Why in the News
- India and France have signed an Amending Protocol to update the India–France Double Taxation Avoidance Convention (DTAC) of 1992, aligning it with current international tax standards and strengthening bilateral economic cooperation.
- The Protocol was signed by the Chairperson of the Central Board of Direct Taxes and the French Ambassador to India.
What is DTAC?
- A Double Taxation Avoidance Convention is an agreement between two countries to:
- Avoid taxing the same income twice
- Prevent tax evasion
- Promote cross border trade and investment
- India has DTAA or DTAC agreements with over 90 countries.
Key Changes in the Amending Protocol
- Capital Gains Taxation: Full taxing rights on capital gains from sale of shares now lie with the country where the company is resident.
- Removal of MFN Clause: The Most Favoured Nation clause has been deleted. This resolves long standing interpretational disputes regarding treaty benefits.
- Dividend Taxation: Earlier: Single 10 percent rate
- Now:
- 5 percent for shareholders holding at least 10 percent capital
- 15 percent for others
- Fees for Technical Services: Definition aligned with the India US Double Taxation Avoidance Agreement. Introduces greater clarity in taxation of cross border services.
- Expansion of Permanent Establishment: Introduces Service Permanent Establishment concept. Expands tax jurisdiction where services are provided in another country.
- Exchange of Information
- Updated as per international standards.
- Introduces Article on Assistance in Collection of Taxes.
- Enhances mutual tax cooperation.
- Exchange of Information: Integrates provisions of the Base Erosion and Profit Shifting Multilateral Instrument. Strengthens anti tax avoidance framework.
| [2016] The term ‘Base Erosion and Profit Shifting’ is sometimes seen in the news in the context of
(a) mining operation by multinational companies in resource-rich but backward areas (b) curbing of the tax evasion by multinational companies (c) exploitation of genetic resources of a country by multinational companies (d) lack of consideration of environmental costs in the planning and implementation of developmental projects. |
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