On November 25, 2016 the Swiss Federal Department of Finance (FDF) issued a press release announcing that the Agreement between the Swiss Confederation and the Sultanate of Oman for the Avoidance of Double Taxation with respect to Taxes on Income, which was signed on May 22, 2015, (Hereafter: the DTA) entered into force on October 13, 2016.
The fact that the DTA entered into force on October 13, 2016 means that based on Article 27, Paragraph 2 of the DTA (“Entry into force”) the provisions of the DTA shall have effect:
a) in respect of taxes withheld at source on amounts paid or credited on or after January 1, 2017;
b) in respect of other taxes for taxation years beginning on or after January 1, 2017;
c) in respect to Article 25, to information that relates to tax years beginning on or after January 1, 2017.
Below we will discuss a selection of provisions included in the DTA of which we think they might interest our readers.
Based on Article 2, Paragraph 3 of the DTA (“Taxes covered”), the existing taxes to which the Agreement shall apply are in particular:
a) in Switzerland:
the federal, cantonal and communal taxes on income (total income, earned income, income from capital, industrial and commercial profits, capital gains, and other items of income);
b) in Sultanate of Oman:
the income tax.
Article 2, Paragraph 4 subsequently arranges that the DTA shall apply also to any identical or substantially similar taxes that are imposed after the date of signature of the Agreement in addition to, or in place of, the existing taxes.
With respect to the residency of a person other than an individual, Article 4, Paragraph 4 of the DTA (“Resident”) arranges where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident only of the State in which its place of effective management is situated.
Article 5, Paragraph 3 of the DTA (“Permanent establishment”) arranges that a building site, construction or installation project constitutes a permanent establishment only if it lasts more than nine months.
Article 6, Paragraph 1 of the DTA (“Income from immovable property”) arranges that income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.
With respect to immovable property Article 13, Paragraph 1 of the DTA (“Capital gains”) arranges that gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State.
Article 13, Paragraph 4 subsequently arranges that gains derived by a resident of a Contracting State from the alienation of shares or other corporate rights in a company the assets of which consist directly or indirectly of more than 50 per cent of immovable property referred to in Article 6 situated in the other Contracting State may be taxed in that other State.
Article 9, Paragraph 2 of the DTA (“Associated enterprises”) contains a so-called appropriate adjustment clause.
If the beneficial owner of the dividends is a resident of the other Contracting State, Article 10, Paragraph 2 of the DTA (“Dividends”) maximizes the withholding tax a Source State is allowed to withhold over dividends to:
a) 5 per cent of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) which holds directly at least 10 per cent of the capital of the company paying the dividends;
b) 15 per cent of the gross amount of the dividends in all other cases.
If the beneficial owner of the interest is a resident of the other Contracting Party, Article 11, Paragraph 2 of the DTA (“Interest”) maximizes the withholding tax a Source State is allowed to withhold over such interest to 5 per cent of the gross amount of the interest.
Article 11, Paragraph 3 subsequently arranges that notwithstanding the provisions of paragraph 2, interest arising in a Contracting State and paid to a resident of the other Contracting State who is the beneficial owner thereof shall be taxable only in that other State to the extent that such interest is paid
a) to the Government of that other State, a political subdivision or local authority thereof or to the Central Bank of that other State;
b) in the case of the Sultanate of Oman, the State General Reserve Fund, the Omani Investment Fund and any other statutory body or institution wholly owned by the Government of the Sultanate of Oman, as may be agreed from time to time between the competent authorities of the Contracting States.
c) with respect to indebtedness arising as a consequence of the sale on credit of any equipment, merchandise or services;
d) on any loan of whatever kind granted by a bank;
e) to a pension scheme or pension fund; or
f) on intercompany loans.
If the beneficial owner of the royalties is a resident of the other Contracting State, Article 12, Paragraph 2 of the DTA (“Royalties”) maximizes the withholding tax a Source State is allowed to withhold over such royalties or fees for technical services to 8 per cent of the gross amount of the royalties.
Furthermore the DTA contains a.o. provisions regarding a Mutual Agreement Procedure (Article 24) and regarding the Exchange of Information (Article 25).
Are you looking for other DTAs? Then check our section DTAs & TIEAs, a very efficient way to locate numerous DTAs.
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