Switzerland withdraws India’s Most Favoured Nation status

The Swiss government withdrew the Most Favored Nation (MFN) status from India. After this decision of the Swiss government, Indian companies working there will now have to pay 10% more tax from January 1, 2025. Switzerland had given MFN nation status to India under the Double Tax Avoidance Agreement (DTAA).

Actually DTAA is a kind of agreement. It is used by two countries to protect their citizens and companies from double taxation. Under this, companies or individuals do not have to pay different taxes in two different countries for their services or products.

On Friday, Switzerland said that it had to take this step due to the decision of the Indian Supreme Court. Last year, in a case related to Nestle, the Indian Supreme Court had ruled that DTAA cannot be implemented in the country until it is notified under the Income Tax Act.

The Indian government will first have to notify DTAA under the Income Tax Act. Only then will companies from Switzerland and India benefit from it. Till then, companies like Nestle will have to pay more tax on their dividends.

Earlier, the Delhi High Court had ordered that companies and individuals working in or for foreign organizations should not have to pay double tax, but later the Supreme Court overturned this decision.

Let us tell you that Nestle is a Swiss company. Its headquarters is in the city of Vevey, Switzerland.

What is MFN?

World Trade Organization (WTO) is an institution of UNO (United Nations). 164 countries are its members. All the countries coming under it give each other the status of Most Favored Nation (MFN). After being given this status, all countries can easily do business with each other without any discrimination.