Nestle India Ltd. on Thursday said the suspension of the 'most favoured nation' status granted to India by Switzerland will have "no impact" on the company.
The suspension of MFN status under the Double Taxation Avoidance Agreement (DTAA) is "a policy issue" between the government of India and Switzerland and "is not Nestle-specific," a company spokesperson said in a statement.
The suspension of the MFN clause follows a 2023 Supreme Court ruling involving Nestlé SA, wherein the court stated that Switzerland's reduction of the tax rate on dividends for Indian entities does not need to be reciprocated by India without a specific government notification.
Nestle India, which owns popular brands such as Maggi, Nescafe, and KitKat, said the company was already deducting 10% 'withholding tax' on cross-country payments.
"Nestle India was/is deducting 10% withholding tax, and this has no impact on Nestle India," the spokesperson added.
India is among the top ten markets of the Swiss FMCG major Nestle SA, where it has been operating for 112 years.
Switzerland's decision, announced on Dec. 11, can have significant implications for investments in India as it may result in higher withholding taxes on dividends. Beginning Jan. 1, dividends paid between Switzerland and Indian residents will be subject to the original 10% withholding tax rate. However, there was no clarity if the suspension of the MFN clause will have an impact on the EFTA.
India had signed a free trade agreement in March with the four European nation bloc, with Switzerland as the largest trading partner of India, followed by Norway.
According to estimates from the Global Trade Research Initiative, Switzerland accounts for 91% of bilateral merchandise trade, emerging as India's largest EFTA trading partner.
According to the agreement document, the EFTA countries will aim to increase foreign direct investment into India by $50 billion within 10 years from when the deal comes into force. An additional $50 billion is expected to flow in the succeeding five years. The investments do not cover foreign portfolio investments.
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