Blacklisted, Cyprus now wants ‘only clean money’

The fallout of the move was higher disclosure requirements, application of transfer pricing provisions and high withholding of tax of 30 per cent in India.

Written by Shruti Srivastava | New Delhi | Published:June 16, 2014 1:03 am

Blacklisted by the government for not sharing information of tax evaders, Cyprus has said that it will work “closely” with the special investigation team (SIT) on black money set up by the Centre as it wants “clean money and only legitimate investments in Cyprus”.

“We don’t want black money in Cyprus, we want legitimate money. We are willing to work with the SIT on black money and will take up the issue with the new government,” high commissioner of the island nation in New Delhi, Maria Michail, told The Indian Express.

She, however, added that India should take necessary steps to remove Cyprus from the notified-jurisdictional area list as it
has started exchanging information with the tax authorities.

Last November, Cyprus became the first country to be declared as notified jurisdictional area under Section 94A of the Income-Tax Act for not providing information on tax evaders.

The fallout of the move was higher disclosure requirements, application of transfer pricing provisions and high withholding of tax of 30 per cent in India.

As per the double-taxation avoidance agreement signed in 1994, the withholding tax of just 10 per cent on Cyprus investors was applicable earlier.

According to the department of industrial policy and promotion, Cyprus is the seventh largest source of foreign direct investment in India, pumping in $557 million in FY14 while $7.44 billion came in between April 2000 and March 2014.

“We welcome the efforts of the new government (on black money). We have already started exchanging information with the Indian tax authorities. The back log has been cleared. We hope to resolve the issue before November and our finance minister will take up the issue with the Indian finance minister after the Budget exercise is over here,” she said adding that Cyprus wants to be a business friendly country and not “some re-routing channel for sending money to India.”

This newspaper had earlier reported that the income tax department has conveyed to the island nation that “only when it agrees for a complete revamp of the DTAA will India reverse its decision”.

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