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      On 30 May 2024, the Sultanate of Oman (Oman) and Ireland signed the Double Taxation Avoidance Agreement (DTAA). This DTAA was ratified by Oman on 19 November 2024 vide Royal Decree RD 60/2024 and by Ireland on 18 September 2024. The DTAA is not yet into force and will be effective from the following dates:

      • For withholding taxes - the first day of January following the date on which the DTAA enters into force
      • For other taxes - the tax year commencing on or after first day of January following the date on which the DTAA enters into force

       

      Applicability

      •       Residents of Oman or Ireland (as defined in the DTAA)

      Nature of income covered

      •       Like any other DTAA, the Oman-Ireland DTAA covers the taxability of various streams of income such as dividends, interest, royalties, capital gains, business income earned by a Permanent Establishment (“PE”) etc.

      PE related provisions

      •       Broadly aligned with the OECD Model

      •       Covers Fixed Place PE, Construction/Installation PE and Agency PE

      Tax rates under the DTAA for certain types of income

      The withholding tax rate on income received by non-residents is 10% (under the Oman Income Tax Law) or the rate under the DTAA, whichever is lower or more beneficial. The withholding tax rate under the DTAA is:

      •       Royalty at 8%

      •       Interest at 5%*

      •       Dividend at 0% if the beneficial owner is a company directly holding at least 10% of the capital of the paying company and 10% in all other cases* 

      * As per the Royal Directive issued on 11 January 2023, withholding tax on dividends and interest payments by a payor in Oman to non-residents is ceased indefinitely and will prevail if the tax rate is 5%/10% under the DTAA.

      Alignment with international tax reforms

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

      ·       Mutual Agreement Procedure provisions (BEPS Action 14) for resolution on issues arising due to interpretation of the DTAA; and

      ·       Principal Purpose Test (BEPS Action 6) which aims to deny treaty benefits under certain circumstances.

       

      It is important for Omani businesses to consider the impact of the Oman-Ireland DTAA on transactions with Ireland-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. provision of services, royalty payments, etc. between the two countries.  

      The interpretation of DTAAs is always evolving and its applicability and interpretation by the relevant authorities may change and develop over time. It is imperative that the articles of the DTAA are correctly interpreted, particularly since businesses have become digitalized and tax administrations are looking to collect more taxes and levy penalties on aggressive tax positions based on interpretation of DTAAs. Additionally, the conditions for availing benefits under DTAAs are being scrutinized in detail by tax administrations. For instance, based on recent practices, taxpayers are now expected to obtain formal confirmation from the Oman Tax Authority before availing treaty benefits in Oman.

      KPMG has a dedicated team of experienced corporate tax specialists based in Oman who are supported by a larger, experienced regional team that can help evaluate if you can use DTAAs to optimize the incidence of tax on your business. If you need assistance in interpreting DTAAs and the implications it may have on your business, please reach out to your advisors at KPMG or the contacts mentioned below.

      Contact us

      Partner, Head of Tax
      Oman
      KPMG Lower Gulf
      Email

      Director
      Corporate Tax, Oman
      KPMG Lower Gulf
      Email

      Director
      Indirect Tax, Oman
      KPMG Lower Gulf
      Email