The tax department today said it has removed Cyprus from the list of ‘notified jurisdictional area’ with retrospective effect from November 1, 2013, thereby providing a big relief to investors and Indian companies that have raised capital from the island nation. “For removal of doubts, it is hereby clarified that Notification No. 86/2013 has been rescinded with effect from the date of issue of the said notification, thereby, removing Cyprus jurisdictional area with retrospective effect from November 1, 2013,” the Central Board of Direct Taxes (CBDT) said. India blacklisted Cyprus in 2013 for not sharing tax information.
It had classified the island nation as a notified jurisdictional area (NJA) by way of Notification 86/2013 on grounds that Cyprus was not providing information requested by tax authorities under the taxation treaty. Following the notification, all payments made to Cyprus attracted a 30 per cent withholding tax and Indian entities receiving money from there were required to disclose the source of funds.
However, following the revision of bilateral tax treaty between India and Cyprus last year, India had removed the island country from the black list. In some cases a view has been taken by the Income-tax authorities that the rescission of Notification No. 86/2013 was not with retrospective effect from November 1, 2013, the CBDT circular said. Hence, the CBDT today came out with this clarification.
India and Cyprus had on November 18, 2016, signed the revised bilateral tax treaty under which capital gains tax will be levied on sale of shares on investments made after April 1, 2017, bringing the island nation at par with Mauritius and Singapore in terms of tax treatment. The new agreement also provides for exchange of banking information and allows the use of such information for purposes other than taxation with prior approval of competent authorities of the country.