Ethiopia - Dividend

Article 10. Dividends

1.   Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.

2.   However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed:

a)   10 per cent of the gross amount of the dividends in case the company paying the dividends is a resident of Ethiopia;

b)  15 per cent of the gross amount of the dividends in case the company paying the dividends is a resident of the Netherlands;

c)   5 per cent of the gross amount of the dividends, if the beneficial owner of the dividends is:

(i)   a company (other than a partnership) which is a resident of the other Contracting State and holds directly at least 10 per cent of the capital of the company paying the dividends; or

(ii)  a pension fund.

3.   The competent authorities of the Contracting States may by mutual agreement settle the mode of application of paragraphs 1 and 2.

4.   The provisions of paragraph 2 shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

5.   The term “dividends” as used in this Article means income from shares, “jouissance” shares or “jouissance” rights, mining shares, founders' shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident.

6.   The provisions of paragraphs 1, 2 and 8 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State, of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.

7.   Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

8.   Notwithstanding the provisions of paragraphs 1, 2, and 7, dividends and distributions in regard of profit sharing certificates paid by a company which under the laws of a Contracting State is a resident of that State, to an individual who is a resident of the other Contracting State and who upon ceasing to be a resident of the first-mentioned State is taxed on the appreciation of capital as meant in paragraph 6 of Article 13, may also be taxed in that State in accordance with the laws of that State, but only for a period of ten years after emigration of the individual insofar as the assessment on the appreciation of capital is still outstanding.

Protocol:

VI. Ad Articles 6, 10, 11, 12 and 13

1.   Income and gains from collective investment through closed funds for joint account based in a Contracting State (closed FJA’s) and umbrella funds consisting of several closed FJA’s, are allocated to the participants that invest through the closed FJA’s, in proportion to their participations in the fund.

2.   A closed FJA which is established in a Contracting State and which receives income or gains arising from the other Contracting State may itself, represented by its fund manager or its depository, in lieu of and instead of the participants in the closed FJA, claim the benefits of an agreement for the avoidance of double taxation, to which the other State is a party and which is specifically applicable to any of the investors concerned, on behalf of those participants in the closed FJA.

Such claims may be subject to enquiry and, where requested, a fund manager or depository shall provide relevant information which may include a schedule of participants and allocated income or gains relevant to a claim, as well as the particular agreements for the avoidance of double taxation under which an application for benefits is made by the FJA.

3.   Notwithstanding the provision of paragraph 2, a closed FJA may not claim treaty benefits on behalf of a participant in the closed FJA if the participant has itself made a claim for benefits in respect of the same income or gains.

X. Ad Article 10

1.   The provisions of paragraph 2 (subparagraph c) (i)) of Article 10 shall apply as long as, under the provisions of its income tax laws the Netherlands applies a full tax exemption to participation dividends which a company receives from a company which is resident of Ethiopia.

2.   The provisions of paragraph 2 (subparagraph c) (ii)) of Article 10 shall apply as long as, under the provisions of the income tax laws of the Netherlands the income of pension funds are exempt.

XI. Ad Articles 10, 11 and 12

Where tax has been levied at source in excess of the amount of tax chargeable under the provisions of Articles 10, 11 or 12, applications for the refund of the excess amount of tax have to be lodged with the competent authority of the State having levied the tax, within a period of five years after the expiration of the calendar year in which the tax has been levied.

XII. Ad Articles 10 and 13

It is understood that income received in connection with the (partial) liquidation of a company or a purchase of own shares by a company is treated as income from shares and not as capital gains.