Most Favoured Nation

Source: DH

Context: Switzerland has recently revoked India’s Most Favoured Nation (MFN) clause in Double taxation avoidance agreement status following a Supreme Court ruling in an adverse tax case involving Nestle.

About Most Favoured Nation (MFN):

• What It Is: MFN is a principle under the World Trade Organization (WTO) that mandates non-discrimination among member countries in trade policies. Members are treated equally in terms of tariffs, quotas, and trade barriers.

• MFN is a principle under the World Trade Organization (WTO) that mandates non-discrimination among member countries in trade policies.

• Members are treated equally in terms of tariffs, quotas, and trade barriers.

• Designation Given By: WTO grants the MFN designation automatically to its 164 members.

• WTO grants the MFN designation automatically to its 164 members.

• Features of MFN: Ensures lowest tariffs, highest import quotas, and minimal trade barriers among member countries. Aims to promote fair trade and equitable market access.

• Ensures lowest tariffs, highest import quotas, and minimal trade barriers among member countries.

• Aims to promote fair trade and equitable market access.

• Origin: Established post-World War II as a cornerstone of the multilateral trading system under the WTO framework.

• Established post-World War II as a cornerstone of the multilateral trading system under the WTO framework.

• Exceptions: Bilateral or regional trade agreements. Special access for developing nations. Non-WTO countries like Iran or North Korea are not bound by these rules.

• Bilateral or regional trade agreements.

• Special access for developing nations.

• Non-WTO countries like Iran or North Korea are not bound by these rules.

• Removal of MFN: No formal WTO procedure for suspending MFN status exists. Members are not obligated to notify the WTO when removing MFN treatment.

• No formal WTO procedure for suspending MFN status exists.

• Members are not obligated to notify the WTO when removing MFN treatment.

• Recent Development: Effective January 1, 2025, Indian companies face a 10% withholding tax on income in Switzerland.

• Effective January 1, 2025, Indian companies face a 10% withholding tax on income in Switzerland.

Insta Links:

• Indias-most-favoured-nation-MFN-approach

Meta Description:

Learn about the Most Favoured Nation (MFN) principle under WTO, its criteria, exceptions, and recent developments like Switzerland revoking India’s MFN status impacting trade and taxes.