A double taxation agreement between Cyprus and the Federal Democratic Republic of Ethiopia was signed on 30 December 2015 and published in the Official Gazette of the Republic of Cyprus on 18 January 2016. It will enter into force once the requisite ratification procedures have been completed in both countries and will have effect from the following 1 January.

The agreement is based on the Organisation for Economic Cooperation and Development Model Agreement (OECD Model). It limits withholding tax on dividends, interest and royalties paid by a resident of one Contracting State to a resident of the other to no more than 5 per cent. Cyprus does not impose withholding taxes on dividends or interest, and imposes withholding taxes on royalties only if they derive from the use in Cyprus of intellectual property.

Capital gains derived by a resident of a Contracting State from the alienation of immovable property situated in the other Contracting State, together with gains from the alienation of movable property forming part of the business property of a permanent establishment, may be taxed in the Contracting State in which the property is located. Gains on disposal of ships or aircraft operated in international traffic are taxable only in the Contracting State in which the place of effective management of the enterprise is situated. Other capital gains, including gains on the disposal of shares in “property-rich” companies, are taxable only in the Contracting State in which the alienator is resident. 

Relief against double taxation is given under the credit method.

The exchange of information provisions in the agreement replicate those of the latest OECD Model but are supplemented by a Protocol setting out the information required to accompany a request for information, in order to demonstrate the foreseeable relevance of the information requested, in line with Cyprus’s Assessment and Collection of Taxes Law. The Protocol also provides that information should not be provided unless the contracting state that made the request has reciprocal provisions or applies appropriate administrative practices for the provision of the information requested.

Either Contracting State may terminate the agreement by giving six months’ written notice no earlier than five years after the agreement entered into force.