Cross-border taxation has always been a concern for freelancers and business owners who work internationally. For Indian professionals working with Omani clients—or Oman-based entrepreneurs doing business with Indian entities—tax complications can eat into profits and create compliance headaches.
Just to put this in perspective, the two countries came together and signed a revised DTAA that went into force in May 2025. This update intends to cease countries from double taxing income, improve transparency, and ensure cooperation between tax authorities.
For freelancers, consultants, software developers, designers, and the like, this new DTAA means more savings and less paperwork, along with clear rules. Business owners too, can now plan ahead with lower tax rates and stronger dispute resolution mechanisms. The revised treaty is great news so long as you do business or render services in the two countries.
What is a DTAA?
A Double Taxation Avoidance Agreement (DTAA) is a tax treaty signed between two countries to ensure that individuals and businesses don’t pay tax on the same income in both countries.
For example, if you are based in India and provide consulting services to a company in Oman, your income might be taxable both in India and in Oman. A DTAA ensures that you don’t have to pay tax twice on the same income — instead, you pay it once, and the other country either exempts you or provides a credit.
The India–Oman DTAA has existed since 1997, but economic realities have changed drastically since then. To reflect the evolving nature of business, especially digital freelancing and cross-border services, the agreement was amended and updated in May 2025.
What Changed in the India–Oman DTAA?
The amended treaty includes several key updates that are especially relevant to service providers, freelancers, and entrepreneurs.
1. Lower Tax on Royalties and Technical Services
One of the most important updates is the reduction of withholding tax on royalties and fees for technical services from 15% to 10%. This is a major win for professionals who provide digital, technical, or consultancy services from one country to the other.
Let’s say you’re a software developer in India and work for a client in Oman. Earlier, Oman would deduct 15% of your payment as tax before you received it. Now, only 10% will be deducted — meaning you take home more money.
This change encourages cross-border projects and makes Indian and Omani professionals more competitive globally.
2. Principal Purpose Test (PPT)
This rule is designed to prevent misuse of the treaty by individuals or companies who set up fake businesses or shell companies just to get tax benefits.
In simple terms: if your main purpose for using the treaty is only to save taxes, and not to carry out real business, then you will not be eligible for DTAA benefits.
However, genuine freelancers and business owners don’t need to worry. If your business is real, and you’re providing actual services, you’ll continue to benefit from the DTAA.
3. Improved Tax Residency & Permanent Establishment Rules
Another change is in how tax residency is defined. If both India and Oman claim that you’re a resident under their respective tax laws, the DTAA will now use a “place of effective management” test to determine where your business is truly based.
Also, the definition of Permanent Establishment (PE) is updated to include digital operations and service-based activities. If you have long-term business activities in one country, even digitally, you may now be considered as having a PE there — which could affect taxation.
This change brings clarity for remote service providers, especially those in tech, media, and consulting sectors.
4. Better Dispute Resolution Through MAP
The amended DTAA strengthens the Mutual Agreement Procedure (MAP) — a process through which tax disputes between the two countries can be resolved.
Let’s say India and Oman both try to tax the same income, or you face trouble claiming DTAA benefits. Now, you can file a dispute under MAP, and the tax authorities of both countries must come to a solution within three years.
5. More Transparency and Information Sharing
The new agreement includes stronger clauses for automatic exchange of information between tax authorities. This means both India and Oman can now share data, including income details, bank accounts, and other financial records, to prevent tax evasion.
This encourages honest reporting and helps eliminate fraudulent transactions. As long as your income is legitimate and declared properly, you are safe.
6. Non-Discrimination Clause
A non-discrimination clause is added to ensure that nationals or companies of one country are not treated unfairly when doing business in the other country.
For example, if you’re an Indian freelancer working in Oman, you cannot be taxed at a higher rate just because you’re not Omani — and vice versa.
7. Alignment with Global Tax Norms
The updated India–Oman DTAA now aligns better with OECD’s Base Erosion and Profit Shifting (BEPS) standards. It introduces rules that make tax avoidance harder but support real business transactions.
In short, if you’re honest and doing actual work, this agreement works in your favor. If you’re trying to exploit loopholes, the new rules will likely block those attempts.
Summary: What This Means for You
If you’re a freelancer:
- You’ll pay less tax on international income (only 10% now).
- Your client won’t over-deduct tax at source.
- Your income will be protected from double taxation.
If you own a business:
- Cross-border projects and contracts will now face less legal ambiguity.
- You’ll benefit from faster dispute resolutions and more clarity on tax residency.
This new DTAA encourages professionals to go global, without worrying about double taxation or unfair rules.
Conclusion
The India–Oman DTAA amendments of 2025 reflect the growing need for modern, fair, and transparent tax systems. These updates are a huge relief for freelancers, consultants, and small business owners engaged in cross-border work.
Whether you’re in IT, marketing, finance, or legal services — the new agreement ensures that you earn more, worry less, and pay fair taxes without duplication.
If you’re working internationally, now is the time to revisit your contracts, check your tax filings, and explore new markets with confidence. With this updated treaty, your global ambitions have better tax support than ever.
Frequently Asked Questions (FAQs)
1. When do the DTAA amendments take effect?
The updated Double Taxation Avoidance Agreement (DTAA) between India and Oman comes into effect from May 28, 2025. This means that any income earned or taxed after this date will fall under the new provisions. It applies to all eligible individuals, professionals, and businesses operating between the two countries.
2. Does this change how much tax I pay if I work with clients in Oman?
Yes, it does. The new DTAA lowers the withholding tax rate on professional fees and technical services from 15% to 10%. This means you will get to retain more of your income, with less tax being deducted at source when you receive payments from clients based in Oman.
3. Do I need to register anywhere to claim DTAA benefits?
Yes, to claim benefits under the DTAA, you need to obtain a Tax Residency Certificate (TRC) from your home country’s tax department (India or Oman). In addition, you may be required to submit specific self-declaration forms or documents to your client or local tax authorities confirming your eligibility under the treaty.
4. I’m an Indian freelancer. Will Oman still deduct tax?
Yes, Oman will still deduct withholding tax on your income, but at the reduced rate of 10% instead of 15%. However, you can claim a foreign tax credit in India for the amount deducted in Oman, so you don’t end up paying double tax on the same income.
5. I live in both countries during the year. Where will I be taxed?
In such cases, your tax residency will be determined based on the “place of effective management” (POEM) rule. This means the country where your core business or personal activities are controlled from will be considered your primary tax residence, and that country will have the first right to tax your global income.
6. Can both India and Oman tax me for the same income?
Under normal circumstances, no. The DTAA is specifically designed to prevent this kind of double taxation. If income is taxed in both countries by mistake, you can claim a credit or exemption in your home country, ensuring that the same income is not taxed twice.
7. Will the PPT clause affect genuine freelancers like me?
Not at all. The Principal Purpose Test (PPT) is introduced to prevent misuse of the treaty by companies or individuals setting up artificial structures just to avoid tax. If you are a genuine freelancer providing real services, this clause will not negatively impact you in any way.
8. What happens if I face double taxation despite DTAA?
If both countries still end up taxing your income, you can file a request under the Mutual Agreement Procedure (MAP). This process allows tax authorities from both countries to negotiate and resolve the issue, ensuring fair tax treatment and avoidance of double taxation for you.
9. Does the new DTAA cover digital services and online income?
Yes, the revised agreement expands the definition of Permanent Establishment (PE) to include digital operations and online services. This is especially beneficial for freelancers, remote workers, tech startups, and consultants, whose income is often derived through virtual platforms or international digital clients.
10. Will Oman tax my global income in the future?
As of now, Oman does not impose personal income tax on individuals. However, the country has announced plans to introduce personal income tax from 2028 for high-income earners. Even then, the DTAA will protect you from paying tax twice by allowing tax credit or exemptions based on residency and source rules.
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