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India-France Tax Treaty Revised: Lower Dividends for Big Investors, Tax Base Safeguarded

The revision of the three-decade-old India-France tax treaty will lower dividend taxes for major French investors holding significant stakes in Indian companies. It expands India's right to tax capital gains from share sales and removes a clause that allowed French entities to claim lower rates. The update aligns the treaty with India's current policy and international standards, aiming to secure economic activity and foster greater investment. The protocol also strengthens mutual tax cooperation through enhanced information exchange and assistance in tax collection.

Key Points: India-France Tax Treaty Revised: Benefits for Investors, Protects Tax Base

  • Lowers dividend tax for large holdings
  • Safeguards India's tax base
  • Removes most-favoured-nation clause
  • Enhances tax cooperation & information exchange
2 min read

New tax treaty to benefit large French investors, safeguard India's tax base: Report

Revised India-France tax treaty lowers dividend tax for major French firms, safeguards India's tax base, and aligns with global standards, boosting investment.

"The changes could benefit major companies such as Sanofi, Renault and L'Oreal - BBC Report"

New Delhi, Feb 25

The revision of three‑decade‑old tax treaty between India and France will lower dividend levies for large French investors including Sanofi, Renault and L'Oreal and safeguard India's tax base, a report has said.

The report from BBC said the new agreement expanded New Delhi's right to tax certain transactions such as capital gains arising from the sale of shares, including transactions where a French entity owns less than 10 per cent of an Indian company.

"The changes could benefit major companies such as Sanofi, Renault and L'Oreal, which have expanded their investments in India over the past few years," the report said.

The revised treaty "realigns the bilateral trade framework with India's current treaty policy" and international tax standards, the report cited global consultancy and financial services firm KPMG.

"It also underscores India's efforts to safeguard its tax base and promote a stable investment environment," the firm said.

The amended agreement cut the dividend tax to 5 per cent for French companies holding at least 10 per cent in an Indian firm and raised the tax to 15 per cent for holdings below 10 per cent.

The amended protocol deleted the most‑favoured‑nation clause which had allowed French entities to claim a lower tax rate in India, the report further said.

The protocol will come into effect after completing formalities and legal approvals in both countries.

During French President Emmanuel Macron's visit to India, the countries announced the elevation of their relationship to a "Special Global Strategic Partnership" and deepened cooperation in areas such as defence and space technology.

Further the countries said that the new tax agreement will "secure economic activity for French and Indian businesses and pave the way for greater investments and collaborations between the two countries".

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 Finance ministry in a statement.

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

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.

- IANS

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Reader Comments

P
Priya S
Good to see India standing firm on its tax rights. The removal of the most-favoured-nation clause is crucial. We can't have companies exploiting old loopholes. This should be the model for updating other old treaties too.
R
Rohit P
Sanofi, Renault, L'Oreal will benefit? Great for them. But what about the common Indian taxpayer? Will this treaty revision lower prices of medicines or cars for us? That's the real question. 🤔
S
Sarah B
As someone working in finance, aligning with BEPS and international standards is a very positive step. It improves India's credibility for foreign investors. The 5% dividend tax for substantial holdings is a good incentive for long-term investment.
V
Vikram M
The strategic partnership with France in defence and space is the bigger story. This tax treaty is just the economic foundation. Jai Hind!
K
Karthik V
While I appreciate the intent, I respectfully worry about the execution. We have great policies on paper, but the ground reality for businesses dealing with tax authorities can still be difficult. Hope the 'stable investment environment' promise is kept.
M
Michael C
The assistance in tax collection and information exchange is a game-changer. It will help curb tax evasion by entities operating in both countries

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