India is among the top ten markets of the Swiss Fast-Moving Consumer Goods (FMCG) major Nestle SA, where it has been operating for 112 years. File
| Photo Credit: Reuters

Fast-Moving Consumer Goods (FMCG) major Nestle India on Thursday (December 19, 2024) said the suspension of the MFN (most favoured nation) clause granted to India by Switzerland will have ‘no impact’ on the company.

The suspension of MFN status under the Double Taxation Avoidance Agreement (DTAA) is a policy issue between the government of India and Switzerland and is not ‘Nestle-specific’, the FMCG firm said in a statement.

Nestle India, which owns popular brands such as Maggi, Nescafe and KitKat, said the company was already “deducting 10% withholding tax” on cross-country payments.

Earlier on December 11, the Swiss government had announced the suspension of the MFN status granted to India following a ruling by the Supreme Court of India, which in a judgement last year had said MFN status under the DTAA cannot be enforced unless notified under Section 90 of the Income Tax Act.

This judgement of the apex court had come in a case related to Nestle, where it overturned an earlier order passed by the Delhi High Court in 2021, which had upheld the residual tax rates’ applicability after considering the MFN clause in DTAA.

This has increased the tax liabilities for Indian companies having their operations in Switzerland.

“The matter is not a Nestle-specific issue but is a policy matter between India and Switzerland. We would like to inform you that Nestle India was/is deducting a 10% withholding tax, and this has no impact on Nestle India,” a Nestle India spokesperson said.

India is among the top ten markets of the Swiss FMCG major Nestle SA, where it has been operating for 112 years.

It is investing Rs 6,000-6,500 crore between a period of 2020-2025 in the Indian market to scale up its manufacturing capabilities and others.

Nestle India, which operates nine factories here and is in the process of setting up the tenth factory in Odisha, had a revenue of Rs 24,393.9 crore for the financial year 2023-24.

In a statement, Switzerland announced suspension of the application of the most favoured nation (MFN) clause of the protocol to the agreement between the Swiss Confederation and the Republic of India for the avoidance of double taxation with respect to taxes on income. File
| Photo Credit: Reuters

Switzerland has withdrawn the Most Favored Nation (MFN) status granted to India following an adverse court ruling against Nestle, a move that will result in adverse tax implications for Indian entities operating in the European nation.

With this, from January 1, 2025, Indian companies will be subject to a higher withholding tax on income generated in Switzerland.

In a statement, Switzerland announced suspension of the application of the most favoured nation (MFN) clause of the protocol to the agreement between the Swiss Confederation and the Republic of India for the avoidance of double taxation with respect to taxes on income.

Switzerland cited a ruling by Indian Supreme Court in a case relating to Vevey-headquartered Nestle for its decision to withdraw the MFN.

This means that Switzerland will tax dividends that Indian entities will earn in that country at 10% from January 1, 2025.