India and France have signed an amending protocol aimed at boosting investment and strengthening economic cooperation. This protocol aligns the tax treaty between the two countries with international standards. The agreement provides full taxing rights for capital gains from the sale of shares of a company to the jurisdiction where the company is a resident.
The protocol also eliminates the Most-Favoured-Nation (MFN) Clause from the India-France Double Taxation Avoidance Convention (DTAC), resolving all related issues. Additionally, it adjusts the taxation of income from dividends by introducing a split rate system of 5% for those holding at least 10% of capital and 15% for other cases.
Furthermore, the protocol aligns the definition of ‘Fees for Technical Services’ with the India US Double Taxation Avoidance Agreement and expands the scope of ‘Permanent Establishment’ by including Service PE. The recent protocol, signed during French President Emmanuel Macron’s visit to India, updates provisions on Exchange of Information and introduces a new Article on Assistance in Collection of Taxes, in line with international standards.
This protocol incorporation of BEPS Multilateral Instrument provisions enhances tax cooperation between India and France. It is expected to provide greater tax certainty to taxpayers, encouraging investment, technology flow, and personnel exchange between the two countries, thereby strengthening their economic ties.
