1 January 2025: Your Swiss Dividend Withholding Doubled.

Several India DTAAs contain a Most-Favoured-Nation (MFN) clause in the protocol to the dividend or interest article. Under the MFN provision, if India later signs a DTAA with another OECD member at a lower withholding rate, the same lower rate automatically extends to the earlier treaty partner from the date that later treaty enters into force.

India's protocols to the Switzerland, Netherlands, France, Hungary, and Sweden treaties carried such a clause. Indian residents holding Nestlé SA, Roche, Novartis and similar Swiss-listed stocks had a 5% Swiss withholding on their Swiss dividends (against the treaty's headline 10%), because Switzerland applied the MFN clause unilaterally, reading India's later treaties with Slovenia, Lithuania and Colombia as pulling the rate down.

In AO vs Nestlé SA (Civil Appeal No. 1420 of 2023, decided 19 October 2023) the Supreme Court held that an MFN clause in a treaty protocol is NOT self-executing. A separate notification by India under Section 90(1) of the Income-tax Act is required to import the lower rate into domestic law. Without that notification, the treaty's headline rate prevails.

Switzerland responded unilaterally.

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.

**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.

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.