Agreement between the Kingdom of the Netherlands and the Sultanate of Oman for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income:Protocol

Agreement between the Kingdom of the Netherlands and the Sultanate of Oman for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income

Protocol

Geldend

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At the signing of the Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, this day concluded between the Kingdom of the Netherlands and the Sultanate of Oman the undersigned have agreed that the following provisions shall form an integral part of the Agreement.

I. General

a)

The benefits of the Agreement are not applicable to companies or other persons which are wholly or partly exempted from tax under the laws of either Contracting State relating to free zones. They are also not applicable to income from such companies or other persons derived by a resident of the other State, nor to shares, ‘jouissance’ rights or interests in such companies or other persons.

b)

It is understood that in the case of the Sultanate of Oman, the term ‘tax’ means Omani tax as the context requires, but shall, except for the purpose of Article 27 (Assistance in the collection of taxes), not include any amount which is payable in respect of any default or omission in relation to the taxes to which this Agreement applies or which represents a civil penalty imposed relating to those taxes.

II. Ad Article 3, paragraph 2, and Article 25

In case

a)

the interpretation of a term not defined in the Agreement; or

b)

differences in characterisation of an element of income; or

c)

differences in characterisation of a person that is fiscally transparent under the laws of either Contracting State

results in double taxation or double exemption, the competent authorities shall reach a solution to avoid the double taxation or double exemption.

III. Ad Article 4

a)

It is understood that the term ‘resident of a Contracting State’ also includes:

i)

any statutory body of a Contracting State, and

ii)

a pension fund that is recognised and controlled according to the domestic law, including regulations, of a Contracting State.

b)

An individual living aboard a ship without any real domicile in either Contracting State shall be deemed to be a resident of the Contracting State in which the ship has its home harbour.

IV. Ad Article 4, paragraph 3

Where

a)

the place of effective management of a person is situated in a Contracting State, and has been situated in the other State at any time in the preceding 3 (three) years; and

b)

at any time during a period of 12 (twelve) months prior to shifting the place of effective management to the first-mentioned State, the assets of such person consisted principally of liquid assets,

paragraph 3 shall not apply, unless it is determined by mutual agreement between the competent authorities of the Contracting States that the main purpose or one of the most important purposes of the shifting of the place of effective management was for bona fide commercial reasons.

V. Ad Article 5, paragraph 5, subparagraph b

Profits derived by the head office from the supply of goods to the permanent establishment or from carrying out the part of the contract in the Contracting State in which the head office of the enterprise is situated shall be taxable only in that State. Such profits shall be determined on the basis of the arm's length principle.

VI. Ad Articles 5, 6, 7 and 13

It is understood that, for the purposes of this Agreement, the rights to the exploration, exploitation or extraction of natural resources granted by a Contracting State according to the laws of that State shall also be deemed to be a permanent establishment in that State, without prejudice to the laws of the Contracting States relating to the natural resources or the exploration, exploitation or extraction of those resources.

VII. Ad Article 7

In respect of paragraphs 1 and 2, where an enterprise of a Contracting State sells goods or merchandise or carries on business in the other Contracting State through a permanent establishment situated therein, the profits of that permanent establishment shall not be determined on the basis of the total amount received by the enterprise, but shall be determined only on the basis of that portion of the income of the enterprise that is attributable to the actual activity of the permanent establishment in respect of such sales or business.

Specifically, in the case of contracts for the survey, supply, installation or construction of industrial, commercial or scientific equipment or premises, or of public works, when the enterprise has a permanent establishment, the profits attributable to such permanent establishment shall not be determined on the basis of the total amount of the contract, but shall be determined only on the basis of that part of the contract that is effectively carried out by the permanent establishment in the Contracting State in which the permanent establishment is situated. The profits related to that part of the contract which is carried out by the head office of the enterprise shall be taxable only in the Contracting State of which the enterprise is a resident.

VIII. Ad Article 7, paragraph 3

It is understood that the provisions of this paragraph do not prevent the Contracting State in which the permanent establishment is situated from applying the provisions of its domestic law, including regulations, relating to deductions when determining the taxable income of the permanent establishment for its domestic tax purposes.

IX. Ad Articles 7 and 14

Payments received as a consideration for technical services, including studies or surveys of a scientific, geological or technical nature, or for consultancy or supervisory services shall be deemed to be payments to which the provisions of Article 7 or Article 14 apply.

X. Ad Article 8

a)

The International Air Transport Agreement between the Netherlands and Oman, signed in February 1991, as amended by the Protocol signed in December 1995, will remain in force. However, if this Agreement provides for a more beneficial tax treatment, it shall also be applicable to the extent that it is more favourable.

b)

It is understood that for the purposes of this Article, the term ‘profits’ includes:

i)

gross receipts and revenues derived directly from the operation of ships or aircraft in international traffic, and

ii)

interest that is incidental to the operation of ships or aircraft in international traffic.

XI. Ad Article 9

It is understood that the fact that associated enterprises have concluded arrangements, such as cost sharing arrangements or general services agreements, for or based on the allocation of executive, general administrative, technical and commercial expenses, research and development expenses and other similar expenses, is not in itself a condition as meant in paragraph 1 of Article 9. However, the burden of establishing that the above-mentioned arrangements conform to the arm's length principle shall be on the taxpayer.

XII. Ad Article 10

It is understood that in the Netherlands the term ‘founders' shares’ means shares that are issued as remuneration for services rendered by founders during the constitution of a company and do not represent capital of the company.

XIII. Ad Articles 10 and 13

a)

It is understood that income received by individuals in connection with the (partial) liquidation of a company or a purchase of own shares by a company is treated in the Netherlands as income from shares and not as capital gains.

b)

The provisions of paragraphs 1, 2 and 7 of Article 10 and paragraph 4 of Article 13 of this Agreement shall not prevent the Netherlands from applying its domestic law in case a so-called preserving tax assessment (‘conserverende aanslag’) has been issued to an individual insofar it concerns a substantial interest, according to Netherlands tax legislation, in a company which is resident in the Netherlands. The aforementioned shall only apply insofar the assessment or a part of the assessment is still outstanding.

XIV. Ad Article 16

It is understood that:

a)

where a company is a resident of the Netherlands, the term ‘member of the board of directors’ includes both a ‘bestuurder’ and a ‘commissaris’. The terms ‘bestuurder’ and ‘commissaris’ mean respectively persons who are charged with the general management of the company and persons who are charged with the supervision thereof;

b)

where a company is a resident of Oman, the term ‘board of directors’ also includes a similar body performing similar functions in a company.

XV. Ad Article 20

It is understood that in paragraph 1, the term ‘recognised’, in the case of the Sultanate of Oman refers to the approval given by the Sultanate of Oman in which the university, college, or other similar educational institution or scientific research institution is situated.

XVI. Ad Article 24

It is understood that the provisions of Article 24 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.

XVII. Ad Article 25

In case the Sultanate of Oman introduces any form of dispute resolution mechanism with any country in a tax agreement, the Contracting States shall enter into negotiations to reach an agreement on an Article concerning dispute resolution.

XVIII. Ad Article 26

It is understood that, in the case of the Sultanate of Oman, the supply of information is subject to its domestic laws.

IN WITNESS WHEREOF the undersigned, duly authorised thereto by their respective Governments, have signed this Agreement.

DONE at Muscat this 5th day of October 2009, corresponding to 15/10 1430 AH, in two identical originals, each in the Netherlands, Arabic and English languages, the three texts being equally authentic. In case there is any divergence of interpretation between the Netherlands and Arabic texts, the English text shall prevail.

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