Focus Point
MFN clause under tax treaties and its current position
What is MFN clause?
In legal terms, the Most Favored Nation (MFN) clause in
international trade agreements mandates that a country must treat
all its trading partners equally, offering them the same trade
benefits and concessions granted to its most favored trading
partner. This principle upholds fairness and non-discrimination in
international trade.
If, after the date of entry into force of the tax treaty between
India and the original state, India enters into a tax treaty with a
third state that is a member of the Organisation for Economic
Co-operation and Development (OECD), providing a beneficial rate of
tax/restrictive scope, then the MFN clause accords a similar
benefit to the original state.
