The Double Taxation Relief (Taxes on Income) (Oman) Order 1998

Made: 21st October 1998

At the Court at Buckingham Palace, the 21st day of October 1998 Present, The Queen’s Most Excellent Majesty in Council

Now, therefore, Her Majesty, in exercise of the powers conferred upon Her by section 788 of the said Act, and of all other powers enabling Her in that behalf, is pleased, by and with the advice of Her Privy Council, to order, and it is hereby ordered, as follows:—

1

This Order may be cited as the Double Taxation Relief (Taxes on Income) (Oman) Order 1998.

2

It is hereby declared—

• (a) that the arrangements specified in the Agreement set out in Part I of the Schedule to this Order and in the Exchange of Notes constituting an Agreement set out in Part II of that Schedule have been made with the Government of the Sultanate of Oman with a view to affording relief from double taxation in relation to income tax, corporation tax or capital gains tax and taxes of a similar character imposed by the laws of Oman;

• (b) that those arrangements include provisions with respect to the exchange of information necessary for carrying out the domestic laws of the United Kingdom and the laws of Oman concerning taxes covered by the arrangements including, in particular, provisions about the prevention of fiscal evasion with respect to those taxes; and

• (c) that it is expedient that those arrangements should have effect.

SCHEDULE

PART I — AGREEMENT BETWEEN THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND AND THE GOVERNMENT OF THE SULTANATE OF OMAN FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL GAINS

The Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Sultanate of Oman,

Desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains,

Have agreed as follows:

ARTICLE 1 — Persons covered

This Agreement shall apply to persons who are residents of one or both of the Contracting States.

ARTICLE 2 — Taxes covered

ARTICLE 3 — General definitions

ARTICLE 4 — Residence

ARTICLE 5 — Permanent establishment

ARTICLE 6 — Income from immovable property

ARTICLE 7 — Business profits

ARTICLE 8 — Shipping and air transport

ARTICLE 9 — Associated enterprises

ARTICLE 10 — Dividends

ARTICLE 11 — Interest

ARTICLE 12 — Royalties

ARTICLE 13 — Capital gains

ARTICLE 14 — Independent personal services

ARTICLE 15 — Dependent personal services

ARTICLE 16 — Directors' fees

Directors' fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State.

ARTICLE 17 — Artistes and sportsmen

ARTICLE 18 — Pensions

ARTICLE 19 — Government service

ARTICLE 20 — Students

Payments which a student or business apprentice who is or was immediately before visiting a Contracting State a resident of the other Contracting State and who is present in the first-mentioned Contracting State solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that first-mentioned State, provided that such payments arise from sources outside that State.

ARTICLE 21 — Other income

ARTICLE 22 — Elimination of double taxation

ARTICLE 23 — Limitation of relief

Notwithstanding the provisions of any other Article of this Agreement, a resident of a Contracting State who, as a consequence of domestic law concerning incentives to promote foreign investment, is not subject to tax or is subject to tax at a reduced rate in that Contracting State on income or capital gains, shall not receive the benefit of any reduction in or exemption from tax provided for in this Agreement by the other Contracting State if the main purpose or one of the main purposes of such resident or a person connected with such resident was to obtain the benefits of this Agreement.

ARTICLE 24 — Partnerships

Where, under any provision of this Agreement, a partnership is entitled, as a resident of the Sultanate of Oman, to exemption from tax in the United Kingdom on any income or capital gains, that provision shall not be construed as restricting the right of the United Kingdom to tax any member of the partnership who is a resident of the United Kingdom on his share of such income or capital gains; but any such income or gains shall be treated for the purposes of Article 22 of this Agreement as income or gains from sources in the Sultanate of Oman.

ARTICLE 25 — Non-discrimination

ARTICLE 26 — Mutual agreement procedure

ARTICLE 27 — Exchange of information

ARTICLE 28 — Members of diplomatic or permanent missions and consular posts

ARTICLE 29 — Entry into force

ARTICLE 30 — Termination

This Agreement shall remain in force until terminated by one of the Contracting States. Either Contracting State may terminate the Agreement, through diplomatic channels, by giving notice of termination at least six months before the end of any calendar year after the period of five years from the date on which the Agreement enters into force. In such event, the Agreement shall cease to have effect:

• (a) in the Sultanate of Oman, in respect of income arising on or after 1st January in the calendar year next following that in which the notice of such termination is given.

• (b) in the United Kingdom:

• (i) in respect of income tax and capital gains tax, for any year of assessment beginning on or after 6th April in the calendar year next following that in which the notice of such termination is given;

• (ii) in respect of corporation tax, for any financial year beginning on or after 1st April in the calendar year next following that in which the notice of such termination is given.

In witness whereof the undersigned, duly authorised thereto (by their respective Governments), have signed this Agreement.

Done in duplicate at London the 23rd day of February 1998 in the English and Arabic languages, both texts being equally authoritative.

For the Government of the United Kingdom of Great Britain and Northern Ireland:

Clinton Davis

For the Government of the Sultanate of Oman:

Ahmed Macki

PART II — EXCHANGE OF NOTES

Your Excellency

London 23rd February 1998

I have the honour to refer to the Agreement between the Government of the Sultanate of Oman and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains which has been signed today, and to make on behalf of the Government of the Sultanate of Oman the following proposals:

• (1) The State General Reserve Fund of the Sultanate of Oman, which is beneficially owned and controlled by the Sultanate of Oman, is a resident of the Sultanate of Oman for the purposes of the Agreement.

• (2) With respect to paragraph (5) of Article 5 (Permanent Establishment), where a person holds a stock of goods or merchandise belonging to an enterprise and also habitually canvasses for orders on behalf of that enterprise in the Sultanate of Oman, that enterprise shall be treated as having a permanent establishment in the Sultanate of Oman, notwithstanding that contracts of sale are actually concluded outside the Sultanate of Oman.

• (3) With respect to paragraph (3) of Article 7 (Business Profits), the total amount of expenses which may be deducted in determining the profits of the permanent establishment shall not be limited solely to the amount of expenses incurred by the permanent establishment itself to acquire the taxable income, but shall also include expenses incurred by the enterprise in the State in which it is resident or in a third State and which contribute to the acquisition of taxable income of the permanent establishment.

• (4) With respect to the recent introduction of the law in the Sultanate of Oman providing for withholding of tax from royalties etc. paid to a foreign company not having a permanent establishment in Oman, the competent authorities will give early consideration to reviewing the provisions of the Agreement.

• (5) The term “annuity” in Article 18 (Pensions) will relate to payments made by a person carrying on the business of life assurance on a policy purchased by an employer to provide a pension for a former employee, or for a dependant of a former employee. Other types of annuity will be subject to the terms of Article 21 (Other Income).

• (6) A period during which a student or business apprentice was visiting a third State solely for the purposes of his education or training immediately before visiting a Contracting State for those purposes shall be disregarded for the purposes of Article 20 (Students).

• (7) The provisions of Article 25 (Non-Discrimination) will not be fully implemented by the Sultanate of Oman until the Sultanate of Oman harmonises the tax rates applicable to enterprises which are carrying on activities in the Sultanate of Oman.

• (8) With respect to paragraph (1) of Article 26 (Mutual Agreement), a case presented to the competent authority of the Sultanate of Oman can only be accepted if it is presented within a period of three years beginning from the date of notification of the final determination of an appeal in accordance with the domestic legislation in the Sultanate of Oman.

If the foregoing proposals are acceptable to the Government of the United Kingdom of Great Britain and Northern Ireland, I have the honour to suggest that the present Note and Your Excellency’s reply to that effect should be regarded as an integral part of the Agreement between the two States in this matter, which shall enter into force at the same time as the entry into force of the Agreement.

I avail myself of this opportunity to extend to Your Excellency the assurance of my highest consideration.

Ahmed Macki

Minister of Finance and National Economy Sultanate of Oman

Your Excellency

London 23rd February 1998

I have the honour to acknowledge receipt of Your Excellency’s Note of today which reads as follows:

I have the honour to refer to the Agreement between the Government of the Sultanate of Oman and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains which has been signed today, and to make on behalf of the Government of the Sultanate of Oman the following proposals: 1 The State General Reserve Fund of the Sultanate of Oman, which is beneficially owned and controlled by the Sultanate of Oman, is a resident of the Sultanate of Oman for the purposes of the Agreement. 2 With respect to paragraph (5) of Article 5 (Permanent Establishment), where a person holds a stock of goods or merchandise belonging to an enterprise and also habitually canvasses for orders on behalf of that enterprise in the Sultanate of Oman, that enterprise shall be treated as having a permanent establishment in the Sultanate of Oman, notwithstanding that contracts of sale are actually concluded outside the Sultanate of Oman. 3 With respect to paragraph (3) of Article 7 (Business Profits), the total amount of expenses which may be deducted in determining the profits of the permanent establishment shall not be limited solely to the amount of expenses incurred by the permanent establishment itself to acquire the taxable income, but shall also include expenses incurred by the enterprise in the State in which it is resident or in a third State and which contribute to the acquisition of taxable income of the permanent establishment. 4 With respect to the recent introduction of the law in the Sultanate of Oman providing for withholding of tax from royalties etc. paid to a foreign company not having a permanent establishment in Oman, the competent authorities will give early consideration to reviewing the provisions of the Agreement. 5 The term “annuity” in Article 18 (Pensions) will relate to payments made by a person carrying on the business of life assurance on a policy purchased by an employer to provide a pension for a former employee, or for a dependant of a former employee. Other types of annuity will be subject to the terms of Article 21 (Other Income). 6 A period during which a student or business apprentice was visiting a third State solely for the purposes of his education or training immediately before visiting a Contracting State for those purposes shall be disregarded for the purposes of Article 20 (Students). 7 The provisions of Article 25 (Non-Discrimination) will not be fully implemented by the Sultanate of Oman until the Sultanate of Oman harmonises the tax rates applicable to enterprises which are carrying on activities in the Sultanate of Oman. 8 With respect to paragraph (1) of Article 26 (Mutual Agreement), a case presented to the competent authority of the Sultanate of Oman can only be accepted if it is presented within a period of three years beginning from the date of notification of the final determination of an appeal in accordance with the domestic legislation in the Sultanate of Oman. If the foregoing proposals are acceptable to the Government of the United Kingdom of Great Britain and Northern Ireland, I have the honour to suggest that the present Note and Your Excellency’s reply to that effect should be regarded as an integral part of the Agreement between the two States in this matter, which shall enter into force at the same time as the entry into force of the Agreement.

The foregoing proposals being acceptable to the Government of the United Kingdom of Great Britain and Northern Ireland, I have the honour to confirm that Your Excellency’s Note and this reply shall be regarded as an integral part of the Agreement between the two States in this matter, which shall enter into force at the same time as the entry into force of the Agreement.

I take this opportunity to renew to Your Excellency the assurances of my highest consideration.

Clinton Davis

Minister of State United Kingdom of Great Britain and Northern Ireland

Signed

N. H. Nicholls — Clerk of the Privy Council

Explanatory note

(This note is not part of the Order)

The Agreement with the Sultanate of Oman is set out in Part I of the Schedule to this Order.

The Agreement provides for business profits not arising through a permanent establishment to be taxed only in the country of the taxpayer’s residence. Profits attributable to a permanent establishment may be taxed in the country in which the permanent establishment is situated (Articles 5 and 7).

Income from immovable property and gains derived from the alienation of such property may be taxed in the country in which the property is situated (Articles 6 and 13).

International transport profits are generally to be taxed only in the country of residence of the operator (Article 8).

The Agreement includes rules for determining taxable profits when a company in one country is related to a company in the other country (Article 9).

The rate of tax imposed in the country of source on dividends derived by a resident of the other country who is subject to tax on them there shall not, in general, exceed 5 per cent. of the gross amount if the beneficial owner is a company controlling at least 10 per cent. of the voting power in the company paying the dividends; and 10 per cent. of the gross amount of the dividends in all other cases (Article 10).

Interest and royalties are generally to be taxed only in the country in which the beneficial owner is resident, provided he is subject to tax on the income in that country (Articles 11 and 12).

Gains arising from the disposal of movable property are normally to be taxed only in the country of the taxpayer’s residence. Gains arising from the disposal of movable property forming assets of a permanent establishment or fixed base which the taxpayer has in the other country may be taxed in that other country (Article 13).

The earnings of temporary business visitors and some other individuals are, subject to certain conditions, only to be taxed in the country of the taxpayer’s residence (Articles 14 and 15). Fees received by a resident of one country in his capacity as a director of a company resident in the other country may be taxed in the latter country (Article 16). Income derived from the activities of artistes and sportsmen may be taxed in the country in which those activities are performed (Article 17). Occupational pensions (other than those paid in respect of Government service) and annuities are to be taxed only in the recipient’s country of residence, provided that the recipient is subject to tax in that country on the income concerned (Article 18). Government service remuneration and pensions are normally taxable only by the paying Government (Article 19). Payments made to students and business apprentices are, subject to certain conditions, to be exempt from tax in the country visited (Article 20). Other income not specified in the Agreement remains taxable only in the recipient’s country of residence (Article 21).

Where income continues to be taxable in both countries credit will be given in the taxpayer’s country of residence for tax imposed by the other country. In the case of dividends, the United Kingdom will give credit for the underlying tax paid in the Sultanate of Oman where the shareholder is a United Kingdom company which controls at least 10 per cent. of the voting power in the company paying the dividends (Article 22).

There are provisions safeguarding nationals and enterprises of one country against discriminatory taxation in the other country (Article 25) and for consultation (Article 26) and exchanges of information (Article 27) between the taxation authorities of the two countries.

The Exchange of Notes set out in Part II of the Schedule contains agreements between the United Kingdom and the Sultanate of Oman in relation to Articles 4, 5, 7, 18, 20, 25 and 26 of the Agreement.

The Agreement will enter into force on the date of the later of the notifications by each country of the completion of its legislative procedures. The Agreement is, in general, to have effect in the United Kingdom for financial years beginning from 1st April 1996 in respect of corporation tax and for years of assessment beginning from 6th April 1996 for income tax and capital gains tax. However, certain provisions of the Agreement relating to profits, income and gains derived from ships or aircraft in international traffic are to have effect from 1st January 1979. The date of entry into force will in due course be published in the London, Edinburgh and Belfast Gazettes.

Footnotes