Delhi High Court confirms 5% dividend WHT rate under India-Netherlands DTAA
This article is an update to our previous article, titled: “Reduction of Dividend WHT (to 5%) under India-Netherlands DTAA as India abolishes DDT (from 1 April 2020)”. With the abolition of the Indian Dividend Distribution Tax (“DDT”) and a return to the “shareholder based taxation system” for dividends paid by Indian companies with effect of 1 April 2020, the withholding tax (“WHT”) rates prescribed in respect of dividends in the Indian Double Taxation Avoidance Agreements (“DTAAs”) have become a popular topic for discussion.
07 Jun. '21 Neha Mohan
With regard to the dividend WHT rate under the India-Netherlands DTAA, the Dutch perspective is clear because of a decree clarifying that the rate is 5% with effect from 21 July 2010 (i.e. the date on which Slovenia became a member country of the OECD, owing to the interplay of the “most favoured nation” (“MFN”) clause in the India-Netherlands DTAA and the India-Slovenia DTAA of 2005). However, there has been some ambiguity from the Indian perspective. Therefore, the recent Delhi High Court ruling confirming that the dividend WHT rate under India-Netherlands DTAA is 5% with effect from 21 July 2010, is of particular importance. This confirmation is relevant for dividends distributed after the abolition of the Indian DDT (i.e. on or after 1 April 2020).
Dividend WHT rate under the India-Netherlands DTAA
The text of the India-Netherlands DTAA prescribes that either country may levy 15% WHT on the gross amount of dividends flowing to the other country. However, in Protocol IV no.2 of the DTAA, it has been agreed that, “if, after the signing of this convention, under any Convention or Agreement between India and a third State which is a member of the OECD