India, France Agree To Give Source Country Full Rights To Tax Share Sale Gains

(MENAFN- KNN India) New Delhi, Feb 23 (KNN) India and France have signed a protocol amending the Double Taxation Avoidance Convention (DTAC) between the two countries.

Under the revised provisions, capital gains arising from the sale of shares will be taxable in the jurisdiction where the company is resident, granting full taxing rights to that country.

The changes to DTAC is aimed at updating the treaty in line with current international tax standards while strengthening bilateral economic cooperation.

As per an official statement from Central Board of Direct Taxes (CBDT), the amending protocol also removes the Most-Favoured-Nation (MFN) clause from the existing agreement, addressing longstanding interpretational issues.

The taxation framework for dividend income has been modified, replacing the earlier uniform 10 per cent rate with a differentiated structure: a 5 per cent rate for shareholders holding at least 10 per cent of the capital of a company, and a 15 per cent rate in other cases.

The definition of“Fees for Technical Services” has been aligned with that contained in the India–US Double Taxation Avoidance Agreement. In addition, the scope of“Permanent Establishment” has been expanded to include a Service Permanent Establishment (Service PE).

The Protocol further updates provisions relating to Exchange of Information and introduces a new Article on Assistance in the Collection of Taxes, consistent with international standards.

It also incorporates relevant provisions of the Base Erosion and Profit Shifting (BEPS) Multilateral Instrument (MLI), which both countries have previously signed and ratified.

The amended provisions will come into effect following the completion of domestic legal procedures in both countries and in accordance with mutually agreed terms.

According to official statements, the revised treaty is expected to enhance tax certainty for businesses and investors, facilitate the flow of investment, technology and skilled personnel, and further strengthen economic ties between India and France.

(KNN Bureau)

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