India and France signed a Protocol to amend the Double Taxation Avoidance Convention (DTAC), which was originally signed in 1992.
- DTAC is the formal/legal name used for some Double Tax Avoidance Agreements (DTAAs).
- DTAA is an agreement signed between two countries to prevent individuals or businesses from being subject to double taxation on their income.
Key Amendments
- Removed the Most-Favoured-Nation (MFN) clause to eliminate ambiguity in treaty benefits.
- Incorporation of Base erosion and profit shifting (BEPS) Multilateral Instrument (MLI) Provisions to prevent profit shifting.
About the Most-Favoured-Nation (MFN)
- It is a fundamental principle of the World Trade Organization (WTO).
- It ensures that countries do not discriminate between their trading partners.
- If a WTO member grants favourable trading terms like lower tariffs to one country, it must extend the same benefits to all other WTO members.
About the BEPS Multilateral Instrument (MLI)
- An international treaty that enables countries to modify existing bilateral tax treaties without renegotiating them individually.
- The BEPS MLI entered into force in 2018, and its provisions entered into effect in 2019.
- Objectives:
- Implements tax treaty measures developed under the OECD/G20 BEPS Project.
- Helps prevent Base Erosion and Profit Shifting.
- BEPS are tax avoidance strategies used by MNCs to shift profits to low or no-tax jurisdictions by exploiting gaps in tax rules, reducing overall corporate tax liability.
