No More Royalty Treatments For Indian Arms of MNCs
No More Royalty Treatments For Indian Arms of MNCs as govt doubles taxes on royalty.
Multinational Companies such as PepsiCo India, Coca-Cola and Hindustan Unilever will now be subject to higher rate of tax on royalty payments to their parents.
By amending the Finance Bill, 2023, India doubled its withholding tax rate on royalties and fees for technical services to 20% from 10% previously.
Apart from affecting companies with parents in jurisdictions that do not have a tax treaty with India, the move allows the government to impose the higher treaty rate of 15% on local arms of companies from the United States, the United Kingdom, and other countries with which India does have a tax treaty.
These companies have until now enjoyed the lower rate of 10% even though tax avoidance treaties with these countries provide for a 15% rate as India’s domestic law provided for the lower rate.