The amendment, notified Thursday, reduced withholding tax rates on interest and royalty payments for technical services to 10% from 15%, while applying a Principal Purpose Test to prevent abuse of the treaty for tax evasion.
Under the test, treaty benefits would be denied if it is ascertained that obtaining them was one of the principal purposes of a deal. The revisions also expand the mutual agreement procedure for resolving tax disputes more efficiently and facilitating greater exchange of information between tax authorities to combat tax evasion and money laundering.
The changes are expected to provide more certainty for businesses operating between India and Oman, encourage investment, and simplify tax compliance. However, companies will need to ensure transactions have a legitimate economic purpose to comply with the anti-abuse provisions.
