Switzerland's decision to cancel MFN status...
The Finance Ministry of switzerland announced the cancellation of MFN status given to india based on the 2023 supreme court decision. This decision will come into effect from january 1, 2025. This means that now indian companies operating in switzerland will have to pay 10% tax on swiss withholding tax, which was earlier 5%. Earlier, 5% tax was levied on dividends of indian companies in switzerland, but now they will have to pay more tax.
Justifying this decision, switzerland said that the MFN provision has been unilaterally suspended under the Double Tax Avoidance Agreement (DTAA) between india and Switzerland. As a result, swiss tax citizens and indian companies will have to face this change, which may affect their business and investment.
Impact of this decision on trade and investment between india and Switzerland
This decision of switzerland can have profound implications for indian companies. Especially for those indian companies that invest in switzerland and do business with swiss companies. indian companies working in switzerland will now have to pay more tax on their dividends, which may affect their return on investment (ROI). This will put additional financial pressure on their business, and they may reconsider investing in switzerland or expanding their business there.
Switzerland is one of the major investor countries in india, and companies coming from there have significant investments in sectors like infrastructure, banking, income tax, engineering and information technology (IT) in India. 323 indian companies working in switzerland currently employ about 1.35 lakh people in India. Some of these companies are working in sectors like machinery, construction, engineering, and banking. This decision of switzerland may affect the business strategies of these companies, and they may reduce investment in India.
click and follow Indiaherald WhatsApp channel