1 January 2025: Your Swiss Dividend Withholding Doubled.
Switzerland reacted to the Indian Supreme Court's Nestlé SA ruling by pulling MFN-based treaty benefits. If you hold Nestlé, Roche, Novartis or any Swiss stock, your dividend withholding jumped from 5% to 10%. Here's what happened and what it means.
The 90-second background
Many India DTAAs contain a Most-Favoured-Nation (MFN) clause. In plain English: if India later signs a DTAA with another OECD country that gives a lower rate on dividends or interest, the earlier treaty partner automatically gets that lower rate too.
Switzerland's India DTAA had such a clause. For years, Indian investors holding Swiss stocks claimed a 5% withholding rate on Swiss dividends (instead of the treaty's 10%), arguing that India's later treaties with Lithuania and Colombia triggered the MFN clause and pulled the rate down.
In October 2023, the Indian Supreme Court in AO vs Nestlé SA held that MFN clauses are NOT self-executing. A separate notification from India under Section 90(1) of the Income-tax Act is required to give MFN effect. No notification, no lower rate.
Switzerland didn't take this well.
What Switzerland did in response
On 11 December 2024, the Swiss Federal Tax Administration announced that from **1 January 2025**, Switzerland would unilaterally suspend MFN-based application of the India treaty.
The practical effect: Swiss withholding tax on dividends paid to Indian residents went from 5% to 10% on the stroke of midnight, 1 January 2025.
If you're an Indian resident holding Nestlé, Roche, Novartis, UBS, Credit Suisse (now part of UBS), Swatch, or any other Swiss-listed company directly, every dividend from 2025 onwards is subject to Swiss WHT at the full 10% treaty rate.
The same logic applies to mutual funds with Swiss holdings. Fund NAVs and yields are lower because Swiss WHT is a drag on the dividend leg of the fund.
What it means for you
**If you hold Swiss stocks directly:** Your dividends from 2025 onwards are withheld at 10%, not 5%. You can claim Foreign Tax Credit in your Indian ITR for the Swiss WHT paid, but the cash-flow impact is real — you get 90% of the dividend in hand instead of 95%.
**If you hold Swiss mutual funds or ETFs:** Your fund's dividend yield is effectively lower because Swiss WHT is deducted at fund level. Performance comparisons against pre-2025 periods will reflect this.
**If you're claiming a refund for past MFN-rate dividends:** Switzerland may still honour MFN claims for dividend payments up to 31 December 2024 (the pre-suspension period), depending on procedural timelines. A Swiss tax advisor can tell you if a refund claim is still on the table.
**If you're Dutch or French:** Same underlying logic, different outcome. India hasn't issued the Section 90(1) notification for the India-Netherlands or India-France MFN extensions either. Any refund claim based on a lower MFN rate (5% instead of the 10% treaty rate) is currently stuck in Indian litigation. Don't bank on it until CBDT moves.
The bigger lesson
MFN clauses in India's tax treaties used to be a quiet goldmine for sophisticated tax planning. Claim the lower rate, save 5 percentage points, never explain how the clause worked to the client.
Post-Nestlé, that door is closed unless and until CBDT issues the enabling notification. For now, the default treaty rate applies. 10% on Swiss dividends. 10% on Dutch dividends. 10% on French dividends.
If your CA or tax advisor is still claiming 5% on your foreign dividends without a CBDT notification backing it, ask them to show you the notification. They won't have one. Let them fix the claim before the Indian tax authorities do it for them.
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