New Delhi, Feb 25 (IANS) The revision of three‑decade‑old tax treaty between India and France will lower dividend levies for large French investors including Sanofi, Renault and L’Oreal and safeguard India’s tax base, a report has said.

The report from BBC said the new agreement expanded New Delhi’s right to tax certain transactions such as capital gains arising from the sale of shares, including transactions where a French entity owns less than 10 per cent of an Indian company.

“The changes could benefit major companies such as Sanofi, Renault and L’Oreal, which have expanded their investments in India over the past few years,” the report said.

The revised treaty “realigns the bilateral trade framework with India’s current treaty policy” and international tax standards, the report cited global consultancy and financial services firm KPMG.

“It also underscores India’s efforts to safeguard its tax base and promote a stable investment environment,” the firm said.

The amended agreement cut the dividend tax to 5 per cent for French companies holding at least 10 per cent in an Indian firm and raised the tax to 15 per cent for holdings below 10 per cent.

The amended protocol deleted the most‑favoured‑nation clause which had allowed French entities to claim a lower tax rate in India, the report further said.

The protocol will come into effect after completing formalities and legal approvals in both countries.

During French President Emmanuel Macron’s visit to India, the countries announced the elevation of their relationship to a “Special Global Strategic Partnership” and deepened cooperation in areas such as defence and space technology.

Further the countries said that the new tax agreement will “secure economic activity for French and Indian businesses and pave the way for greater investments and collaborations between the two countries”.

The Protocol also updates the provisions on Exchange of Information and introduces a new Article on Assistance in Collection of Taxes, as per international standards, said the Finance ministry in a statement.

This would enable and facilitate seamless exchange of information and strengthen mutual tax cooperation between India and France, it added.

The Protocol also incorporates within the DTAC, the applicable provisions of BEPS Multilateral Instrument (MLI), that had already become applicable consequent to the signing and ratification of MLI by India and France.

–IANS

aar/pk