After the supreme court ruled against Nestle in 2023, the swiss government terminated India's most-favorable-nation (MFN) designation. Higher taxes will now be the main consequence of the judgment for indian businesses doing business in Switzerland.
 
Beginning on january 1, 2025, the corporations will be required to pay higher taxes.
 
The swiss government has suspended the MFN status provision in the Double Taxation Avoidance Agreement (DTAA) between the two countries, which would affect swiss investments in india, according to a statement released by the swiss Finance Department on december 11. Companies from both countries were free from taxes under the MFN status, but now they must pay higher taxes.

Switzerland has justified its action by pointing to the supreme Court's 2023 decision against Nestle.
 
Dividends earned by indian firms in switzerland will now be subject to a 10% tax starting on january 1, 2025.
 
The statement claims that after considering the MFN clause in the double taxation avoidance treaty, the delhi High court confirmed the validity of the residual tax rates in the Nestle case in 2021. The indian supreme court, however, overturned the lower court's ruling in a judgment dated october 19, 2023, concluding that the MFN provision "was not directly applicable in the absence of 'notification' in accordance with Section 90 of the Income Tax Act."
 
Nangia Andersen M&A Tax Partner sandeep Jhunjhunwala commented on the swiss authority's ruling, stating that the unilateral suspension of the MFN clause's applicability under its tax treaty with india represents a major change in the dynamics of bilateral treaties.
 


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SIBY JEYYA

14/12/2024 11:14 AM