Spain: Most favoured nation clause under income tax treaty activated by India

Reduced tax rate of 10% on royalties for technical services

Reduced tax rate of 10% on royalties for technical services

India has activated the “most favoured nation” clause in its income tax treaty with Spain, allowing a reduced tax rate of 10% on royalties for technical services, as opposed to the 20% rate stipulated in Article 13 of the income tax treaty.

This change is due to a protocol in the income tax treaty that states if any income tax treaty signed between India and another OECD member state after 1 January 1990 limits the taxation of such royalties to a lower rate, that rate will also apply to the income tax treaty between India and Spain. The Indian Ministry of Finance issued a notification on 19 March 2024 stating that the conditions for triggering this clause with Spain had been met, referencing the India-Germany income tax treaty.

The new rate will be effective from the 2024/2025 fiscal year.

Read an April 2024 report prepared by the KPMG member firm in Spain



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