India Revises 30-Year Tax Pact With France, 5% Dividend Tax For 10% Stake & Wider Capital Gains Rules To Protect Revenue
India and France have revised their 30-year-old tax treaty, cutting dividend tax to 5 percent for 10 percent stake holders while expanding India’s capital gains taxation rights. The agreement removes the MFN clause, strengthens tax cooperation, and aims to protect India’s tax base while promoting French investment.
India and France have revised their 30-year-old tax treaty. |
New Delhi: India and France have revised their three-decade-old Double Taxation Avoidance Convention (DTAC). The new agreement is expected to benefit large French investors while also protecting India’s tax base.
According to a BBC report, the revised treaty expands India’s right to tax certain transactions, especially capital gains arising from the sale of shares in Indian companies.
Lower Dividend Tax For Large Investors
Under the amended treaty, dividend tax has been reduced to 5 per cent for French companies holding at least 10 per cent stake in an Indian company.
However, if the holding is less than 10 per cent, the tax rate has been increased to 15 per cent.
The changes are likely to benefit major French companies such as Sanofi, Renault and L’Oreal, which have expanded their presence in India in recent years.
Stronger Safeguards For India
The report said the new treaty allows India to tax capital gains even when a French entity owns less than 10 per cent stake in an Indian firm.
The amended protocol also removes the most-favoured-nation (MFN) clause. Earlier, this clause allowed French entities to claim lower tax rates if India gave better terms to another country.
Global consultancy firm KPMG said the revised treaty realigns the bilateral framework with India’s current tax policy and global standards. It also supports India’s effort to safeguard its tax base while promoting stable investment conditions.
Better Tax Cooperation
The protocol updates rules on Exchange of Information and introduces a new Article on Assistance in Collection of Taxes.
According to the Finance Ministry, this will improve information sharing and strengthen tax cooperation between the two countries.
The treaty also incorporates provisions of the BEPS Multilateral Instrument (MLI), which both countries have signed and ratified.
Boost To Strategic Ties
During French President Emmanuel Macron’s visit, both nations elevated their relationship to a “Special Global Strategic Partnership”. They said the new tax agreement will secure economic activity and encourage greater investment and collaboration.
The treaty will come into effect after completing legal formalities in both countries.
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