Africa Tax In Brief – 20 September 2016

Ethiopia: Treaty and amending protocol with the Netherlands enter into force

The Ethiopia-Netherlands Income Tax Treaty, 2012 and the exchange of notes, signed on 10 August 2012, entered into force on 1 September 2016, and the amending protocol to the treaty, signed on 18 August 2014, will enter into force on 30 September 2016. The exchange of notes generally applies from 1 September 2016.

The treaty and the amending protocol generally apply from 1 January 2017 for the Netherlands, Bonaire, St. Eustatius and Saba and from 8 July 2017 for Ethiopia. Only once Ethiopia is capable of fulfilling the obligations of article 26 of the treaty on assistance in tax collections will this article apply, after which Ethiopia would need to inform the Netherlands through diplomatic channels.

Ethiopia: Treaty with Ireland enters into force

The Ethiopia-Ireland Income Tax Treaty, 2014 entered into force on 12 August 2016. The treaty generally applies from 1 January 2017 for Ireland and from 8 July 2017 for Ethiopia.

Ethiopia: Income Tax Proclamation 2016

Parliament approved the Income Tax Proclamation 2016 ("ITP 2016") (equivalent to an act of parliament) on 26 July 2016. Key features of the ITP 2016 include:

a definition of "permanent establishment" as a fixed place of business through which the business of a person is wholly or partly carried on, including a building or a construction, assembly, installation project, or supervisory activity connected with such a site or project when the site, project, or activities continue for more than 90 days a thin capitalisation rule in terms of which a foreign-controlled resident company, other than a financial institution, having an average debt to average equity ratio in excess of 2 to 1 for a tax year, shall be disallowed a deduction for the interest paid by the company during that year a treaty override rule which stipulates that, generally, if there is any conflict between the terms of a tax treaty having legal effect in Ethiopia and ITP 2016, the tax treaty will prevail over the provisions of ITP 2016 Parliament also adopted the Tax Administration Proclamation legislation, which is effective from 8 July 2016 and is aimed at consolidating the administration of tax laws and enhancing good governance in tax administration.

A Tax Appeal Commission, accountable to the Prime Minister, has been established to hear tax appeals against appealable decisions.

Ghana: Guidance on taxation of casual labour issued

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