India, France amend DTAC; capital gains to be taxed on basis of residency of company
GS3Economy · S&T · Environment · Security· External sector, trade & FDI· Prelims + Mains·
Why in news
India and France signed an amending protocol to their Double Taxation Avoidance Agreement (DTAA) to provide certainty in taxation and strengthen economic ties.
Background
The amending protocol modifies the taxation of income from dividends and capital gains, and defines 'Fees for Technical Services' and 'Permanent Establishment'. It also introduces a new Article on assistance in tax collection and updates exchange of information provisions.
Facts for Prelims
- FactCapital gains are now to be taxed on the basis of the residency of the company.
- FactThe protocol defines 'Fees for Technical Services' and 'Permanent Establishment' for taxation purposes.
- FactThe agreement includes a new Article specifically for assistance in tax collection.
- FactThe amendments were signed during President Macron's visit to India.
For Mains
Q. Discuss how bilateral Double Taxation Avoidance Agreements (DTAAs) serve as instruments for fostering economic cooperation and ensuring fiscal transparency between trading partners.
Dimensions to cover in your answer
- Fiscal certainty: Reducing ambiguity in dividend and capital gains taxation to encourage cross-border investment
- Information integrity: Strengthening exchange of information to curb illicit financial flows and tax evasion
- Regulatory alignment: Standardizing definitions of 'Permanent Establishment' to streamline corporate compliance
Keywords: Double Taxation Avoidance Agreement · Capital Gains Tax · Permanent Establishment · Fiscal Transparency · Bilateral Trade · Tax Collection Assistance
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