India, France amend double taxation avoidance agreement to provide better tax certainty
India and France have amended the double taxation avoidance agreement which will provide full taxing rights in respect of capital gains to the nation where such company is a resident and delete the Most-Favoured-Nation (MFN) Clause bringing in certainty in taxation. Under the amendments, the single 10% tax rate on income from dividends will be replaced by slit rate of 5% for those who hold at least 10% of capital and 15% for all other cases. The protocol amending the India-France Double Taxation Avoidance Convention (DTAC) was signed during the recent visit of France’s President Emmanuel Macron to India.
The amendments also modify 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. Further, it updates the provisions on exchange of information and introduces a new Article on assistance in collection of taxes, as per international standards. Moreover, the amending protocol 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 Central Board of Direct Taxes (CBDT) has noted that the amendments would enable and facilitate seamless exchange of information and strengthen mutual tax cooperation between India and France. It added that the amendments 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.
