Last week, Switzerland suspended the most-favoured-nation (MFN) clause in its double taxation avoidance agreement with India. A major fallout of this is that beginning 1 January, taxation on dividend payments from Swiss entities to Indian investors has been doubled from 5% to 10%.
The changes could also have some implications for India-based employees and freelancers working for Swiss companies, and people settled in India but earning a pension from Switzerland. Mint breaks down the impact of the development.
Stock option holders
Switzerland's suspension of the MFN status for India will primarily affect taxation of cross-border dividends.
"Earlier, dividends from Swiss-listed companies were taxed at 5% under the MFN clause. With its withdrawal, dividends will now be subject to the default rate of 10% (according to the India-Switzerland Double Taxation Avoidance Agreement, or DTAA)," said Ajay R. Vaswani, the founder of Aras and Co. Chartered Accountants.
In effect, starting 1 January, a higher 10% withholding tax will apply to Indian investors with direct investments in Swiss stocks, mutual funds, or exchange traded funds (ETFs).
This story is from the December 19, 2024 edition of Mint Hyderabad.
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This story is from the December 19, 2024 edition of Mint Hyderabad.
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