The taxation of income in a certain country possesses an international character when either thernincome subject to tax is derived from a foreign source or the person subject to income tax is arnnon-resident. The growing presence of multinational enterprises in different countries throughrntheir subsidiaries also brings up issues of international taxation. Such internationalizationrnbroadens the dimension of income taxation in significant ways making the concept ofrninternational taxation complex and subjecting it to profound study worldwide. It however has notrnreceived the attention it deserves in Ethiopian legal education and rather seemed ignored for sornlong by Ethiopian tax legislations and the tax administration.rnThis history however needs to change instantly for the better if Ethiopia is ever going to fulfill itsrngrowing need to attract foreign investment and build a modern and efficient tax administrationrncapable of raising the revenues generated by the economy and preventing and fightingrninternational tax avoidance. The recent introduction of the new Federal Income TaxrnProclamation incorporating relatively extensive provisions on international taxation can be seenrnas one important leap in this regard.rnTo do its own humble part, this research paper attempts to bring the concept of internationalrntaxation to the spotlight by focusing on the issue of business income taxation of foreign ownedrnconstruction companies in Ethiopia. It first depicts the global understanding of the importantrnconcepts present in international taxation and then reviews the rules of Ethiopia governing thernmatter together with their practical application on the ground. Since most foreign ownedrnconstruction companies engage in various activities both in Ethiopia and other countries, thernresearch specially focuses on issues surrounding the attribution of income from their activitiesrnoccurring in different jurisdictions and the allocation of expenses to their Ethiopian businesses.rnIn so doing, the research shows the important areas where the Ethiopian international taxationrnrules and the practical determination of the taxable income of foreign owned constructionrncompanies fall short of. It then concludes that the gaps existing in the rules and the practice arerntoo significant to be ignored and could lead to failure in realizing Ethiopian tax policyrnobjectives. The research finally recommends some key solutions in order to fill the gaps alreadyrnidentified.