Cabinet clears revised India-Cyprus DTAA
The Cabinet approved the revised Double
Taxation Avoidance Agreement (DTAA) with Cyprus, a move that gives India the
right to tax capital gains on investments routed through Cyprus prospectively
from April 1, 2017.
Details:
The fresh DTAA with Cyprus, which is
considered a haven for money laundering, round-tripping, and profit-shifting,
assumes significance coming soon after the signing of the revised pact with
Mauritius.
- The treaty with Cyprus had provided for residence-based taxation of capital gains.
- With the revision of the treaty now approved by the Cabinet, capital gains will be taxed in India for entities resident in Cyprus, subject to double tax relief. In other words, India will have the right to tax capital gains arising in India.
- The Cyprus DTAA also includes a provision for assistance in collection of taxes. It also has a revised provision for the exchange of information that would enable the use of information exchanged for other purposes.
Background:
Cyprus used to have a DTAA with India
but was blacklisted on November 1, 2013, by the Indian government for
non-cooperation.
- Excessive taxes paid by way of higher withholding taxes from November 1, 2013 being the date from when Cyprus was notified as a non-cooperative jurisdiction could possibly be claimed as refunds given if the withdrawal of the notification with retrospective effect.
