diff --git a/dlt/common/utils.py b/dlt/common/utils.py
index 656cf1cdc4..9beb4e48bf 100644
--- a/dlt/common/utils.py
+++ b/dlt/common/utils.py
@@ -292,7 +292,8 @@ def _is_recursive_merge(a: StrAny, b: StrAny) -> bool:
                 # If a key exists in both objects and the values are `same`, the value from the `dst` object will be used.
                 pass
             else:
-                if keep_dst_values:
+                if not keep_dst_values:
+                    # if not keep then overwrite
                     dst[key] = src[key]
         else:
             # If the key exists only in `src`, the value from the `src` object will be used.
diff --git a/tests/common/test_utils.py b/tests/common/test_utils.py
index 7cd8e9f1a2..2cf3fa9bf0 100644
--- a/tests/common/test_utils.py
+++ b/tests/common/test_utils.py
@@ -21,6 +21,7 @@
     extend_list_deduplicated,
     get_exception_trace,
     get_exception_trace_chain,
+    update_dict_nested,
 )
 
 
@@ -277,3 +278,14 @@ def test_exception_trace_chain() -> None:
     assert traces[0]["exception_type"] == "dlt.common.exceptions.PipelineException"
     assert traces[1]["exception_type"] == "dlt.common.exceptions.IdentifierTooLongException"
     assert traces[2]["exception_type"] == "dlt.common.exceptions.TerminalValueError"
+
+
+def test_nested_dict_merge() -> None:
+    dict_1 = {"a": 1, "b": 2}
+    dict_2 = {"a": 2, "c": 4}
+
+    assert update_dict_nested(dict_1, dict_2) == {"a": 2, "b": 2, "c": 4}
+    assert update_dict_nested(dict_2, dict_1) == {"a": 1, "b": 2, "c": 4}
+    assert update_dict_nested(dict_1, dict_2, keep_dst_values=True) == update_dict_nested(
+        dict_2, dict_1
+    )
diff --git a/tests/load/utils.py b/tests/load/utils.py
index 3d331986bb..7b4cf72b47 100644
--- a/tests/load/utils.py
+++ b/tests/load/utils.py
@@ -386,7 +386,9 @@ def destinations_configs(
         if not isinstance(file_format, Sequence):
             file_format = [file_format]
         destination_configs = [
-            conf for conf in destination_configs if conf.file_format in file_format
+            conf
+            for conf in destination_configs
+            if conf.file_format and conf.file_format in file_format
         ]
     if supports_merge is not None:
         destination_configs = [