Oman - Russia Double Tax Treaty

Background

On 8 June 2023, the Sultanate of Oman (Oman) and the Russian Federation (Russia) signed the Double Taxation Avoidance Agreement (DTAA).

This DTAA was ratified by Oman on 27 December 2023 vide Royal Decree RD 89/2023 and by Russia on 12 December 2023. The DTAA will be effective from the following dates:

For withholding taxes - 1 January 2024; and
For other taxes - tax year starting on or after 1 January 2024.

What are the key provisions of the DTAA?

Applicability	Residents of Oman or Russia (as defined in the DTAA)
Nature of income covered	Like any other DTAA, the Oman-Russia DTAA covers taxability of various streams of income such as dividends, interest, royalties, capital gains, 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 DTAA for certain types of income	General tax rate for interest and royalties is equal to the withholding tax rates as per the Oman domestic tax law (i.e. 10%) The tax rate for dividends is 10%, if the beneficial owner is a company directly owning at least 20% of the capital of the company paying dividend for a period of 365 days (ending on the date on which entitlement to a dividend is determined); and 15% in all other cases. As per the Royal Directive issued on 11 January 2023, Oman withholding tax on dividends and interest payments made to non-residents is ceased indefinitely. There is no specific article for “fees for technical services”.
Alignment with international tax reforms	The Oman-Russia 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 different interpretations of the DTAA; and Principal Purpose Test (BEPS Action 6) which aims to deny treaty benefits under certain circumstances.

Who will be impacted by the DTAA?

It is important for Omani businesses to consider the impact of the Oman-Russia DTAA on transactions with Russia-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 payouts etc. between the two countries.

How can KPMG help you?

The interpretation of the DTAA is always evolving with developments in the international arena and relevant jurisprudence. As a result, its applicability and interpretation by relevant authorities may change and develop over time. It is imperative that the articles of the DTAA are correctly interpreted, particularly 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 DTAA.

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