India and France Amend Double Taxation Avoidance Convention:
India and France have signed an amending protocol to the India-France Double Taxation Avoidance Convention (DTAC, 1992), introducing key changes to capital gains taxation, the Most-Favoured-Nation (MFN) clause, and incorporating provisions of the multilateral Base Erosion and Profit Shifting (BEPS) framework.The amendments are designed to provide greater tax certainty for taxpayers and are expected to boost the flow of investment, technology, and personnel between the two nations.The Protocol provides full taxing rights in respect of capital gains arising from the sale of shares of a company, to the jurisdiction where such company is a resident.The agreement formally deletes the MFN Clause from the Protocol to the DTAC, thereby bringing to rest all issues relating to it. The agreement modifies the taxation of income from dividends by replacing a single rate of 10% with a split rate, i.e., 5% for those holding at least 10% of capital and 15% of tax for all other cases.It modifies the definition of ‘Fees for Technical Services’ (FTS) by aligning it with the definition in the India-US Double Taxation Avoidance Agreement.The Protocol expands the scope of ‘Permanent Establishment’ (PE) by adding Service PE.It updates provisions on Exchange of Information and introduces a new article on Assistance in Collection of Taxes, as per international standards, to facilitate seamless exchange and strengthen mutual tax cooperation.The Protocol incorporates within the DTAC the applicable provisions of the BEPS Multilateral Instrument (MLI), which had already become applicable consequent to the signing and ratification of MLI by India and France.
