Double Taxation Avoidance Agreement (DTAC) Context: India and France have signed an Amending Protocol to update the 1992 Double Taxation Avoidance Agreement (DTAC) to align it with international tax standards. About the Double Taxation Avoidance Agreement (DTAC) 1992 It is also known as a double taxation avoidance agreement or tax treaty. It is designed to ensure that the same income is not taxed in both the country where it is earned and the country where the taxpayer is resident (country of residence). Key Features of the Revised India-France DTAC Capital Gains Taxation: It gives a company full taxing rights on gains arising from the sale of its shares to the country of residence. Revised dividend rates: Replaces the standard 10% rate with a split rate of 5% for holders of at least 10% of the company’s capital and 15% for all other cases. MFN clause removal: Formally removes the most-favoured-nation (MFN) clause, ending interpretation conflicts and ensuring that treaty benefits are limited to specific agreed terms. BEPS integration: Incorporates provisions from the Base Erosion and Profit Shifting (BEPS) Multilateral Instrument (MLI) to prevent tax avoidance by multinational enterprises. Enhanced cooperation: Updates the rules on exchange of information and introduces a new article on assistance in tax collection to combat financial evasion. Service Permanent Establishment (PE): Expands the scope of permanent establishment by including service PE and aligns the definition of fees for technical services with international models.
