7 months ago
1
India and France person struck a woody to revise their 1992 pact which volition halve the taxation connected dividends paid by Indian units to French parents, perchance redeeming millions for companies with large operations successful the South Asian nation, documents show.
In return, India volition get to widen its powers to taxation stock income by French investors, and revoke the “most favoured nation” presumption of France that gave it definite taxation advantages, according to confidential Indian authorities documents reviewed by Reuters.
Bilateral commercialized betwixt India and France stood astatine $15 cardinal past year, and Prime Minister Narendra Modi and French President Emmanuel Macron person been forging warmer ties. The 2 sides person been moving to recast their taxation pact since 2024 to modernise it by adapting planetary standards connected taxation transparency.
“The projected amending protocol volition boost travel of investment, exertion and unit betwixt India and France, and volition supply taxation certainty,” said 1 of the Indian authorities documents from August. The caller pact could person implications for ample French portfolio investors arsenic good arsenic companies similar Capgemini , Accor, Sanofi, Pernod Ricard , Danone and L’Oreal — each of which person expanded their beingness successful India successful caller years.
A cardinal alteration is that French companies which clasp a involvement of much than 10% successful immoderate Indian entity volition person to wage a 5% taxation connected the dividends they receive, alternatively of 10% earlier.
For number French shareholdings of nether 10% successful Indian companies, however, dividend taxation volition emergence from 10% to 15%.
Many French firms’ Indian units similar Capgemini Technology Services India, BNP Paribas Securities India and TotalEnergies Marketing India person declared dividends successful the past, their Indian regulatory disclosures show. The Capgemini unit’s dividend stood astatine $500 cardinal successful 2023-24.
France’s taxation bureau said it could not remark for this communicative fixed the negotiations are ongoing, portion the concern ministry did not respond to Reuters’ queries.
India’s overseas and concern ministries besides did not respond.
Capgemini and Danone declined to remark portion the different French companies did not respond to Reuters’ queries.
Opinion | India, France and what keeps their ties ticking
Changes to superior gains, services tax
Currently, India tin enforce taxes connected immoderate French entity’s stock sale, but lone erstwhile it holds much than 10% of an Indian company. The caller projected pact volition region that threshold.
The caller pact “will supply for afloat source-based taxation rights successful respect of superior gains connected equity shares (in India),” said the Indian documents.
France-based overseas portfolio investors (FPIs) ain $21 cardinal worthy of shares successful Indian companies arsenic of November 2025, a 3rd higher than levels successful 2024, Indian stock depository information shows.
And much than 40 French companies clasp stakes of nether 10% successful Indian entities, according to an investigation by Indian marketplace quality level Tracxn.
“This volition interaction French FPIs successful India and besides French companies holding number involvement successful Indian companies. These investments were not taxable to taxation nether the existent treaty,” said Riaz Thingna, a spouse astatine Grant Thornton Bharat LLP.
One authoritative acquainted with the deliberations told Reuters on information of anonymity that Indian and French officials person agreed the presumption of the caller treaty, which volition apt beryllium signed successful the coming weeks.
In New Delhi, the woody is taxable to last support by Prime Minister Narendra Modi’s cabinet, according to the documents.
Reuters is the archetypal to study the planned changes to India-France treaty.
India has besides agreed to France’s request to bounds taxation connected fees for method services to cases wherever a French supplier transfers method know-how, removing astir regular consultancy and enactment services from the scope of India’s tax.
“This tin assistance French companies that render services similar plan consultancy, cybersecurity and marketplace research,” Thingna said.
No much ‘most favoured nation’
Differences implicit however to construe the alleged most-favoured nation, oregon MFN, clause were among the main reasons for the renegotiation, the authoritative said. If a state has an MFN clause with India nether a signed treaty, it typically starts claiming little taxation rates if New Delhi strikes much favourable taxation presumption aboriginal with different OECD nation.
But a landmark Indian Supreme Court determination successful precocious 2023 said countries can’t automatically commencement doing so, triggering concerns successful France.
“This determination led to a crisp deterioration successful the ineligible and economical information of French companies successful India. The imaginable further taxation outgo was estimated astatine 10 cardinal euros for existing contracts alone,” said the official.
India and France person reached a determination to delete the MFN clause from their pact which had historically benefitted lone France, according to Indian authorities documents. That was to enactment an extremity to disagreements related to its mentation that person led to “tax uncertainty and protracted litigation,” said 1 document.
Switzerland successful January besides suspended its exertion of the MFN clause successful its India pact citing the Supreme Court ruling.
