Overview
- Capital gains from share sales will be taxed in the jurisdiction where the company whose shares are sold is resident, removing the earlier over-10% shareholding threshold.
- Dividend withholding under the treaty shifts to 5% for shareholders with at least 10% ownership and 15% for all other holdings.
- The Most-Favoured-Nation clause is deleted, aligning with a 2023 Supreme Court view that MFN benefits require explicit government notification.
- The pact aligns the ‘fees for technical services’ article with the India–US treaty, adds a Service Permanent Establishment, and strengthens enforcement through updated information exchange and assistance in tax collection.
- Signed during President Emmanuel Macron’s visit by CBDT Chairperson Ravi Agrawal and Ambassador Thierry Mathou, the protocol awaits ratification and may lead some FPIs to reassess investment structures.