Switzerland Withdraws MFN Status Granted to India: Implications for Indian Entities
Switzerland has officially withdrawn the Most Favoured Nation (MFN) status that was previously granted to India, following a recent adverse court ruling against Nestle. This decision is set to significantly impact Indian entities operating within the European nation, introducing unfavorable tax implications.
Starting January 1, 2025, Indian companies will face a higher withholding tax rate on income generated in Switzerland. The Swiss government announced the suspension of the MFN clause as part of the protocol to the agreement between the Swiss Confederation and the Republic of India aimed at avoiding double taxation concerning income taxes. This action was directly influenced by a ruling from the Indian Supreme Court concerning Vevey-headquartered Nestle.
As a result of this change, dividends earned by Indian entities in Switzerland will be subject to a withholding tax of 10% beginning January 1, 2025. This new tax regime marks a critical shift and could alter the financial landscape for Indian companies conducting business in Switzerland.
