Cyprus’s removal from the tax blacklist comes after India agreed to changes in the double taxation avoidance agreement in the India Cyprus tax treaty.
The Indian government has rescinded a notification blacklisting Cyprus, providing relief to investors who route their investments through the Mediterranean island nation.
The notification has been rescinded retrospectively with effect from 1 November 2013, the date on which Cyprus was listed as a “notified jurisdiction” for not providing financial information sought by the Indian government—as previously agreed upon by both the countries, according to the notification published in the official gazette on 14 December and as confirmed by income tax department officials.
This means that investors can hope for some relief from the Indian tax department for investments routed through Cyprus in the intervening three-year period that attracted some of the stringent provisions like increased withholding tax requirements.
“The Government of India has finally rescinded the notification of Cyprus as a non-cooperative jurisdiction. Coming on the heels of the new tax treaty, this will come as a big relief to investors and Indian companies that have raised capital from Cyprus investors,” according to Abhishek Goenka, partner–direct tax, PwC.
Cyprus’s removal comes after both countries agreed to changes in the double taxation avoidance agreement between both them.
The revised treaty signed by both the countries last month gives India the right to tax capital gains from sale of shares on investments made by Cyprus-based companies after 1 April 2017.