India, Ethiopia sign tax accord

May 27th, 2011 - 9:00 pm ICT by IANS  

Manmohan Singh New Delhi, May 27 (IANS) India and Ethiopia have signed double taxation avoidance agreement aimed at strengthening bilateral economic cooperation and stimulate the flow of investment and technology.

“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 the two countries,” the finance ministry said in a statement Friday.

The agreement was signed by External Affairs Minister S.M. Krishna and Ethiopian Finance Minister Sufian Ahmed in the presence of visiting Prime Minister Manmohan Singh and his Ethiopian counterpart Meles Zenawi in Addis Ababa May 25.

Under the deal, business profits will be taxable in the source state if the activities of an enterprise constitute a permanent establishment, like branch, factory, 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,” the statement said.

Profits derived by an enterprise from the operation of ships or aircraft 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, it said.

The May 25 bilateral talks between Singh and Zenawi had called for scaling up Indian investments in Ethiopia to $10 billion by 2015.

India pledged $300 million for an Ethiopia-Djibouti rail link and also announced new research and capacity-building institutions in the areas of agriculture, sugar and textiles.

The Indian prime minister, who was in Addis Ababa for the India-Africa Forum Summit, also addressed the Ethiopian parliament Thursday.

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