contracting State.
Other
Furthermore the DTA contains provisions regarding a Mutual Agreement Procedure (Article 26) and regarding the Exchange of Information (Article 27).
Click here to be forwarded to the text of the DTA as available on the website of the Irish Revenue. (The DTA comes in the form of a downloadable Pdf document)
Are you looking for other DTAs? Then check our section DTAs & TIEAs, a very efficient way to locate numerous DTAs.
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