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India-France Tax Treaty Updated to Boost Investment & Curb Evasion

India and France have signed a protocol to amend their decades-old Double Taxation Avoidance Convention, updating it to modern international standards. Key changes include granting full taxing rights on capital gains to the country where the company is resident and replacing a flat dividend tax with a split rate structure. The protocol deletes the Most-Favoured-Nation clause and incorporates Base Erosion and Profit Shifting provisions to prevent tax avoidance. These updates aim to provide greater tax certainty, facilitate investment flows, and strengthen the overall economic partnership between the two nations.

Key Points: India-France Sign Protocol to Amend Double Tax Avoidance Treaty

  • Full taxing rights on capital gains to resident country
  • MFN clause deleted from treaty
  • Dividend tax rates split to 5% & 15%
  • Aligns with BEPS standards to curb profit shifting
  • New provisions for tax info exchange & collection assistance
2 min read

India and France sign the Amending Protocol to amend the India-France Double Taxation Avoidance Convention: Finance Ministry

India & France update tax treaty with new capital gains, dividend rules & BEPS standards to boost investment and strengthen economic ties.

"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. - Finance Ministry"

New Delhi, February 23

During the recent visit of the France President to India, the Indian Government and the Government of the French Republic have signed a Protocol amending the India-France Double Taxation Avoidance Convention, signed on 29 September 1992. The Amending Protocol was signed by Ravi Agrawal, Chairperson, Central Board of Direct Taxes, Government of India, and Thierry Mathou, Ambassador of France to India, on behalf of their respective Governments.

The Ministry of Finance released a statement regarding that. It stated, "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."

"The Amending Protocol also deletes the so-called Most-Favoured-Nation (MFN) Clause from the Protocol to the DTAC, thereby bringing to rest all issues relating to it. The Amending Protocol also modifies the taxation of income from dividends by replacing a single rate of 10% of tax with a split rate of 5% for those holding at least ten percent of capital and 15% of tax for all other cases," it added.

The release also highlighted that the Amending Protocol 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 Amending Protocol also updates the provisions on Exchange of Information and introduces a new Article on Assistance in Collection of Taxes, as per international standards. This would enable and facilitate seamless exchange of information and strengthen mutual tax cooperation between India and France. The Amending Protocol also incorporates within the DTAC, the applicable provisions of Base Erosion and Profit Shifting (BEPS) Multilateral Instrument (MLI), that had already become applicable consequent to the signing and ratification of MLI by India and France.

The changes introduced through the Amending Protocol shall enter into effect subsequent to the completion of internal procedures under the laws of both the countries and subject to the terms agreed between the two countries.

The Amending Protocol updates the India-France DTAC to the latest international standards, in a manner that balances the interests of both India and France, and updates it in accordance with international standards. 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.

- ANI

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Reader Comments

P
Priya S
The changes on capital gains and the Service PE expansion are crucial. It closes loopholes and ensures companies pay tax where the economic activity happens. This is good for India's revenue base. Hope it gets implemented quickly after internal procedures.
R
Rohit P
While the intent is good, I hope the "greater tax certainty" promised actually translates to simpler compliance for small and medium businesses, not just large MNCs. Sometimes these agreements look great on paper but create more paperwork for us on the ground.
M
Michael C
Aligning with BEPS standards and improving information exchange is a global necessity. This modernizes a 30-year-old treaty. Smart move by both governments to foster a stable environment for cross-border business.
S
Shreya B
Deleting the MFN clause seems significant. It brings clarity and prevents automatic claims based on treaties with third countries. This should reduce litigation. Overall, a balanced agreement that protects India's interests while encouraging French investment.
K
Karthik V
Good to see progress on the diplomatic front. These technical agreements are the bedrock of strong economic ties. Hope this leads to more French companies setting up R&D centers here, creating high-skilled jobs for our engineers.

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