from
May 28, 2025
Key updates include:
Expanded Permanent Establishment (PE)
The definition now covers digital and service-based operations, and includes dependent agents concluding contracts, aligning with global BEPS standards
Lower Withholding Tax (WHT) Rates
WHT for dividends, interest, royalties, and technical fees reduced to 10% (from previous 15%), with dividends at 12.5% for some cases
Anti-Abuse Provisions (PPT & LOB)
Introduction of the Principal Purpose Test (PPT) and Limitation of Benefits (LOB) ensures treaty benefits only when economic substance exists
Capital Gains Tax Updates
Now clearly specifies taxing rights for share sales and immovable property gains in the country of residence
Enhanced Mutual Agreement Procedure (MAP)
Tighter timelines and clearer bilateral mechanisms aim to resolve cross-border tax disputes faster and more transparently
Information Exchange & Tax Collection Support
Includes automatic exchange of financial data and cooperation in tax recovery
⚙️ Who Gains & Who Needs Caution?
For Freelancers & Professionals
Digital services now create PE—professionals offering digital work in Oman may face Omani tax obligations under PE rules
Lower WHT on royalty/fees makes cross-border collaborations more tax-efficient.
PPT/LOB clauses require clear economic substance—shell or paper structures may lose treaty benefits.
For Cross-Border Businesses
Reduced WHT rates enhance net returns on royalties, interest, and dividends.
Digital-first models must assess PE presence proactively.
Strengthened MAP and information exchange increase the need for robust compliance systems.
For Investors & Equity Holders
Capital gains clarity helps in planning share sale and exit strategies.
Tie-breaker rules and residency definitions reduce tax treaty misinterpretations
📌 Why This Reform Matters
Alignment with OECD BEPS principles—India and Oman now share state-of-the-art standards to curb treaty abuse
Creates an environment conducive to CEPA negotiations, with tax certainty bolstering bilateral trade
Improves ease of doing business by reducing WHT friction and speeding up dispute resolution.
✅ Action Plan for Stakeholders
Assess Digital PE Exposure
Identify digital/service operations in Oman; evaluate PE risk and expected tax obligations.
Update Withholding Processes
Ensure WHT deductions align with new 10% slabs, and proper documentation is in place.
Strengthen Substance Documentation
Ensure genuine commercial purpose to comply with PPT and avoid denials of treaty benefits.
Enhance Tax Dispute Preparedness
Document evidence for MAP eligibility; track resolution timelines proactively.
Plan Capital Asset Transactions
Factor amended capital gains clauses into exit planning and structuring.
Conclusion
The India–Oman DTAA amendments, effective May 28, 2025, usher in a BEPS-aligned tax framework with lower WHT, broader PE definitions, anti-abuse provisions, and tighter dispute mechanisms. These changes bring greater clarity and cost savings, especially for digital professionals, cross-border firms, and investors. However, they also require carefully structured operations, robust taxation handling, and substance in commercial transactions.
By proactively reviewing business models against these updates, professionals and companies can maximize benefits and ensure compliance under this modernized DTAA.
