Specifying the time from which Cyprus will be excluded from the list of ‘notified jurisdictional area’, the tax department on Friday said that the removal will be with retrospective effect from November 1, 2013, providing 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“For removal of doubts, it is hereby clarified that Notification No. 86/2013 has been rescinded with effect from the date of issue of the said notification, thereby, removing Cyprus jurisdictional area with retrospective effect from November 1, 2013,” the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 had blacklisted or in other terms specified Cyprus as a notified jurisdictional area 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 attracted a 30 per cent withholding tax and Indian entities receiving money from there were required to disclose the source of funds. Then, following the revision of bilateral tax treaty between India and Cyprus last year, India had removed the island country from the notified jurisdictional area list.
In some cases, however, 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. Therefore, the CBDT has now come 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. However, unlike the revised Mauritius tax treaty, the revised Indo-Cyprus DTAA did not have any Limitation of Benefit and did not provide a concessional window for capital gains tax, as was provided in the revised treaty with Mauritius.