Delhi HC provides tax relief on dividend income to Dutch companies

Invokes 'most-favoured nation' clause and applies lower 5% withholding tax on dividend income under India-Netherlands tax treaty

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