Indian Court rules on applicability of Most Favored Nation clause for determining withholding tax rate on dividend payments

Executive summary

On 22 April 2021, India’s Delhi High Court (the Court) ruled in favor of non-Indian taxpayers on the issue of the rate of withholding tax applicable to dividend income received from Indian subsidiaries under the India-Netherlands tax treaty.¹ The Court applied the principle of parity and granted a 5% withholding tax rate under the Most Favored Nation (MFN) clause of the treaty. The Court also noted that as the MFN clause is part of the protocol to the India-Netherlands tax …