India, Ethiopia sign Double Taxation Avoidance Agreement

New Delhi, May 27(ANI): India has signed a Double Taxation Avoidance Agreement (DTAA) with Ethiopia for the avoidance of double taxation and for the prevention of fiscal evasion with respect to taxes on income.

The agreement was signed by External Affairs Minister S.M. Krishna on behalf of the India government and by Sufian Ahmed, Minister of Ethiopia, on Thursday in Addis Ababa, Ethiopia, in the presence of Prime Minister, Dr. Manmohan Singh and Ethiopian Prime Minister 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. 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," Union Finance Ministry said in a statement today.

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 percent in the case of dividends and 10 percent in the case of interest, royalties and fees for technical services.

Capital gains from the scale 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. (ANI)