In November 2021, the Sultanate of Oman and the State of Qatar signed the Double Tax Treaty on income and capital (‘DTT’). It is the first DTT signed by Oman with a Gulf Cooperation Council (‘GCC’) Member. This DTT was ratified by Oman in January 2022 vide Royal Decree 4/2022 and Qatar in November 2022 vide Emiri Decree No. 45 of 2022.

Prior to this, among the GCC Members only the United Arab Emirates (UAE) and the Kingdom of Saudi Arabia (KSA) had signed a DTT in 2018.

What does this mean?

After ratification by the Qatar Government, the Oman-Qatar DTT has now ‘entered into force’. This means that the DTT articles will also need to be considered while determining the taxability of transactions between residents of Oman and Qatar under their respective domestic tax laws.

The Oman-Qatar DTT generally applies from 1 January 2023, for both withholding tax (‘WHT’) and other taxes on income and capital (refer to the table below for more details).

Effective Date

  • WHT - Amounts paid or recorded on or after 1 January 2023
  • For other taxes on income and capital - Tax years beginning on or after 1 January 2023

 

Key provisions of the DTT include:

Applicability

  • Residents (as defined therein) of Oman or Qatar

Nature of income covered

  • Like any other DTT, the Oman-Qatar DTT covers taxability of various streams of income such as royalties, dividends, interest, fees for technical services, business income earned by Permanent Establishment (“PE”), etc.

PE related provisions

  • Broadly aligned with the OECD Model
  • Cover Fixed Place PE, Construction/Installation PE and Agency PE
  • No specific article on Service PE

Benefits under the DTT

  • Reduced/Nil tax rate provided for certain payments subject to specified conditions

Alignment with international tax reforms

The Oman-Qatar DTT reflects Oman’s commitment towards implementing Base Erosion Profit Shifting (BEPS) minimum standards and includes:

  • MAP (Mutual Agreement Procedure) provisions [Action 14] for resolution on issues arising due to interpretation of the DTT
  • Principal Purpose Test [Action 6] which aims to deny treaty benefits under certain circumstances

Who will be impacted?

It would be important for Omani businesses to consider the impact of the Oman-Qatar DTT on transactions with Qatar-based companies from a corporate tax perspective and vice-versa. This may impact the taxability of various payments made in relation to both inbound and outbound investments, e.g. financing arrangements, provision of service, royalty payouts, etc. between the two countries.

How can KPMG help you?

It is imperative that the articles of the  DTT are correctly interpreted, particularly in the current scenario where businesses have become digitalized and tax administrations are looking to collect more taxes and levy penalties for taking aggressive tax positions based on the interpretation of the DTT.

KPMG has a dedicated team of experienced tax specialists based in Oman and supported by a larger, experienced regional team. If you need assistance in interpreting the DTT and the implications it may have on your business, please reach out to your advisors at KPMG or the contacts mentioned below.