FTS Tax Rate Between India and Belgium Under DTAA

Quick answer: Under the India-Belgium DTAA, fees for technical services are taxed at a treaty rate of 10% under Article 12(2), reduced from the original 20% cap by Notification S.O. 54(E) with effect from 1998, versus India's domestic rate of 20% plus surcharge and cess. If a service fails the “make available” test -- imported via the treaty's MFN clause from the India-Portugal DTAA, as held in the Soregam SA ruling, though this scope import is exposed to the Supreme Court's 2023 Nestle notification requirement -- it is instead treated as business profits under Article 7, taxable at 0% if the Belgian provider has no permanent establishment in India.

Key takeaways:

• Treaty FTS rate is 10% under Article 12(2), down from the original 20% cap with effect from 1998.
• Domestic FTS withholding rate is 20% plus surcharge and cess, deducted under section 393(2) of the Income-tax Act, 2025 (Table, Sl. No. 17; section 195 of the Income-tax Act, 1961).
• The argument that services failing the make-available test are business profits, taxed at 0% without a PE, depends on importing that condition through the MFN clause -- an import that has never been notified.
• The Soregam SA ruling held that the MFN clause imports the make-available condition from India-Portugal, but it predates the Supreme Court's 2023 Nestle ruling and no notification supports it, so the benefit cannot be assumed at source.
• Withholding at the notified 10% treaty rate, without relying on the make-available import, is the conservative course for Indian payers.
• FTS connected to a PE in India is taxed at 35% under Article 7.

FTS Tax Rate Between India and Belgium

The India-Belgium Double Taxation Avoidance Agreement (DTAA), signed on 26 April 1993 and effective from 1 October 1997, addresses fees for technical services (FTS) under Article 12, which combines royalties and FTS in a single article. The original treaty cap for both royalties and FTS was 20% of the gross amount -- among the higher FTS rates in India's treaty network.

However, two mechanisms have dramatically reduced the effective FTS burden for Belgian service providers:

• Rate reduction: The treaty cap on royalties and FTS was reduced from 20% to 10% with effect from 1998 by Notification S.O. 54(E) dated 19 January 2001, implementing the Protocol's Most Favoured Nation clause by importing the rate from the India-Sweden convention.
• Scope restriction via MFN clause (contested): It is argued -- and has been accepted by the ITAT -- that the MFN clause also imports the make-available condition from India's treaty with Portugal (an OECD member), narrowing the scope of what constitutes taxable FTS. Unlike the rate reduction, this scope import has never been given effect by a CBDT notification, which the Supreme Court's 2023 Nestle ruling requires. It is a litigating position, not a settled entitlement.

The two mechanisms are not on the same footing. The 10% rate is notified and safe. The scope argument, if it holds, would take a Belgian company providing consulting services that do not transfer enduring technical knowledge from 20% (original treaty cap) or 20% (domestic rate under section 393(2)) to 0%, provided the company has no permanent establishment in India -- but that outcome cannot be assumed at source, and an Indian payer who withholds nil on that basis carries the risk if the position is rejected. Understanding these mechanisms is essential for Belgian companies providing cross-border services to Indian clients. For the complete treaty overview, see our India-Belgium DTAA guide, the withholding tax rates page, and the related royalty tax rate page.

Treaty Rate vs Domestic Rate: Detailed Comparison

The effective FTS rate under the India-Belgium DTAA depends on three factors: the MFN rate reduction, the MFN scope restriction, and whether the Belgian provider has a PE in India.

Original Treaty Cap: 20% (Article 12(2))

As originally enacted, Article 12(2) provided that FTS arising in India and paid to a Belgian beneficial owner may be taxed at a maximum of 20% of the gross amount -- the highest such cap in India's treaty network.

Reduced Treaty Rate: 10% (amended)

The treaty cap on royalties and FTS was reduced from 20% to 10% with retrospective effect from 1 April 1998 (India) / 1 January 1998 (Belgium) by Notification S.O. 54(E) dated 19 January 2001, which substituted Article 12 under the Protocol's MFN clause, importing the rate from India's convention with Sweden. Because the 10% rate is embodied in a notification under section 90 of the Income-tax Act, 1961, it is unaffected by the Supreme Court's 2023 Nestle ruling. It applies to all FTS that meets the definition under the treaty (as potentially narrowed by the MFN scope restriction).

MFN Scope Restriction: The Contested 0% Position

The Soregam SA ruling held that the MFN clause imports not only rate reductions but also scope restrictions. India's treaty with Portugal includes a make-available condition for FTS, and on that reasoning the condition is read into the India-Belgium treaty: if a service does not make available technical knowledge, experience, skill, know-how, or processes to the Indian recipient, the payment does not qualify as FTS and is instead classified as business profits under Article 7, taxable only if the Belgian provider has a PE in India.

That reasoning has not been backed by a CBDT notification importing the India-Portugal condition, and the Supreme Court's 2023 Nestle ruling holds that an MFN benefit takes effect only through such a notification. The 0% outcome is therefore a contested position that a taxpayer may have to litigate, not an entitlement a payer can rely on when deducting tax. The notified 10% rate is the safe course at source; the scope argument, if pursued, is better raised in the recipient's return or through a section 395(2) determination than by withholding nil.

Who Qualifies for the Reduced Rate

Claiming the reduced FTS rate (10%, or 0% on the contested scope-import argument) under the India-Belgium DTAA requires satisfying multiple conditions:

The Make-Available Test (via the Contested MFN Scope Import)

This is the most critical condition for anyone advancing the scope-import argument. The make-available test, imported from the India-Portugal DTAA, requires that technical or consultancy services must make available technical knowledge, experience, skill, know-how, or processes to the recipient, enabling the recipient to apply the technology independently in the future.

Services that typically meet the make-available test:

• Training programmes that transfer skills for independent application
• Technology implementation with knowledge transfer documentation
• Design transfers enabling the Indian team to replicate the work

Services that typically do not meet the make-available test:

• Ongoing IT support and managed services without knowledge transfer
• Strategic consulting where recommendations are provided but no technology is transferred
• Legal, accounting, and audit services
• Market research and analysis reports

Belgian Tax Residency

The recipient must be a tax resident of Belgium, confirmed by a Tax Residency Certificate from the Belgian Federal Public Service Finance (SPF Finances/FOD Financien).

Beneficial Ownership

The Belgian entity must be the beneficial owner of the FTS income, not a conduit or agent for a third-country entity.

MFN Notification Requirement

Following the Supreme Court's 2023 Nestle ruling, an MFN benefit requires a CBDT notification under section 90 of the Income-tax Act, 1961 to take effect. The India-Belgium 10% rate is safe: it was formally notified by S.O. 54(E) dated 19 January 2001, which substituted Article 12 itself. The make-available scope restriction is not: no notification has imported the India-Portugal make-available condition, so the Soregam SA position rests on pre-Nestle reasoning and carries litigation risk. Belgian companies relying on the business-profits (0%) classification should weigh this exposure; the notified 10% rate is the conservative fallback.

FTS-Specific Treaty Provisions

Definition of FTS Under Article 12

Article 12 of the India-Belgium DTAA defines fees for technical services as payments for managerial, technical, or consultancy services, including the provision of services of technical or other personnel. This is the standard broad definition found in most Indian DTAAs, covering virtually all professional and technical services.

MFN Clause: Rate and Scope

The Protocol's MFN clause provides that if India enters into a DTAA with an OECD member country providing lower rates or a more restricted scope for royalties and FTS, those beneficial provisions apply to Belgium. This is a dual-benefit clause -- it confirms the reduced 10% rate and potentially restricts the scope (by importing the make-available condition from the India-Portugal treaty).

PE Attribution

If the Belgian provider has a PE in India and the FTS income is effectively connected with that PE, the income is taxed as business profits under Article 7 at the applicable corporate tax rate (35% for foreign companies), not under the reduced Article 12 rates. This makes PE management essential for Belgian service providers.

Exclusions

Certain payments are excluded from FTS treatment:

• Salaries and wages for employment services
• Income covered under other specific articles (e.g., independent personal services under Article 14)
• Payments that constitute pure reimbursements of expenses without any profit element

Documentation Required

To claim the reduced DTAA rate on FTS payments, the following documentation is mandatory:

Tax Residency Certificate (TRC)

The Belgian recipient must obtain a Tax Residency Certificate from SPF Finances/FOD Financien, confirming Belgian tax residency for the relevant period.

Form 41 (formerly Form 10F)

Form 41 must be filed electronically on India's income tax e-filing portal, providing the recipient's status, Belgian enterprise number, and residential status details.

Self-Declaration with MFN and Make-Available Analysis

A comprehensive declaration confirming: (i) beneficial ownership; (ii) no PE in India; (iii) invocation of the MFN clause; and (iv) an analysis of whether the services make available technical knowledge to the Indian recipient. If the services do not meet the make-available test, the declaration should state that the payment is claimed to constitute business profits under Article 7, and should acknowledge that the scope import relied on has not been notified.

Service Agreement

A detailed scope of work or service agreement describing the nature of services rendered. This is critical for demonstrating whether the make-available test is satisfied. The agreement should clearly delineate whether technical knowledge is being transferred or whether the service provider is merely rendering services using their own expertise.

Withholding Procedure for Indian Payers

Section 393(2) Compliance

Under section 393(2), the Indian payer must assess the appropriate withholding rate. The notified treaty rate of 10% is the default. Nil withholding on the footing that the services fail the make-available test depends on the unnotified MFN scope import, and if that position is rejected the payer -- not the Belgian recipient -- bears the shortfall, interest and penalty. Withholding at 10% and leaving the recipient to press the scope argument in its return is the conservative course. Given the complexity of this assessment, many payers seek a determination under section 395(2) of the Income-tax Act, 2025 (section 195(2) of the Income-tax Act, 1961), or the Belgian provider obtains a lower deduction certificate under section 395(1) of the Income-tax Act, 2025 (section 197 of the Income-tax Act, 1961).

Form 145 (formerly Form 15CA) and Form 146

For remittances exceeding INR 5 lakh, Forms 145 and 146 (formerly Forms 15CA and 15CB) compliance is mandatory. The Chartered Accountant issuing Form 146 must address the MFN clause, the make-available analysis, and confirm the applicable rate; where nil is certified, the certificate should state expressly that the scope import relied on is unnotified. This is one of the most complex Form 146 analyses in practice due to the layered MFN mechanism.

Quarterly TDS Return

The Indian payer files Form 144 (formerly Form 27Q) quarterly, reflecting the treaty rate applied. If nil withholding is applied based on the business profits classification, this should be documented with references to Article 7 and to the contested MFN scope import, together with the payer's basis for accepting that risk.

Common Disputes and Judicial Precedents

Soregam SA -- Landmark MFN Scope Restriction Ruling

In the Soregam SA case, the ITAT examined whether IT support services provided by a Belgian company to its Indian affiliate constituted FTS under Article 12 of the India-Belgium DTAA, read with the India-Portugal DTAA through the MFN clause. The tribunal held that the MFN clause imports the make-available condition from the India-Portugal treaty. Since the IT support services did not make available any technical knowledge, experience, or skill to the Indian entity, the payments were not in the nature of FTS. The income was classified as business profits, and in the absence of a PE, was not taxable in India. The ruling predates the Supreme Court's 2023 decision on MFN notification and should be read subject to it.

Supreme Court MFN Ruling (2023)

The Supreme Court's ruling in Assessing Officer v. Nestle SA held that a benefit under an MFN clause takes effect only when the Government issues a notification under section 90 of the Income-tax Act, 1961. For Belgium this cuts cleanly in two: the 10% rate survives, because S.O. 54(E) of 2001 is exactly such a notification, while the make-available scope import has no notification behind it and is open to challenge. Belgian companies and their Indian payers should treat the scope argument as one that may have to be litigated, and should consider an advance ruling or a section 395(2) determination before withholding nil.

IT Services and Cloud Computing

Multiple ITAT rulings have addressed whether IT services, cloud computing, and SaaS payments constitute FTS. Tribunals have consistently held that services involving remote access to technology, managed services, and standard IT support do not make available technical knowledge. These rulings strengthen the position of Belgian IT service providers.

Management Consultancy

Strategic management consultancy -- including market analysis, business planning, and organisational restructuring advice -- does not typically make available technical knowledge. Belgian consultancies providing strategic advisory services without transferring proprietary methodologies have the stronger version of the make-available argument -- but it still depends on the unnotified scope import, so the classification is arguable rather than assured.

Practical Examples and Calculations

Example 1: Belgian IT Company Providing Managed Services (0% Claimed)

A Belgian IT company provides ongoing managed IT infrastructure services to an Indian client remotely from Brussels. No technical knowledge is transferred. The annual fee is INR 4,00,00,000 (INR 4 crores).

• Make-available test: Not satisfied -- no technical knowledge transferred to Indian client.
• PE in India: None.
• Domestic rate: 20% + 2% surcharge + 4% cess = 21.216% = ~INR 84,86,400
• DTAA treatment claimed: Business profits under Article 7 (0%)
• Tax saving if the claim holds: ~INR 84,86,400
• Risk: The claim depends on the unnotified MFN scope import. If it is rejected, the payment is FTS at the notified 10% (INR 40,00,000), and an Indian payer who withheld nil is liable for that amount with interest under section 398. Withholding 10% pending a section 395(2) determination is the conservative course.

Example 2: Belgian Engineering Firm Providing Training (10% Tax)

A Belgian engineering firm conducts a 4-week training programme in India, training the client's engineers on a proprietary manufacturing technique. The training fee is INR 1,50,00,000 (INR 1.5 crores).

• Make-available test: Satisfied -- Indian engineers can independently apply the technique after training.
• Domestic rate: 20% + 2% surcharge + 4% cess = 21.216% = ~INR 31,82,400
• DTAA rate (notified): 10% = INR 15,00,000
• Tax saving: ~INR 16,82,400

Example 3: Belgian Consultancy Providing Strategic Advisory (0% Claimed)

A Belgian management consultancy provides market entry strategy and M&A advisory to an Indian conglomerate. The consultancy delivers recommendations but does not transfer any proprietary methodologies. The fee is INR 2,00,00,000 (INR 2 crores).

• Make-available test: Not satisfied -- strategic advice without technology transfer.
• PE in India: None.
• DTAA treatment claimed: Business profits under Article 7 (0%)
• Tax saving if the claim holds: ~INR 42,43,200
• Risk: Same notification exposure as Example 1. If the scope import is rejected, the fallback is the notified 10% (INR 20,00,000), not the domestic 20%.

Frequently Asked Questions

What is the FTS tax rate under the India-Belgium DTAA?

The treaty rate is 10% under Article 12 (reduced from the original 20% cap with effect from 1998 by the notified MFN amendment, S.O. 54(E) of 2001). It is further argued that services which do not meet the make-available test (imported via MFN from the India-Portugal treaty) are business profits under Article 7, and so bear no Indian tax where the Belgian provider has no PE. That scope import has never been notified and is contested after the Supreme Court's 2023 Nestle ruling, so 10% is the rate that can be applied with confidence at source.

What is the make-available clause and how does it apply to Belgium?

The make-available clause requires that services must transfer technical knowledge, experience, or skill to the recipient, enabling independent application. The India-Belgium treaty does not contain the condition itself; tribunals have read it in through the MFN clause from the India-Portugal treaty, on which reasoning services that do not make available technology would be business profits rather than FTS. No CBDT notification has effected that import, so the position is contested rather than settled and the benefit cannot be assumed when deducting tax.

How did the Soregam SA ruling affect FTS taxation for Belgian companies?

The Soregam SA ruling held that the MFN clause imports the make-available condition into the India-Belgium treaty, so that IT support services which do not transfer technical knowledge to the Indian recipient are not FTS and are business profits taxable only if a PE exists. The ruling predates the Supreme Court's 2023 Nestle decision and no notification has imported the condition. Belgian IT and consulting companies should treat it as an arguable position to be pressed in assessment, not as a benefit their Indian payers can grant at source.

Does the Supreme Court's 2023 MFN ruling affect Belgian FTS claims?

Yes. The Supreme Court held that a benefit under an MFN clause takes effect only through a CBDT notification under section 90 of the Income-tax Act, 1961. The 10% rate is unaffected, because S.O. 54(E) dated 19 January 2001 is such a notification and it substituted Article 12 itself. What the ruling unsettles is the make-available scope import, for which no notification exists; a 0% claim resting on it should be expected to be challenged. Payers should withhold at the 10% treaty rate unless they hold a section 395(2) determination or the recipient holds a section 395(1) certificate.

Are management consultancy fees taxable under the India-Belgium DTAA?

Management consultancy that provides strategic advice without transferring technical knowledge would not meet the make-available test, and on the scope-import argument such payments would be business profits, untaxed in India without a PE. That argument is contested, because the import is unnotified. If it fails, the rate is the notified 10% treaty rate rather than the domestic 20%.

How should the Indian payer handle withholding for Belgian FTS?

The payer should start from the notified treaty rate of 10%. Nil withholding on the footing that the services fail the make-available test relies on the unnotified scope import, and if that is rejected the payer bears the tax, interest and penalty under section 398. The conservative course is to withhold 10% and let the recipient press the scope argument in its return. For certainty, the payer can seek a section 395(2) determination or the Belgian provider can obtain a section 395(1) lower deduction certificate.

What happens if the Indian payer incorrectly applies nil withholding?

If the tax department later determines the services met the make-available test (and should have been taxed at 10%) or that a PE existed, the payer faces liability under section 398 of the Income-tax Act, 2025 (section 201 of the Income-tax Act, 1961), including interest at 1% per month under section 398(3)(a). The payer can mitigate this risk through a section 395(2) determination or a section 395(1) certificate.