INDIA- OMAN DOUBLE TAXATION AVOIDANCE AGREEMENT

The government of the Sultanate of Oman and the government of the Republic of India entered into a Double Taxation Avoidance Agreement (“DTAA”) for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, which came into effect from 03 June, 1997. Double taxation is usually attracted when a non-resident becomes liable to tax on the income earned across the world, in the country of his residence and in the country where the income arises.

Applicability

The DTAA is applicable to persons who are residents of one or both of the states. The taxes to which this agreement shall apply to are:

1. In India: the income-tax including any surcharge; and
2. In Sultanate of Oman: the company income-tax and the profit tax on commercial and industrial establishments.

Key takeaways

1. Income derived by a resident of one state from immovable property situated in the other state, may be taxed in that other state.
2. The profits of an enterprise of a contracting state shall be taxable only in that state unless the enterprise carries on business in the other state through a permanent establishment situated therein.
3. Profits derived by an enterprise of a contracting state from the operation of aircraft in international traffic shall be taxable only in that contracting state.
4. Income derived by a resident of a contracting state as an entertainer or a sportsperson in the other state, may be taxed in that other state.
5. The authorities of the contracting states shall exchange information related to the taxes, as is necessary for carrying out the provisions of the DTAA.
6. The DTAA facilitates a beneficial withholding tax rate of –

• 10% (if at least 10% of shares are held by the recipient company) and a 12.5%, in all other cases of dividends;
• 10% in respect of interests; and
• 15% for royalty and fees for technical services.

7. Fiscal privileges of diplomatic or consular officials shall not be affected as a result of the DTAA.

Inference

Various Indian companies have invested in Oman in sectors like iron and steel, cement, fertilisers, textile, cables, chemicals, and automotive, etc. The presence of a representative of a non-resident entity in Oman in relation to a business or a contract in Oman, may trigger a taxable presence for the foreign entity in Oman for income tax purposes. Despite being a DTAA which was agreed to almost 25 years ago, the DTAA is in consonance with the internationally accepted standards and practices.