INDIA signed a Double Taxation Avoidance Agreement (DTAA) with the
Federal Democratic Republic of Ethiopia for the avoidance of double taxation and
for the prevention of fiscal evasion with respect to taxes on income on 25th
May, 2011 at Addis Ababa. The Agreement was signed by Mr S.M. Krishna, External
Affairs Minister on behalf of the Government of India and by Mr. Sufian Ahmed,
Minister of Ethiopia in the presence of the Prime Minister, Dr. Manmohan Singh
and the Ethiopian Prime Minister. Mr. Meles Zenawi.
The DTAA provides
that business profits will be taxable in the source State if the activities of
an enterprise constitute a permanent establishment in the source State. Examples
of permanent establishment include a branch, factory, etc. Profits of a
construction, assembly or installation projects will be taxed in the State of
source if the project continues in that State for more than 183 days.
Profits derived by an enterprise from the operation of ships or
aircrafts in international traffic shall be taxable in the country of residence
of the enterprise. Dividends, interest, royalties and fees for technical
services income will be taxed both in the country of residence and in the
country of source. However, the maximum rate of tax to be charged in the country
of source will not exceed 7.5% in the case of dividends and 10% in the case of
interest, royalties and fees for technical services. Capital gains from the sale
of shares will be taxable in the country of source.
The Agreement
further incorporates provisions for effective exchange of information and
assistance in collection of taxes between tax authorities of the two countries
in line with internationally accepted standards including exchange of banking
information and incorporates anti-abuse provisions to ensure that the benefits
of the Agreement are availed only by the genuine residents of the two countries.
The Agreement will provide tax stability to the residents of India and
Ethiopia and facilitate mutual economic cooperation as well as stimulate the
flow of investment, technology and services between India and Ethiopia.
|
