India – Cyprus DTAA Negotiations

India – Cyprus DTAA Negotiations

PRESS RELEASE BY CBDT

New Delhi, 1st July, 2016.

Sub: Indo- Cyprus Double Taxation Avoidance Agreement

An official level meeting between India and Cyprus took place in New Delhi on 28 and 29 June, 2016, to finalize the new India Cyprus Double Taxation Avoidance Agreement, wherein all pending issues, including taxation of capital gains, were discussed, and in-principle agreement was reached on all pending issues. It was agreed to provide for source based taxation of capital gains on transfer of shares. However, a grandfathering clause would be provided for investments made prior to 1.4.2017, in respect of which capital gains would be taxed in the country of which taxpayer is a resident. These provisional agreements will now be placed before the Cabinet for its approval, subsequent to which the new tax treaty can be signed by the two countries.

Both sides also discussed the issue of notification of Cyprus under section 94A of Income-tax Act, 1961. It was agreed that India will consider rescinding the said notification with effect from 1st November, 2013, and will be initiating the process for the same. Both sides expressed satisfaction with the progress achieved in the meeting, and hoped that it would lead to resolution of all pending matters at the earliest.

Cyprus claims DTAA negotiations successfully concluded, Sec. 94A blacklisting to be retrospectively revoked

Source: Cyprus Ministry of Finance

Cyprus Govt. puts out statement claiming successful completion of DTAA negotiations with India; Cyprus says with agreement reached on all 'pending issues', CBDT to retrospectively revoke classification of Cyprus u/s 94A as 'Notified Jurisdictional Area'; Re-negotiated DTAA provides for source based taxation of gains from alienation of shares, however investments made prior to April 2017 to be grandfathered.

Note: CBDT, in November 2013 had notified Cyprus u/s 94A of the Income-tax Act for not providing information requested by Indian Income tax authorities under Exchange of Information provisions