Switzerland's MFN Clause Suspension: A Wake-Up Call for India's Tax Strategy

Switzerland's suspension of the most favoured nation (MFN) clause for India demands a strategic overhaul of international tax treaties. Indian firms in Switzerland face increased taxes, impacting competitiveness. Aligning treaty frameworks with modern business realities is crucial to safeguard Indian interests and reduce uncertainties.

Switzerland's recent suspension of the most favoured nation (MFN) clause within the Double Taxation Avoidance Agreement (DTAA) with India presents significant tax challenges for Indian companies operating in Switzerland, particularly within financial services, pharmaceuticals, and IT sectors.

The suspension will mandate a rise in tax rates on dividends and other incomes from 5% to 10% starting January 1, 2025, according to GTRI, affecting Indian firms' competitiveness globally.

A coherent and strategic approach in international taxation is crucial for India to prevent such scenarios in the future and promote global competitiveness through effective treaty frameworks, particularly in rapidly-evolving digital and service industries.

(With inputs from agencies.)