The Swiss government has paused a special rule in its tax agreement with India called the "Most Favoured Nation" (MFN) clause. This could result in higher taxes for Swiss investors in India and Indian companies operating in Switzerland. From January 1, Switzerland will tax dividends from Indian companies at 10%.

According to a statement from the Swiss finance department on December 11, the decision to suspend the MFN clause came after a ruling by the Supreme Court of India last year. The court ruled that the MFN clause doesn’t automatically apply when a country joins the OECD (Organization for Economic Cooperation and Development) if India had already signed a tax treaty with that country before it became a member of the organization. 

India made a tax deal with Colombia and Lithuania that set lower tax rates on certain incomes. When these countries joined the OECD, Switzerland thought that the tax rate on dividends from India should be reduced to 5%, based on the "Most Favoured Nation" rule. This would be lower than the 10% rate in the India-Switzerland tax agreement.

In October 2023, the Supreme Court of India changed a lower court's decision. The court said that the "Most Favoured Nation" (MFN) clause doesn’t automatically apply unless India formally announces it through a "notification," as required by its tax laws. This decision was made in a case involving Nestle, a Swiss food company.

In March, India and the four EFTA countries including Norway, Switzerland, Iceland, and Liechtenstein signed a free trade agreement. Through this deal, the countries aim to invest $100 billion in India over the next 15 years.