Reportedly Switzerland’s recent decision to suspend the Most Favoured Nation (MFN) status for india could impact indian investors in IT, pharma and financial services. This move disrupts the preferential trade framework that india previously enjoyed under the World Trade Organization’s (WTO) MFN principle. The swiss government has suspended the most favoured nation status (MFN) clause in the Double Taxation Avoidance Agreement (DTAA) between india and switzerland, potentially impacting swiss investments in india and leading to higher taxes on indian companies operating in the european nation.
Perhaps the companies will now have to pay a 10 per cent tax on dividends and other incomes, up from the earlier 5 per cent, effective january 1, 2025. According to a december 11 statement by the swiss finance department, the move follows the supreme court of india last year ruling that the MFN clause doesn’t automatically trigger when a country joins the OECD if the indian government signed a tax treaty with that country before it joined the organisation. The MFN status is a cornerstone of global trade under WTO rules. It mandates that countries treat all trading partners equally, ensuring the same trade tariffs, quotas, and regulations applied to the most favoured partner. The suspension of this status by switzerland means indian goods and services may now face higher tariffs, additional trade barriers, and reduced access to the swiss market.
Moreover switzerland imports gold and silver, primarily used in the jewellery sector, pharmaceutical intermediates and machinery. Major exports include pharmaceutical products, gems and jewelry, organic chemicals, and machinery. india received about $10.72 billion in foreign direct investments from switzerland between april 2000 and september 2024. The India-Switzerland Double Taxation Avoidance Agreement was signed on november 2, 1994, and subsequently amended in 2000 and 2010.
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