India-Oman Double Taxation Treaty Amended: Effective FY 2026–27
A protocol amending the Agreement between the Republic of India and the Sultanate of Oman for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, was signed at Muscat on the 27 January 2025. The protocol will enter into force on the
The protocol has entered into force on the 28 May 2025, being the date of receipt of the later of the notifications regarding the completion of the procedures required by the respective laws of the Contracting States for entry into force of the said Protocol.
The provision of the amendment shall have effect in India for income derived in any fiscal year beginning on or after the first day of April following the date on which the protocol enters into force. Therefore, the protocol will be applied in India from FY 2026-27.
Following are the key amendments under the protocol:
- Preamble: A third para has been inserted in the
preamble of the agreement in lines with the preamble of
MLI for prevention of tax evasion. The relevant extract of
the preamble are as follows:
“….Intending to eliminate double taxation with respect to the taxes covered by this Agreement without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance (including through treaty-shopping arrangements aimed at obtaining reliefs provided in this agreement for the indirect benefit of residents of third States);…” - Covered taxes under Oman has replaced “Company Income-tax” and “Profit Tax on Commercial and Industrial Establishments” to “the income tax.”
- Competent Authority and Tax Year (Definition):
- In case of Oman, the competent authority is replaced from the Ministry of National Economy and Supervisor of Ministry of Finance or his authorized representative to the Chairman of Tax Authority or their authorized representative.
- The reference of tax year has been changed from the Company Tax law to Income Tax.
- Dual residency in case of non-corporates: Under the old agreement, the tie breaker for dual residency was determination of the Place of Effective Management (POEM). Under the protocol, the tie breaker for dual residency shall be decided under Mutual Agreement Procedure (MAP) by competent authorities. They will consider factors like where it is effectively managed or incorporated and such other relevant factors. If no agreement is reached, the company won’t get any tax benefits from the treaty unless both countries specifically agree to give them.
- MAP has been introduced for determining Arm’s Length Price (ALP) between two Associated Enterprises (AEs) under India and Oman.
- The rate of royalties and technical fees has been reduced from 15% to 10%.
- Under Para 4 of Article 25 of the old agreement, tax credit was available for the taxes which would have been payable even on the exempted income. This benefit is now removed.
- Non-Discrimination:
A new Article 25A has been
inserted to restrict non-discrimination in the tax
treatment of the non-resident persons. Following is the
brief scope of the matters covered in the Article are as
under:
- No discrimination in the tax treatment against the nationals of the other state.
- No discrimination in the tax treatment against the PE of the other state.
- Conditions for availing deduction on account of payment of interest, royalty and FTS shall apply as if the payment is made to a resident.
- Enterprises owned or controlled by residents of the other state shall not be treated differently than enterprises owned or controlled by domestic residents.
- Mutual Agreement Procedure (MAP): Article 26 of MAP of the old agreement is totally replaced by a new article in the protocol. This article provides a MAP mechanism under a Double Taxation Avoidance Agreement (DTAA), allowing a person who believes they are being taxed in a way that violates the treaty to seek relief. They can present their case to the competent authority of the country where they reside or where they are a national if Article 25A applies within three years of being notified of the issue. The competent authorities of the two Contracting States will then attempt to resolve the matter through mutual agreement to avoid taxation contrary to the treaty. These authorities may also work together to clarify ambiguities or resolve disputes regarding the treaty’s interpretation or application, even in cases not explicitly covered. Any resulting agreement will apply regardless of time limits in domestic laws, and direct communication between the authorities is permitted to facilitate resolution.
- Exchange of Information: Article 27 of Exchange of Information of the old agreement is totally replaced by a new article in the protocol. This article mandates both Contracting States to exchange tax-related information that is foreseeably relevant for enforcing the DTAA or domestic tax laws. The exchanged information must be kept confidential and used only by tax authorities or relevant agencies. A State must gather and share requested data even if it doesn’t need it for its own tax purposes. However, it is not required to violate its laws, disclose trade secrets, or obtain information it cannot normally access. Importantly, it cannot refuse to share data solely because it is held by a bank or fiduciary.
- Assistance in Collection of Tax: A new article of 27A has been introduced for Assistance in Collection of Taxes. This article allows both Contracting States to assist each other in collecting taxes, treating foreign tax claims like their own for enforcement. Legal disputes over such claims must be handled only in the requesting State. Assistance can be denied if it violates local laws, public policy, or imposes excessive administrative burden.
- Principal Purpose Test: A new Article of 27B has been introduced in lines with MLI where benefit under the Tax Treaty shall not be available if it is reasonable to conclude that obtaining the said tax benefit was one of the principal purposes of the arrangement or transaction.