India-Oman Double Taxation Agreement Amended

The Government of India has officially notified the Protocol amending the 1997 Double Taxation Avoidance Agreement (DTAA) between India and the Sultanate of Oman. The amendment, formalized through Notification No. 69/2025, was signed in Muscat on January 27, 2025, and came into effect on May 28, 2025.

The revised treaty provisions will apply in India for income derived in any fiscal year starting on or after April 1, 2026.

Key Highlights of the Amended Protocol

1. Anti-Treaty Abuse Measures Introduced: The new preamble clarifies that the DTAA aims to eliminate double taxation without enabling opportunities for non-taxation or reduced taxation via tax evasion or avoidance, including treaty-shopping practices.

2. Reduction in Withholding Tax Rates:

   • Royalties and technical service fees will now be taxed at a maximum of 10%, reduced from the earlier 15%, making cross-border transactions more cost-effective for businesses.

3. New Article on Non-Discrimination:

   • A new Article 25A ensures that nationals or enterprises of one country are not subjected to more burdensome taxation in the other country, aligning with OECD and international tax fairness principles.

4. Enhanced Mutual Agreement Procedure (MAP):

   • The updated Article 26 provides taxpayers with the right to seek relief against taxation not in accordance with the DTAA within three years, regardless of domestic legal remedies.

5. Exchange of Information and Collection Assistance:

   • Articles 27 and 27A provide for broader exchange of tax-related information, including banking data, and mutual assistance in tax recovery, strengthening the enforcement of tax claims across jurisdictions.

6. Principal Purpose Test (PPT) Introduced:

   • A new anti-abuse clause under Article 27B disallows treaty benefits if the main purpose of a transaction is to obtain tax advantages, unless aligned with the intent of the treaty.

7. Clarified Definitions and Residency Rules:

   • Updates to Articles 2 through 4 standardize definitions such as "taxes covered," "competent authority," and criteria for determining tax residency of entities that are dual residents.

8. Adjustments in Transfer Pricing:

   • The amended Article 10 mandates corresponding tax adjustments in one country when the other country adjusts profits between associated enterprises.

Implications for Taxpayers and Businesses

This amendment is expected to facilitate smoother cross-border tax compliance and improve dispute resolution for businesses operating between India and Oman. With lower tax rates on royalties and technical services, Indian companies investing in Oman-or vice versa-can expect reduced tax burdens and improved certainty in tax treatment.

Moreover, the enhanced cooperation on tax recovery and information sharing signifies a tightening of tax enforcement frameworks, reducing room for evasion and misuse of treaty benefits.

Background

The original DTAA between India and Oman was signed in April 1997. The latest protocol brings the agreement in line with OECD's BEPS (Base Erosion and Profit Shifting) standards, ensuring that it meets modern international tax standards, particularly with respect to transparency, dispute resolution, and anti-abuse measures.

Official copy of the notification has been attached