Switzerland scraps MFN status to India, dividend income to face higher tax

In a statement, Switzerland announced suspension of the application of the most favoured nation (MFN) clause of the protocol to the agreement between the Swiss Confederation and the Republic of India for the avoidance of double taxation with respect to taxes on income. File
| Photo Credit: Reuters

Switzerland has withdrawn the Most Favored Nation (MFN) status granted to India following an adverse court ruling against Nestle, a move that will result in adverse tax implications for Indian entities operating in the European nation.

With this, from January 1, 2025, Indian companies will be subject to a higher withholding tax on income generated in Switzerland.

In a statement, Switzerland announced suspension of the application of the most favoured nation (MFN) clause of the protocol to the agreement between the Swiss Confederation and the Republic of India for the avoidance of double taxation with respect to taxes on income.

Switzerland cited a ruling by Indian Supreme Court in a case relating to Vevey-headquartered Nestle for its decision to withdraw the MFN.

This means that Switzerland will tax dividends that Indian entities will earn in that country at 10% from January 1, 2025.