Switzerland's suspension of India's MFN status will not impact bilateral relations: Swiss Embassy

In response to a question from ANI regarding the potential effects of this decision on Swiss investments in India, the embassy clarified, "The current suspension from the Swiss side of the application of the most-favoured-nation clause (MFN) under the protocol to the double taxation agreement between Switzerland and India does neither affect the free trade agreement between the two countries nor Swiss investments in India. It adapts the Swiss interpretation of the most favoured nation clause to the one taken by India and confirmed by the Indian Supreme Court."

When asked about the implications for the European Free Trade Association (EFTA), the embassy stated, "The decision taken by the Swiss competent authority on December 11, 2024 is deemed to ensure equal treatment between Swiss and Indian investors. Since India does not grant the 5 per cent tax rate to Indian dividends paid to Swiss investors, Switzerland will align itself, with effect from January 1, 2025, and will also maintain a residual tax of 10 per cent instead of 5 per cent."

The embassy further added, "This change restores the taxation modalities to the situation applicable prior to the Swiss communication of 13 August 2021. The change in this residual rate has no impact on the validity of the double taxation agreement as such, or on any other treaties under international law concluded between Switzerland (independently or under the EFTA framework) and India."

The embassy further noted that the MFN clause in the double taxation agreement would remain applicable should the necessary conditions for its application be fulfilled.

On the broader question of potential impacts on bilateral ties, the Swiss Embassy emphasised that relations between the two countries remain strong and unaffected by this development.

"The bilateral relationship between Switzerland and India is excellent," the embassy affirmed. "Since the signature of the TEPA (Trade and Economic Partnership Agreement) in March 2024, our partnership has entered a new era. Switzerland remains committed to promoting investments in India. This decision does not negatively affect investments from Switzerland to India, nor does it impact the EFTA-India TEPA." (ANI)