Oman: Income tax treaty with Egypt signed

Key provisions of the income tax treaty between Oman and Egypt

Key provisions of the income tax treaty between Oman and Egypt

Article Posted date 10 July 2023

Oman and Egypt in May 2023 signed an income tax treaty on income and capital.

While the income tax treaty was ratified by Oman under Royal Decree RD 43/2023 (dated 25 June 2023), it is yet to be ratified by Egypt. In Oman, the income tax treaty will be effective on or after the first day of January of the calendar year in which the ratification instruments are exchanged. For example, if the corresponding ratification and procedural requirements are completed by 31 December 2023, the income tax treaty will be effective from 1 January 2024. The only exception for effective date in Oman is provided with respect to Article 8 (Shipping and Air Transport) which will be effective retroactively for tax years beginning from or after 1 January 1978.

Key provisions of the income tax treaty

Applicability
  • Residents of Oman or Egypt (as defined in the income tax treaty)

Nature of income covered
  • Like any other income tax treaty, the Oman-Egypt income tax treaty covers taxability of various streams of income such as dividends, interest, royalties, fees for technical services, business income earned by permanent establishment (PE), etc.
  • PE related provisions
  • Broadly aligned with the OECD model
  • Covers fixed place PE, construction/installation PE, agency PE and service PE
  • Rates under the income tax treaty for certain types of income
  • Tax rate for dividend, royalties and technical service fees is equal to the withholding tax rates as per the Oman domestic tax law (i.e., 10%)
  • Tax rate for interest is 12% that is higher compared to the Oman domestic tax law (10%)

Alignment with international tax reforms

The Oman-Egypt income tax treaty reflects Oman’s commitment towards implementing base erosion profit shifting (BEPS) minimum standards and includes:

  • Mutual agreement procedure provisions (Action 14) for resolution of issues arising due to interpretation of the income tax treaty
  • Principal purpose test (Action 6), which aims to deny treaty benefits under certain circumstances


Read a July 2023 report prepared by the KPMG member firm in Oman

 

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