1.

Preamble: The original Preamble focused only on avoiding double taxation and preventing fiscal evasion with respect to taxes on income. It did not contain any reference to tax avoidance, treaty shopping, or misuse of treaty benefits.

The Preamble has been revised to expressly affirm that the principal objective of the Treaty is the elimination of double taxation without creating avenues for non-taxation or reduced taxation through tax evasion or avoidance, including through treaty-shopping arrangements or other forms of abuse, particularly those designed to improperly benefit residents of third jurisdictions.

This amendment brings the Treaty preamble into alignment with the preamble language of the Organisation for Economic Co-operation and Development (OECD) Model Tax Convention, thereby reinforcing the Treaty’s anti-abuse framework. The inclusion of the Principal Purpose Test (PPT) [as recommended under Action Plan 6 of the OECD’s Base Erosion and Profit Shifting (BEPS) Project] empowers the tax authorities to deny treaty benefits where one of the principal purposes of an arrangement or transaction is to secure such benefits in a manner that is inconsistent with the object and purpose of the Treaty.

2.

Article 4 (Resident): As per Article 4(3) of the DTAA, if a taxpayer other than an individual is a resident of both countries, he shall be deemed to be a resident of that country in which the place of effective management (POEM) is situated.

The new Article 4(3) of the DTAA requires the Competent Authorities of both countries to mutually agree on the residence of a non-individual taxpayer, considering factors like POEM, place of incorporation or constitution and other relevant factors. In the absence of such agreement, such taxpayer shall not be entitled to any treaty relief or tax exemption, except as agreed by both the Competent Authorities.

The amendment strengthens anti-abuse provisions by introducing a clearer, more stringent tie-breaker rule in line with OECD BEPS Action Plan-6. Under the new Article 4(2), dual residents are no longer automatically entitled to Treaty benefits. Instead, entitlement is subject to mutual agreement between the Competent Authorities.

3.

Article 10 (Associated Enterprises): It provides for adjustments to profits between associated enterprises to reflect the arm's length pricing in transfer pricing scenarios.

A new Paragraph 2 is inserted to provide for appropriate adjustments where an enterprise of one state is taxed on profits from an associated enterprise in the other state, provided the conditions are similar to those between independent enterprises.

This ensures relief from economic double taxation by mandating corresponding adjustments in both countries. It aligns the DTAA with OECD guidelines and promotes certainty and fairness in cross-border related-party transactions.

4.

Article 13(2) (Royalties): It provides for a maximum withholding tax of 15% on royalties in the source country if the recipient is the beneficial owner.

The Protocol reduces the tax withholding rate to 10%.

Reduction in the withholding tax rate on royalties encourages cross-border licensing and use of intellectual property by reducing tax cost.

5.

Article 14(2) (Technical Fees) provides for a maximum withholding tax of 15% on technical fees in the source country if the recipient is the beneficial owner.

The Protocol reduces the tax withholding rate to 10%.

This reduces the tax burden on cross-border technical service payments and enhances cost-efficiency for businesses.

6.

Tax Credit: As per Article 25(4), a resident can claim a foreign tax credit in their home country, even if the tax is exempted or reduced in the source country. This is referred to as ‘tax-sparing credit’.

Article 25(4) of the DTAA is deleted.

The removal of the tax-sparing credit clause reflects India's policy shift away from such provisions. It means that a resident country (such as India) will no longer grant a foreign tax credit for taxes forgone due to incentives in the source country (such as Oman). This increases actual tax liability and aligns with India's evolving Tax Treaty policy.

7.

Non-discrimination: The original DTAA does not contain a separate article on a non-discrimination clause.

A new Article 25A (Non-Discrimination) is inserted. It prohibits discriminatory taxation based on nationality, the status of a permanent establishment, or foreign ownership or control. It also ensures the deductibility of cross-border payments, such as interest, royalties, and technical fees, under the same conditions as domestic payments.

The provisions shall also apply
to persons who are not residents of one or both of the countries.

The new provision eliminates any preferential treatment that could result in discrimination between nationals of India and Oman, thereby ensuring equitable taxation.

8.

Article 27 (Exchange of information) allows the exchange of information necessary for enforcing the DTAA or preventing fraud or tax evasion.  

A new Article 27 is substituted. It requires the exchange of all foreseeable relevant information, even if the requested State does not need it for its own tax purposes. It prohibits the State from declining to supply banking, financial, nominee, agency and ownership information. It obligates the requested State to use its powers to obtain and share such information, and refusal solely due to lack of domestic interest is not permitted.

This amendment aligns the DTAA with OECD standards for transparency and international cooperation by significantly broadening the scope and obligations. This enables robust cross-border transparency, helps India and Oman combat tax evasion more effectively, and removes barriers like bank secrecy or domestic irrelevance.

9.

Assistance in Collection of Taxes: The original DTAA does not contain a separate article on assistance in the collection of taxes between India and Oman.

A new Article 27A (Assistance in the Collection of Taxes) is inserted, allowing the Contracting States to assist each other in the recovery of taxes covered under the DTAA, including interest, penalties, and costs of collection. The assistance extends to taking interim measures such as conservancy or precautionary actions and includes the obligation to recognise and enforce revenue claims as if they were domestic tax debts.

The insertion introduces a new obligation for cross-border tax recovery assistance. It enhances enforcement by enabling one country to collect tax claims on behalf of the other, reducing tax avoidance risks and aligns the DTAA with OECD and UN model conventions on administrative cooperation.

10.

Entitlement of Benefits: The original DTAA did not contain an article on Entitlement of Benefits, which meant there was no explicit safeguard against Treaty abuse.

A new Article 27B (Entitlement of Benefits)
is inserted, which provides that the benefits under the DTAA may be denied if it is reasonable to conclude that one of the principal purposes of any arrangement or transaction was to obtain such benefits unless granting the benefits is in line with the object and purpose of the Treaty.

This insertion introduces the PPT in line with BEPS Action Plan-6. This helps prevent Treaty abuse, such as Treaty shopping or use of shell entities and aligns the DTAA with international anti-avoidance standards, ensuring that only genuine residents benefit from the Treaty.