The countries will make revisions to cut dividend withholding tax and update provisions on share gains and technical fees.
India and France will make revisions to the 1992 income and capital tax treaty, introducing key changes aimed at reducing the tax burden on cross-border investments and modernising treaty rules.
Under the proposed amending protocol, the withholding tax on dividends paid to French investors holding at least 10% of an Indian company’s capital would fall from 10% to 5%. Dividends not meeting this holding condition would face a 15% levy. The protocol also removes the 10% participation threshold for taxing gains from the sale of shares, allowing India to tax such gains regardless of the stake held by French investors.
In addition, the definition of fees for technical services will be narrowed so that only payments involving the transfer of technical know-how are taxable. The treaty’s “most favoured nation” clause, which previously offered France certain tax advantages, will also be removed.
The amending protocol must be finalised, signed, and ratified before it can enter into effect.
Bilateral trade between India and France reached USD 15 billion last year, with both governments aiming to strengthen economic ties.
