Federal Supreme Court decides in favor of Total in a major tax case
The Cassation Division of the Federal Supreme Court decided in favor of Total Ethiopia in a major dividend tax litigation worth ETB 12.5 million (around Five Hundred Thousand dollars). It involved dividend tax claims on a 21.6 million Birr of accumulated profit in Mobil Ethiopia, a branch of Mobil Oil East Africa, which was transferred to Total to buy shares in the latter.
Total Ethiopia, represented by Kumlachew Dagne and Associates (KDA) Law Office, was requested to pay dividend tax on this accumulated profit. Since the accumulated profit is part of the global income of Mobil Oil East Africa and not a dividend per se, KDA argued, it should not be subject to dividend tax. At the decision it rendered onOctober 4th 2019, that profit generated at the branch of Foreign Companies is not dividend but part of the global income of the parent company. It therefore reversed the majority decision by the Federal Supreme Court and confirmed that dividend tax will not apply to profit generated at the branch level. This is a landmark decision, in the innovation it showed, the legal interpretation, and the sum involved.
KDA is one of the leading business law firms in Ethiopia. In 2019, it was ranked Band 2 by Chambers and Global which identifies and ranks top law firms in 190 countries of the World. Chambers & Global states that Kumlachew Dagne, Managing Director of KDA “is best recognized for his corporate offering and has experience assisting international clients on M&A transactions. Sources describe him as “one of the good lawyers” and say they are “comfortable recommending clients to his practice.”