Govt bets on more Swiss investments post withdrawl of ‘most favoured nation’ status

The Minister of State for Finance Pankaj Chaudhary stated that the unilateral withdrawal of Most Favoured Nation (MFN) status by Switzerland in  2024 may lead to more Swiss investments in the country. In a reply to the Parliament, the MoS asserted, “The unilateral statement issued by the Government of Switzerland on August 13, 2021, restricted the double taxation relief provided to Swiss companies receiving dividend from India to 5% instead of 10% as agreed by it in the India-Switzerland Double Taxation Avoidance Agreement (DTAA)”.The Swiss government earlier reversed its 2021 decision, restoring the full 10% relief agreed under DTAA. A unilateral statement issued by Switzerland on August 13, 2021, had limited the relief to 5%, despite Indian tax authorities levying a 10% tax on dividends as per the DTAA. This led to double taxation, as Swiss companies could claim relief only up to 5% in Switzerland while being taxed 10% in India.

Chaudhary explained that under the 2021 interpretation, instead of giving relief for the full 10% tax paid in India, Switzerland only provided a relief for 5%. He expressed confidence that with the country withdrawing the MFN status, Swiss companies would be eligible for greater relief in their home country. This tax benefit, as per the MOS, could incentive further Swiss investments.
On December 11, 2024, Switzerland issued a new statement suspending the application of the Most Favoured Nation (MFN) clause, effectively restoring full relief. Under the DTAA, the MFN clause allowed treaty nations to avail of reduced tax rates on income such as dividends, royalties, or technical fees.Also Read: US slams high India duties on farm goods before April 2 tariffs