Royalty rate under Spain DTAA notified

New Delhi: India has notified the tax rates on royalties and fees for technical services (FTS) under the India-Spain double taxation avoidance agreement (DTAA) at up to 10%, lower than specified in its domestic law.

New Delhi has notified lower tax rate on most-favoured nation basis to Spain.

As per the notification, royalties and fees for technical services may also be taxed in the contracting state in which they arise, according to the law of that state.


"If the recipient is the beneficial owner of the royalties or fees for technical services, the tax so charged shall not exceed 10% of the gross amount of royalties or fees for technical services," the notification said. Tax rate under the domestic law can go up to 20%, as per a provision that is effective from the assessment year 2024-25.

The notification holds importance especially in view of the recent Supreme Court judgement in the case of Nestle wherein it was held that the Most favoured Nation clause is not auto-executory. "The notification ensures availability of the benefit of lower Tax Rate with respect to Royalty income & FTS under the India Spain Tax Treaty," Pranav Sayta, Partner & Leader International Tax and Transaction Services, EY India said.