Application of the most-favoured-nation clause according to the protocol of the double taxation agreement between Switzerland and India

The Protocol of Amendment of 30 August 2010 contains a so-called most-favoured-nation clause in Art. 11. According to this clause, if India provides for lower rates of withholding tax on dividends, interest, royalties or remuneration for technical services in a convention, agreement or protocol concluded with a third country that is a member of the OECD after the signing of the Protocol of 30 August 2010 than in this agreement, these rates shall also apply between Switzerland and India from the entry into force of this agreement concluded with the third country.

In the meantime, India has concluded such agreements, one with Lithuania and one with Colombia.

For Swiss tax resident beneficial owners of Indian source dividend income, the credit of foreign withholding taxes for dividends that became due on or after 1 January 2021 is 5% instead of 10%.

Indian tax resident beneficial owners of Swiss-source dividend income may claim the treaty benefit for dividends from qualifying holdings that have become payable on or after 5 July 2018, or on or after 28 April 2020 for all other dividends, and apply for an additional refund of withholding tax in accordance with the procedures provided. Applications for refunds relating to the 2018 tax year must be submitted to the FTA by 31 December 2021.

Should the Indian competent authority not grant a reciprocal right with regard to the interpretation of the most-favoured-nation clause, the Swiss competent authority reserves the right to refrain from this interpretation and to adjust the tax rates agreed in the agreement for income due from 1 January 2023.

Further details are available here.