An analysis by Garrigues, Taxand Spain
India has implemented the most favoured nation (MFN) clause in its double taxation avoidance agreement (DTA) with Spain, reducing the withholding tax rate to 10% on royalties and technical service payments. This marks a decrease from the previous 20% rate and aligns with India’s DTAs with other OECD countries established after 1 January 1990.
Despite prior directives from India’s Directorate of Taxes, the Indian Tax Administration mandated an official notification to enforce the MFN clause, a stance upheld by the Indian Supreme Court. Consequently, Spanish firms faced a 20% withholding tax until the Indian Ministry of Finance’s recent notification, which harmonises the rate with the 1996 India-Germany DTA.
Further details regarding the effective date of this adjustment and the reimbursement procedure for Spanish entities concerning overpaid tax in India are pending.
Eduardo Abad from Garrigues, Taxand Spain, analyses this change in more detail here.
For similar content to our Global Guide, subscribe to our mailing list and keep up to date.
