A recent report highlighted that the revision of the three-decade-old tax treaty between India and France is set to reduce dividend levies for prominent French investors like Sanofi, Renault, and L’Oreal. The updated agreement grants New Delhi the authority to tax specific transactions, such as capital gains from share sales, even if a French entity holds less than 10% of an Indian company. This move is expected to particularly favor companies like Sanofi, Renault, and L’Oreal, which have significantly increased their investments in India in recent years.
The revised treaty, as per the report, aligns with India’s current treaty policy and global tax standards, emphasizing the nation’s commitment to protecting its tax base and fostering a secure investment climate. Notably, the amended agreement reduces the dividend tax rate to 5% for French firms holding a minimum of 10% stake in an Indian enterprise, while increasing it to 15% for holdings below 10%. Additionally, the updated protocol eliminates the most-favored-nation clause that previously allowed French entities to claim a lower tax rate in India.
Following the completion of formalities and legal approvals in both countries, the protocol is expected to come into effect. The revised tax agreement was announced during French President Emmanuel Macron’s visit to India, where the nations elevated their relationship to a “Special Global Strategic Partnership” and enhanced collaboration in defense and space technology sectors. The updated provisions on Exchange of Information and Assistance in Collection of Taxes, in line with international standards, aim to facilitate seamless information exchange and strengthen mutual tax cooperation between India and France.
