The Swiss government has withdrawn Most Favored Nation (MFN) status from India. After this decision by the Swiss government, Indian companies operating there will now have to pay 10% more taxes from January 1, 2025. Switzerland had granted MFN status to India under the Agreement to avoid double taxation (DTAA).
In fact, the DTAA is a kind of agreement. Two countries use it to protect their citizens and businesses from double taxation. Under this, businesses or individuals do not have to pay separate taxes in two different countries for their services or products.
On Friday, Switzerland said it had to take the step because of the Indian Supreme Court’s ruling. Last year, in a case related to Nestle, the Indian Supreme Court had ruled that DTAA could only be implemented in the country if it was notified under the Income Tax Act.
The Government of India will first have to notify the DTAA under the Income Tax Act. Only then will Swiss and Indian companies benefit. By then, companies like Nestlé will have to pay higher taxes on their dividends.
Earlier, the Delhi High Court had ordered that companies and individuals working in or for foreign entities should not be required to pay double taxation, but the Supreme Court later overturned this decision.
Let us tell you that Nestlé is a Swiss company. Its head office is located in the city of Vevey in Switzerland.
What is the MFN? The World Trade Organization (WTO) is an organization of the United Nations (UN). 164 countries are members. All countries involved give each other Most Favored Nation (MFN) status. After obtaining this status, all countries can easily do business with each other without any discrimination.
Why and how is MFN status removed? Generally, under WTO Article 21B, any country can revoke this status from another country due to security disputes. According to the report, to remove it, several main conditions must be met. But in reality, there is no formal procedure for its removal.
It is also unclear whether a country is obliged to inform the WTO whether or not it withdraws MFN status from another country.
India had withdrawn MFN status from Pakistan in 2019. After the 2019 terror attack in Pulwama, Jammu and Kashmir, India had also withdrawn MFN status from Pakistan. Under which customs duties were increased on many things imported from Pakistan. ,
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