English term (edited): withholding agent/contribution payer

What is the withholding agent?

Withholding agent is any person with a tax collection obligation as provided in the income tax proclamation N0 286/2002.

5. Who are withholding agents?

Organization or any company Government Owned Enterprises, Share Co, private Limited Co, partnership, etc incorporated under the law of Ethiopian or abroad, private non-profit organization and Non Governmental Organization (NGO) having legal personality.

6. Obligations and records of withholding agents

Ø Issue serially numbered official receipt to persons and organizations from whom tax is withheld;

Ø Fill in a form provided, taxpayer identification number (TIN), total payments and tax withhold.

Ø Transferring the tax withhold to the tax authority within ten days from the end of month of transaction.

Ø Withholding agent shall maintain and make available for inspection, records in relation to each fiscal year for payments made and tax withheld.

Ø The withholding agent shall keep the records for five (5) years after the end of the fiscal year to which the records relate.

7. Which types of services are subject to withholding tax?

Types of services that are subject to withholding tax: -

a) Consultancy

b) Designs, written materials, lectures and dissemination of information;

c) Lawyers, accountants, auditors and other services of similar nature

d) Sales persons, arts and sports professionals and brokers including insurance brokers and other commission agents

e) Advertisements and entertainment programs for television and radio broadcasts

f) Construction

g) Advertisement services

h) Patents for scientific and intellectual works

i) Rent for lease of machineries building and other goods including computers

j) Maintenance services

k) Tailoring

l) Printing and

m) Insurance


Who is the withholding agent/contribution payer?
If a non-resident employee is employed by a (sub)contractor based abroad who has contracted for work from a Netherlands-based entrepreneur, the foreign (sub)contractor will qualify as the withholding agent/contribution payer in any case in the following two situations:

if he has a permanent establishment in the Netherlands (e.g., an office, factory or quarry);
if he has a permanent representative resident or established in the Netherlands.
In addition, the non-resident (sub)contractor himself may request to be regarded as the withholding agent/contribution payer in the Netherlands.

Example
In the following situation, a foreign contractor himself may request to be regarded as the withholding agent/contribution payer in the Netherlands. He executes a building commission in the Netherlands with a duration of nine months. This period is not long enough to bring about a permanent establishment (this would require twelve months). Consequently, the contractor is not a withholding agent/contribution payer. His staff, however, are taxable in the Netherlands: they work and/or sojourn in the Netherlands for a period longer than 183 days. They will have to register with the Dutch Tax and Customs Administration and apply for a tax and national insurance number ('SOFI number'). Subsequently, they should pay the tax owed in the Netherlands themselves. The employer may elect to register in the Netherlands and to pay wage tax and contributions. This will make things a great deal easier for the employees: usually, there will be no need for them to pay an income tax assessment in the Netherlands or apply for a refund of tax already paid in their country of residence.