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

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.