Qatar: Ratification of income tax treaty with Oman

Provisions of an income tax treaty between Qatar and Oman will take effect:

• For amounts paid on or after 1 January 2023, for taxes withheld at source
• For tax years beginning on or after 1 January 2023, for other taxes on income and taxes on capital

Officials from Qatar and Oman in November 2021 signed an agreement for the avoidance of double taxation and the prevention of tax evasion with regard to income and capital tax, which is the first tax treaty signed between Qatar and any Gulf Cooperation Council (GCC) member.

A royal decree (RD 4/2022) was issued in January 2022, ratifying the tax treaty in Oman.

Qatar has now ratified the tax treaty through Emiri Decree No. 45 of 2022 and has published it in the official gazette on 9 November 2022. The tax treaty provisions will become effective from 1 January 2023.

• The tax treaty reduces the withholding tax rates on payments of dividends to 0% if the beneficiary is a corporation that owns at least 20% of the entity that pays the dividends. The rate is 5% in all other cases.
• Interest is taxable only in the contracting state in which the recipient is a resident. Hence, interest payments between Qatar and Oman residents will not be subject to withholding tax. Note that Qatar generally follows a “pay and reclaim” mechanism and any withholding tax deducted by Qatari resident persons from interest payments to Oman will be subject to refund.
• Withholding tax on royalty and technical services is capped at 8%. As Qatar applies a lower 5% withholding tax rate on royalty and technical fees, no tax treaty benefit will be available for withholding taxes paid on account of royalty and technical fees in Qatar. However, Qatari recipients of payments from Oman may benefit from the reduced tax treaty rate of 8% compared to the 10% as per Oman domestic law.

• The PE wording is mostly in alignment with the OECD Model. The tax treaty provides that a PE would also arise if a building site, construction, assembly, or installation project in the other contracting state lasts for a period of more than six months.

• Gains from the alienation of any property (other than immovable property, gains from the alienation of ships) will be taxable only in the resident state of which the alienator is a resident. 

• Taxpayers are allowed to seek assistance from their local competent authority in resolving disputes relating to the interpretation of the tax treaty, within a period of three years (from the date of the “notification” of the dispute to the relevant tax authority).
• In response to BEPS Action 6, which deals with treaty shopping arrangements, Article 29 of the tax treaty includes the so-called principal purpose test (PPT) that aims to deny treaty benefits when considering all the relevant facts and circumstances, it is reasonable to conclude that obtaining such benefits was one of the principal purposes for entering into that particular transaction or arrangement.
   

Read a December 2022 report [PDF 217 KB] prepared by the KPMG member firm in Qatar

Read a December 2022 report prepared by the KPMG member firm in Oman