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Switzerland has waived its unilateral application of the most-favoured-nation (MFN) interpretation in its tax treaty with India for income accruing from 1 January 2025. For dividends, that means the treaty’s 10% source-country rate applies; the change does not terminate the treaty. Switzerland says its earlier position continues to apply to income accruing from 2018 through 2024.
What does Switzerland’s MFN suspension mean for India?
The measure concerns how Switzerland applied the MFN clause in the India–Switzerland double taxation agreement (DTA), not whether the DTA remains in force. In a notice dated 11 December 2024, the Swiss Federal Tax Administration said it would waive its unilateral application of that interpretation from 1 January 2025. It cited the absence of reciprocity after India rejected the interpretation Switzerland had adopted. Swiss Federal Tax Administration notice and treaty information.
The practical change established by the notice is specific to dividends: for income accruing on or after 1 January 2025, the source-state residual rate is limited to the treaty’s 10% rate, regardless of paragraph 5 of the protocol. The notice does not establish that every income type mentioned in the protocol received an identical change.
When does the 10% dividend rate apply?
Switzerland identifies the relevant dividing line as the date income accrues, not simply the payment date or the date a return is filed. For dividends accruing on or after 1 January 2025, the source-state rate is 10% under the treaty. The announcement does not determine every payment-date or accounting-period question, so taxpayers should not infer an individual result from the general rule alone.
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| Income accrual period | Swiss position on dividend source taxation | Qualification |
|---|---|---|
| 2018–2024 | Switzerland says its 13 August 2021 position continues to apply, including the claimed 5% rate for specified dividends. | Categories, treaty conditions, procedures and time limits matter; see the Swiss notice. |
| On or after 1 January 2025 | 10% treaty residual rate. | Applies to dividends under the 11 December 2024 Swiss notice. |
What was the earlier Swiss MFN position?
The treaty’s baseline residual rate for source-country taxation of dividends is 10%. Switzerland’s 2021 interpretation treated later OECD accessions by Lithuania and Colombia as activating lower dividend rates India had provided in other treaties. Under that interpretation, qualifying dividends could receive a 5% rate from specified dates. The Swiss notice says that this earlier position remains applicable for income accruing during 2018–2024, subject to treaty requirements and applicable domestic procedures and deadlines.
- From 5 July 2018: Switzerland associated a claimed 5% rate with qualifying participation dividends following Lithuania’s OECD accession.
- From 28 April 2020: Switzerland associated a claimed 5% rate with qualifying participation and portfolio dividends following Colombia’s OECD accession.
These are descriptions of Switzerland’s historical position, not a statement that every dividend paid in those periods automatically qualified. The Swiss notice refers to treaty conditions and the relevant Swiss withholding-tax limitation period.
Why did Switzerland change its position?
The dispute followed the Indian Supreme Court’s 19 October 2023 decision in Assessing Officer Circle (International Taxation) v. Nestle SA. The Court held that the protocol’s MFN clause did not operate directly under Indian law without notification under Section 90 of the Income Tax Act. It also interpreted the protocol’s reference to a third state “which is a member of the OECD” as referring to states that were OECD members when the protocol was signed. Supreme Court of India judgment, 19 October 2023.
Switzerland’s 11 December 2024 notice says India did not share Switzerland’s interpretation. Given the lack of reciprocity, Switzerland waived its unilateral application from 1 January 2025. The protocol also discusses interest, royalties and fees for technical services, but the Swiss notice’s stated 2025 rate result is specifically about dividends.
What does the change mean for Indian residents receiving Swiss dividends?
In an answer to Rajya Sabha Unstarred Question No. 3443 dated 1 April 2025, India’s Ministry of Finance said that the change restores 10% treaty treatment for source taxation of dividends from 1 January 2025. It said Indian residents receiving Swiss-source dividends may claim a corresponding 10% Indian tax credit in the circumstances described and are not expected to face an additional tax burden as a result. These are the government’s stated implications, not a guarantee of the result for each taxpayer. Ministry of Finance parliamentary answer, 1 April 2025.
Foreign tax credit is one route to relief from double taxation. India’s Income Tax Department says that where a DTA applies, relief is governed by the agreement and Sections 90 and 90A. Eligibility, documentation, credit limits and filing deadlines depend on the applicable rules and the taxpayer’s facts. Indian Income Tax Department guidance on double-tax relief.
What about Indian dividends received by Swiss residents?
The Ministry of Finance said that before the change, Swiss residents receiving Indian dividends taxed at 10% were receiving only 5% relief in Switzerland under the Swiss position. It said restoring 10% relief addresses that double-taxation issue. This is the Indian government’s description of the effect; Swiss foreign-tax credit and withholding-tax refund claims remain subject to treaty provisions, domestic law, documentation and time limits.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What should taxpayers check before claiming a rate, refund or credit?
- Identify the relevant income accrual period. The Swiss notice distinguishes 2018–2024 from income accruing on or after 1 January 2025.
- Confirm which country is the source of the dividend and where the recipient is resident; the source withholding rate and residence-country credit are different parts of the analysis.
- For a historical 5% claim, establish whether the dividend category and treaty conditions fit the Swiss position for the relevant period.
- Check the applicable domestic process, documentation requirements and limitation period before pursuing a refund or foreign tax credit.
The Swiss treaty page lists the notice and directs treaty-application and refund questions to the relevant Swiss authorities. Swiss treaty page for India. For an individual filing or withholding issue, the applicable treaty rules and both countries’ procedures should be checked against the taxpayer’s circumstances.
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