NEW DELHI: In a retaliatory action, Switzerland has withdrawn the Most Favoured Nation (MFN) status granted to India, which will result in higher tax implications for Indian companies operating in the central European country.The Swiss action came after India’s Supreme Court rejected automatic applicability of MFN clause under the bilateral tax treaty in a case related to Swiss firm Nestle.In its order dated December 11, the Swiss government said the Supreme Court’s ruling shows Switzerland’s interpretation of MFN clause under the Double Taxation Avoidance Agreement is not shared by the Indian side. Therefore, it said it was waiving its unilateral application of MFN clause with effect from January 1, 2025.Accordingly, income accruing on or after January 1, 2025 may be taxed in Switzerland at higher rates. The applicable residual rates on dividend paid by Indian firms in Switzerland would now be 10% instead of the 5% under the MFN clause.
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