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The Delhi High Court has ruled that a withholding tax rate of 5 per cent has to be applied when an Indian entity doles out dividends to its shareholder in Netherlands after applying the Most Favoured Nation (MFN) clause in the tax treaty between the two countries. The High Court s decision assumes significance given that India has reintroduced the classical system of dividend taxation in the hands of shareholders and because the availability of tax treaty benefits based on the MFN clause has been a subject of litigation in the past, said experts. Companies based in Netherlands and even other European countries such as France, Hungary, Spain, Switzerland and Sweden may be able to claim the benefit of lower withholding tax rates from now on. The decision could also apply to categories other than dividend income such as royalty and fees for technical services.

Saurabh shahConcentrix services netherlandsOptum global solutions internationalDelhi high courtHigh courtMost favoured nationIncome tax actIndia netherlands tax treatyTax treatyMost favoured nation clauseTax ratesTax treaty benefitsச ura ரப் ஷாடெல்ஹி உயர் நீதிமன்றம்உயர் நீதிமன்றம்வருமானம் வரி நாடகம்