India and France Sign Amending Protocol to Enhance Economic Ties
Synopsis
India and France have signed a significant amending protocol to enhance investment and economic cooperation. The agreement aligns their tax treaty with international standards, setting the stage for improved collaboration between the two nations.
Key Takeaways
Amending Protocol signed to enhance economic ties.
Aligns tax treaty with international standards .
Grants taxing rights on capital gains to the company's jurisdiction.
Changes dividend taxation to a tiered structure.
Removes the MFN clause from the DTAC.
New Delhi, Feb 23 (NationPress) India and France have formalized an amending protocol aimed at enhancing investment and fortifying economic cooperation. This agreement aligns their tax treaty with global standards, as announced on Monday.
The protocol grants full taxing rights regarding capital gains from share sales to the jurisdiction where the respective company is domiciled.
Additionally, the protocol removes the Most-Favoured-Nation (MFN) clause from the India-France Double Taxation Avoidance Convention (DTAC), effectively resolving all related disputes, according to a statement from the Finance Ministry.
It also revises the taxation structure for dividends by substituting a flat tax rate of 10% with a tiered rate: 5% for shareholders with a minimum of 10% equity and 15% for others.
Furthermore, the definition of ‘Fees for Technical Services’ has been updated to match the definition in the India-US Double Taxation Avoidance Agreement, while the concept of ‘Permanent Establishment’ is expanded to include Service PE, as stated by the ministry.
This protocol was signed during French President Emmanuel Macron's recent visit to India.
Moreover, it modernizes the provisions on the Exchange of Information and introduces a new article concerning Assistance in Tax Collection in line with international norms, thereby facilitating a seamless flow of information and reinforcing tax cooperation between India and France.
Additionally, the protocol incorporates the applicable provisions of the BEPS Multilateral Instrument (MLI), which had already come into effect following the ratification of the MLI by both nations.
“The Amending Protocol will enhance tax certainty for taxpayers and stimulate the flow of investment, technology, and personnel between India and France, thereby fortifying the economic ties between the two nations,” the ministry stated.
Point of View
The signing of this amending protocol between India and France represents a strategic move to bolster economic ties. It reflects a commitment to international cooperation and the alignment of tax standards, ultimately benefiting taxpayers and fostering investment opportunities.
NationPress
9 May 2026
Frequently Asked Questions
What is the purpose of the amending protocol?
The amending protocol aims to enhance investment and strengthen economic cooperation between India and France by aligning their tax treaty with international standards.
What changes does the protocol bring to capital gains tax?
The protocol grants full taxing rights on capital gains from share sales to the jurisdiction where the company is a resident.
How does the protocol affect dividend taxation?
It replaces the flat 10% tax rate on dividends with a split rate of 5% for significant shareholders and 15% for others.
What are the implications of removing the MFN clause?
Removing the MFN clause resolves all related disputes concerning the India-France Double Taxation Avoidance Convention.
How does this protocol support tax cooperation?
The protocol facilitates seamless information exchange and strengthens mutual tax cooperation between India and France.
