Taxpayers from France, Swiss corporations can not declare low tax profit by citing tax treaties with different OECD members


Indian arms of corporations from France, Netherlands would not be eligible for low tax price of 5% whereas remitting dividends to their abroad dad and mom. India’s apex direct taxes physique Thursday mentioned taxpayers from these nations can not apply the advantages obtainable below tax treaties with entered into by India with Columbia, Slovenia making use of essentially the most favoured nation clause.

International locations together with France, Switzerland, Netherlands, lately, affirmed that withholding tax in India shouldn’t exceed the speed prescribed below the treaties with Columbia, Slovenia and so on, which is at decrease price of 5%, in opposition to the common tax price of 15%.

The Central Board of Direct Taxes, in a round, mentioned that Lituania and Columbia grew to become members of OECD after signing the tax treaty with India and subsequently these treaties couldn’t be utilized to all nations.

It mentioned unilateral decrees, issued by these nations (France, Switzerland and Netherlands), stating that they may avail low tax relevant because of MFN was a merely a mirrored image of the understanding of the respective nations and didn’t affirm India’s place on this matter.

The CBDT mentioned that India reserves its proper to use withholding tax on the charges prescribed below the respective tax treaties and treaties with Columbia, Slovenia and might be topic to frequent interpretation.

It added that import of concessional charges by invoking MFN clause can’t be carried out selectively and the good thing about decrease price or restricted scope of supply taxation can be obtainable solely when the circumstances specified within the Round are met.

Specialists declare that this may have a bearing on Indian arms of corporations based mostly in these nations and had been engaged in litgation with Indian tax authorities.

“This assumes significance as there have been current Excessive Courtroom rulings in favor of the taxpayers on this problem which upheld the applicability of decrease withholding tax charges utilizing the MFN clause based mostly on the precept of frequent interpretation. Although the Round clarifies that present rulings already rendered in favor of the taxpayer wouldn’t be affected, taxpayers staking refund claims or looking for to acquire decrease withholding tax certificates would stand impacted by this Round,” Sudin Sabnis, Associate, Nangia Anderson LLP mentioned.

He added that many excessive court docket rulings had additionally being appealed by the Income within the Apex Courtroom and this Round might give a brand new dimension on whether or not the interpretation in unilateral decrees of Netherlands, France actually mirrored a typical interpretation.


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