India, France update tax treaty to cut ambiguity and boost cross-border investment

The Government of India and the Government of the French Republic have signed a Protocol amending the India–France Double Taxation Avoidance Convention (DTAC), originally signed on September 29, 1992, during the recent visit of the French President.The Amending Protocol was signed by Ravi Agrawal, Chairperson of the Central Board of Direct Taxes, on behalf of India, and Thierry Mathou, Ambassador of France to India, on behalf of France.

Under the revised provisions, full taxing rights on capital gains arising from the sale of shares will be granted to the jurisdiction where the company is resident. The Protocol also deletes the Most-Favoured-Nation (MFN) clause from the existing DTAC Protocol.
The amendment replaces the single dividend tax rate of 10% with a two-tier structure — 5% for shareholders holding at least 10% of the capital, and 15% in all other cases. It aligns the definition of ‘Fees for Technical Services’ with that in the India–US Double Taxation Avoidance Agreement and expands the scope of ‘Permanent Establishment’ by introducing provisions for a Service PE.Also Read: Sectoral, thematic fund inflows plunge 88% YoY in January: ICRA Analytics

Additionally, the Protocol updates provisions on Exchange of Information and introduces a new Article on Assistance in the Collection of Taxes, in line with international standards. It also incorporates applicable provisions of the Base Erosion and Profit Shifting (BEPS) Multilateral Instrument (MLI), following its signing and ratification by both countries.

The changes will take effect after completion of internal procedures under the laws of both countries and in accordance with agreed terms.

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The updated DTAC aims to provide greater tax certainty to taxpayers, facilitate seamless information exchange, strengthen mutual tax cooperation, and boost the flow of investment, technology, and personnel between India and France, reinforcing economic ties between the two nations.