These amendments are consistent with the renegotiated Indie-Maurice tax treaty, i.e. the taxation at source of capital income and a “grandfather” clause. In 2011, as part of the fight against the use of foreign tax havens and the “full coverage” of funds, the Indian government adopted a provision requiring it to inform a country or territory as an area of law notified (NJA) in which the country or territory did not effectively exchange information with India. Taxpayers in an NJA will be subject to a disastrous 30% withholding tax, whether or not there is an agreement between the jurisdiction and India to avoid double taxation (DBA). On 16 December, the Indian government issued a press release on the completion of the internal procedures of the revised convention on double taxation between India and Cyprus. The press release is shown below: the text of the new DBAA provides for a tax based on the source of the capital gains from the disposal of the shares. 2.) It was agreed that, like Mauritius – India`s new double taxation agreements, that it is based on the income tax of the disposal of shares. However, the investments made before April 1, 2017 will be made on the basis that the imposition of the sale of these shares will remain at a later date in the seller`s residence state. The information-sharing provisions have been updated in the new treaty and are now in line with international standards and Indian tax policies.
The provisions relating to the exchange of information will allow the exchange of banking information and allow the use of this information for purposes other than taxation, with the prior authorization of the competent authorities of the country that provides the information. The new contract replaces the capital gains tax base resulting from the disposal of the test shares based on the residence of the previous contract, in a source-based tax test, in accordance with the provisions recently introduced in the India-Maurice and India-Singapore agreements. The two parties have now exchanged notifications that have exchanged the completion of their respective internal procedures for the entry into force of the DBAA, which is to allow the revised DBAA to enter into force in India in the fiscal years beginning April 1, 2017 or after April 1, 2017. The revised DBAA will allow capital gains to be taxed on shares on a source basis, except for investments made before April 1, 2017. In addition, the DBAA will also implement updated provisions in accordance with international standards and in accordance with India`s consistent position. The modernization and development of the network of double taxation conventions is of great economic and political importance and aims to further strengthen and attract foreign investment to Cyprus. This is an important development that will contribute to the development of trade and economic relations between India and Cyprus. On 1 July 2016, CBDT issued a press release stating that an official meeting had been held between India and Cyprus to finalise the new India-Cyprus tax treaty.
All outstanding issues, including the taxation of capital income, were discussed and an agreement in principle was reached on all outstanding issues.