Article 126 empowers the Tax Authority to adjust the results of related party transactions (Transfer Pricing adjustment). If a transaction between related persons is conducted on terms that result in a lower taxable income or higher loss than would have occurred between independent persons, the Authority will ignore the agreed terms. Instead, it will re-calculate the taxable income or loss based on 'arm's length' terms—the conditions that would have been agreed upon by independent parties. This ensures that profits are taxed in Oman according to their true economic value rather than artificial pricing.
Part 4 - Avoidance of Double Taxation
Chapter 2 - Tax Avoidance between Persons or By Entering into Transactions
Section 1 - Cases of Avoidance between Related Persons
Article 126
[GTL Notes: Adjustment of Related Person Transactions]
In determining the taxable income of a person who has entered into a transaction referred to in the foregoing Article 125, the effects of the transactions entered into under the conditions mutually agreed between the two persons shall be ignored if the terms agreed upon result in determination of a lower taxable income or higher loss allowable to be deducted or carried forward for that person than would be the case if it was between independent persons. Instead, the effects of such transactions shall be taken into account assuming the terms on which the transactions would have been entered into by independent persons.
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