India-France Tax Treaty Update Boosts Investment with New Capital Gains Rules

The amending protocol provides full taxing rights in respect of capital gains arising from sale of shares of a company, to the jurisdiction where such company is a resident.

It also deletes the so-called Most-Favoured-Nation (MFN) Clause from the Protocol to the India-France Double Taxation Avoidance Convention (DTAC), thereby bringing to rest all issues relating to it, according to a Finance Ministry statement.

The protocol also modifies the taxation of income from dividends by replacing a single rate of 10 per cent of tax with a split rate of 5 per cent for those holding at least 10 per cent of capital and 15 per cent of tax for all other cases.

"It also modifies the definition of 'Fees for Technical Services' by aligning it with the definition in India US Double Taxation Avoidance Agreement, and expands the scope of 'Permanent Establishment' by adding Service PE," the ministry said.

During the recent visit of French President Emmanuel Macron to India, both the nations signed a protocol amending the India-France DTAC.

The Protocol also updates the provisions on Exchange of Information and introduces a new Article on Assistance in Collection of Taxes, as per international standards, said the ministry.

This would enable and facilitate seamless exchange of information and strengthen mutual tax cooperation between India and France.

The Protocol also incorporates within the DTAC, the applicable provisions of BEPS Multilateral Instrument (MLI), that had already become applicable consequent to the signing and ratification of MLI by India and France.

"The Amending Protocol will provide greater tax certainty to the taxpayers and boost flow of investment, technology and personnel between India and France, and thereby strengthen the economic relationship between the two countries," said the ministry.

- IANS