Govt examines Liechtenstein’s tax treaty proposal as FDI inflows touch $110 million

The government is examining a proposal from Liechtenstein for a Double Taxation Avoidance Agreement (DTAA), as the two countries explore ways to strengthen investment flows and expand bilateral economic engagement. The proposal was discussed during Prime Minister Narendra Modi’s meeting with Hereditary Prince Alois of Liechtenstein in New Delhi on October 27, with the European nation seeking a framework that offers greater predictability to its companies investing in India.

In a post on X following the meeting, Modi said: “Had an excellent meeting with His Serene Highness Hereditary Prince Alois of Liechtenstein.

"Our discussions were wide-ranging and focused on strengthening India-Liechtenstein relations across several sectors. We reviewed the progress under the historic India-EFTA Trade and Economic Partnership Agreement (TEPA), which has completed its first year and discussed opportunities for greater investment and economic cooperation," tweeted PM Modi. 

The Ministry of External Affairs (MEA) confirmed that a draft proposal for the tax agreement had been received. Secretary (West) Sibi George said the proposal would be examined by the Finance Ministry to assess how it could support deeper economic engagement. The agreement has not yet been finalised.

Proposed tax pact could improve investment certainty

A DTAA seeks to prevent the same income from being taxed in two jurisdictions, helping reduce uncertainty for businesses and investors operating across borders. India has such agreements with more than 90 countries, while its existing arrangement with Liechtenstein is a tax information exchange agreement.

Liechtenstein views the proposed treaty as an enabling framework that could provide greater legal certainty for its companies investing in India, George said. The proposal comes as both countries explore opportunities in advanced manufacturing, technology, financial services, innovation and other sectors.

Cumulative foreign direct investment (FDI) inflows from Liechtenstein into India stand at around $110 million, according to the MEA. India’s exports to the European country include pharmaceuticals and electrical products, while imports comprise precision equipment, machinery and devices.

India-EFTA pact targets $100 billion in investment

The discussions come against the backdrop of the India-EFTA Trade and Economic Partnership Agreement, which took effect on October 1, 2025. The four-member European Free Trade Association (EFTA) comprises Switzerland, Norway, Iceland and Liechtenstein.

Under the agreement, EFTA countries have committed to facilitating $100 billion in investment into India over 15 years, alongside a target of creating one million direct jobs. These commitments apply to the broader India-EFTA partnership and are not specific to Liechtenstein.

Modi and Prince Alois also discussed cooperation in education, skill development, agriculture, space and institutional partnerships. The proposed tax agreement, if concluded, could add another dimension to efforts to encourage cross-border investment and strengthen commercial ties between India and Liechtenstein.