The India-UK tax treaty was signed in 1993 and has been amended periodically. It's bilateral and is independent of the UK's EU membership status — Brexit did not change the treaty. For a UK Ltd / PLC with an Indian subsidiary, the DTAA governs the rates at which the Indian side can withhold tax on cross-border payments and provides the credit mechanism in the UK.
Key India-UK DTAA rates
| Payment type | India domestic (non-resident) | DTAA cap |
|---|---|---|
| Royalty (literary, artistic, scientific work) | 20% | 10% (industrial/commercial) / 15% (others) |
| Fees for Technical Services (FTS) | 10% | 10-15% (depending on nature) |
| Dividend | 20% | 15% (if 10%+ shareholding) / 15% (others) |
| Interest | 20% | 10% (banks) / 15% (others) |
| Capital gains on shares | Domestic rates apply | India retains taxing rights on share sales |
Brexit impact — none on the DTAA
The India-UK DTAA is a bilateral treaty between the two countries' governments. EU membership was never relevant to its provisions. Post-Brexit, the treaty continues unchanged. UK companies operating in India face the same treaty rates as before.
What did change post-Brexit: VAT mechanics on UK-Indian service transactions (now under UK VAT rules rather than EU rules), and standalone UK GDPR for personal-data flows (substantively similar to EU GDPR).
UK-specific DTAA + GDPR handled together
FastLegal's UK-headquartered clients get integrated DTAA + UK GDPR support — including the data-processing agreement, SCC-equivalent language for India transfers under UK GDPR, and the FTS / royalty position justified per the UK treaty. Your tax adviser in the UK and our Indian tax specialist coordinate as one team.
Claiming UK tax credit for India withholding
- Indian subsidiary withholds TDS at the treaty rate on the payment.
- Indian subsidiary issues Form 16A to the UK recipient.
- UK recipient files for Foreign Tax Credit Relief in the UK Corporation Tax return (CT600) using the Form 16A as supporting documentation.
- Credit limited to the UK CT that would have applied to the same income.
- Excess credit cannot generally be carried forward to other periods.
PE considerations for UK companies
Article 5 of the India-UK DTAA defines PE similarly to most modern treaties — fixed place of business, service PE (after 90 days in 12 months), agency PE. UK companies operating Indian subsidiaries face the same PE risk profile as US / EU counterparts.
One UK-specific consideration: UK Diverted Profits Tax (DPT) and the OECD Pillar 2 minimum tax overlay with the DTAA. For multinational groups with Indian and UK presence, the interaction can create additional reporting requirements beyond standard DTAA compliance.
Operating tips for UK companies in India
- Obtain HMRC residency certificate annually for the UK parent.
- File Form 10F online for treaty benefit eligibility (requires Indian PAN of the UK recipient).
- Document the FTS / royalty classification carefully — UK treaty 'make available' test similar to US.
- Time zone advantage for live tax / compliance reviews — only 4-5 hour gap with India.
- GDPR (UK) data-processing agreements with the Indian subsidiary; SCC-equivalent transfer clauses.
Frequently asked questions
Is there a Most Favoured Nation clause in the India-UK treaty?+
Yes — for some royalty / FTS provisions. India has invoked MFN to reduce rates with certain other countries to UK levels (and vice versa) historically. Verify current applicable rate before each remittance.
Does the UK ATAD impact India operations?+
UK ATAD-equivalent rules (CFC, interest deduction limits) apply to the UK parent's CT computation. India operations interact through the dividend, royalty, and interest flows; structure these with both jurisdictions in mind.
What about the new OECD Pillar 2 15% minimum tax?+
Applies to multinational groups with >€750M annual revenue. India implemented its 22% corporate tax for new manufacturing companies but Pillar 2 broadly aligns. UK groups should verify Pillar 2 compliance separately.
Are royalties under software licensing taxable in India?+
After the Supreme Court Engineering Analysis ruling (2021), pure 'shrink-wrap' or licence-to-use software payments are not royalty under the India-UK treaty. SaaS with bespoke configuration or right-to-modify IP can still be royalty. Get an opinion per arrangement.
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