Switzerland’s decision to suspend the Most-Favored-Nation (MFN) clause under its Double Taxation Avoidance Agreement (DTAA) with India is expected to increase costs for Swiss companies operating in India, such as Nestle. The suspension, effective from January 1, 2025, comes after a 2023 Supreme Court ruling that stated the MFN clause isn’t automatically applicable without explicit notification by India. Switzerland cited unfair treatment, pointing to discrepancies in dividend taxation when compared to India’s more favorable agreements with countries like Slovenia and Lithuania.
As a result of this suspension, Swiss companies like Nestle will face higher dividend tax rates of up to 10%, rather than the reduced 5% rate they previously enjoyed. Nestle’s appeal for the lower tax rate was denied by the Supreme Court, increasing their tax liabilities. This rise in costs will likely prompt Nestle to adjust pricing strategies in India, affecting the affordability of their popular products, including Maggi noodles.
For consumers, the impact of this trade dispute could be direct and noticeable. Nestle’s increased operational costs may lead to higher prices for staples like Maggi, which is a household favorite in India. Even a slight price hike could affect many Indian families, underscoring how international trade policies and taxation disputes can influence everyday commodities and household expenses.
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