The Swiss government has suspended the most favoured nation status (MFN) clause in the Double Taxation Avoidance Agreement (DTAA) between India and Switzerland. The move by the European nation follows the Supreme Court of India ruling that the MFN clause doesn’t automatically trigger when a country joins the OECD if the Indian government signed a tax treaty with that country before it joined the organisation.
Swiss Government cited a 2023 ruling by Indian Supreme Court in a case relating to Nestle, headquartered in Vevey, Switzerland, for its decision to withdraw the MFN status.
This ruling is likely to impact Swiss investments in India and can lead to higher taxes on Indian companies operating in Switzerland. The ruling also means that Switzerland will tax dividends that Indian entities will earn in Switzerland at 10 per cent instead of current 5 per cent from January 1, 2025.
