India and France Sign New Tax Agreement for Greater Economic Collaboration

India–France Tax Treaty Revised: Dividend Tax Cut for Sanofi, Renault, L'Oreal; Capital Gains Tax Scope Expanded​

India Updates 30-Year-Old Tax Treaty with France​

New Delhi, February 25: India and France have revised their three-decade-old tax treaty, introducing significant changes that lower dividend taxes for large French investors while strengthening India’s ability to tax certain cross-border transactions.

According to a BBC report, the updated agreement expands India’s rights to tax specific transactions, including capital gains arising from the sale of shares, even in cases where a French entity holds less than 10 percent in an Indian company.

Dividend Tax Rates Reworked for French Investors​

Under the amended protocol, dividend taxation has been restructured:

• 5 percent tax rate for French companies holding at least 10 percent stake in an Indian firm
• 15 percent tax rate for holdings below 10 percent

The changes are expected to benefit major French corporations such as Sanofi, Renault, and L'Oreal, which have expanded their presence in India in recent years.

The revised treaty also removes the most favored nation clause. Earlier, this provision allowed French entities to claim lower tax rates in India if similar concessions were granted to other countries.

Alignment with India’s Current Treaty Policy​

Global consultancy KPMG stated that the updated agreement aligns the bilateral trade framework with India’s current treaty policy and international tax standards. It also reinforces India’s efforts to safeguard its tax base while promoting a stable investment climate.

The protocol further updates provisions on Exchange of Information and introduces a new Article on Assistance in Collection of Taxes. According to a statement from the Ministry of Finance, these measures are designed to facilitate seamless information sharing and enhance mutual tax cooperation between the two nations.

BEPS Multilateral Instrument Provisions Incorporated​

The amended treaty incorporates applicable provisions of the Base Erosion and Profit Shifting Multilateral Instrument, which had already become operational following its signing and ratification by both India and France.

Strategic Ties Deepen During Macron Visit​

The treaty revision comes amid broader diplomatic engagement. During French President Emmanuel Macron’s visit to India, the two countries elevated their bilateral ties to a Special Global Strategic Partnership. They also deepened cooperation in areas such as defense and space technology.

Both nations said the updated tax agreement will help secure economic activity for French and Indian businesses and pave the way for greater investments and collaborations.

The protocol will take effect after the completion of formalities and legal approvals in both countries.